Page last updated at 19:31 GMT, Tuesday, 22 April 2008 20:31 UK

Darling 'promises to act on tax'

Alistair Darling
Mr Darling said the meeting with MPs had been "useful"

Chancellor Alistair Darling has told MPs he will act "within this financial year" to answer concerns about ending the 10p tax rate, the BBC has learned.

He made the commitment during a meeting aimed at quelling a rebellion which could see the government lose a Commons vote next week, several MPs said.

Some 39 Labour backbenchers have signed a motion criticising the change.

Lib Dem leader Nick Clegg has told the BBC his party will support any moves to compensate people who have lost out.

Meanwhile, Treasury committee MPs are to hold a short inquiry into the effect of axing the 10p income tax rate.

'Compensation'

Opponents say it is unfair as it will hit some 5.3 million of the UK's lowest earners.

Following a cabinet meeting earlier, the government said it would be "working hard" to allay fears.

Mr Darling's meeting was part of this strategy and, according to several MPs, he promised: "We will take action within this financial year."

EFFECTS OF TAX CHANGES
Winners:
Most people with incomes of 17,500+
Under 17,500 but aged 65+ and therefore eligible for higher personal allowances
Under 17,500 but with young children and therefore eligible for child tax credits
Losers:
Under 17,500 and ineligible for working tax credits because under 25
Retired early and therefore ineligible for higher personal allowances
Part-timer working insufficient hours to qualify for tax credits
Different personal circumstances may affect final amounts
Source: PWC

Some MPs said they thought Mr Darling might consider backdating compensation for low earners who have lost money.

But Treasury sources said all options were on the table and no details had been decided. After the meeting, Mr Darling said it had been "very useful".

The Finance Bill - which enacts this year's Budget - was given a second reading on Monday evening when MPs approved it by 298 votes to 223.

But the government could faces a likely rebellion next week when amendments are put forward relating to the abolition of the 10p rate, introduced in last year's Budget.

Frank Field, the Labour MP heading the revolt, said 39 backbenchers had signed his amendment, which seeks compensation for those who lose out.

If they, and all opposition parties back him, the government would be defeated.

'Absolute uproar'

Liberal Democrat leader Mr Clegg told the BBC the abolition of the 10p rate had caused "absolute uproar amongst the poorest, most vulnerable families, who are feeling overstretched already".

Asked whether his party would support Mr Field's amendment, he said: "We will support any amendments and we might well put forward our own amendments which will mitigate, reverse the damage done to those poorest individuals who are being hit by this measure."

HAVE YOUR SAY
I will benefit from the tax changes but I think they are immoral
Christine, Belper

Conservative leader David Cameron has pledged to "stop the government in its tracks" and make them "think again" over abolishing the 10p rate.

The cross-party Treasury committee's inquiry will look into its effects, as well as the impact of other Budget decisions on low-income households.

It aims to produce its recommendations for action before the Finance Bill completes its final passage through the Commons, probably no earlier than June.

BBC political editor Nick Robinson said this could delay any rebellion by Labour MPs during next week's vote on Mr Field's amendment.

It would also mean any Commons embarrassment came after next week's local elections in England and Wales.

Earlier the prime minister's spokesman again refused to say whether Gordon Brown saw the tax issue as a "confidence vote", simply describing it as "important".

He said the government would be "working hard during the course of the next week to persuade MPs of the merits of its case".

The changes, which came into force this month, abolished the 10% starter rate of income tax, but lowered the basic rate from 22% to 20%.

The Treasury committee has said single people with no children earning under 18,500 will lose up to 232 a year as a result of the changes.

Ministers say rises in child benefits, state pensions and tax credits have gone up, benefiting millions of people.


SEE ALSO
Brown acts to head off tax revolt
21 Apr 08 |  UK Politics
Cameron vow to 'stop' tax changes
21 Apr 08 |  UK Politics
Tax changes: Winners and losers
21 Apr 08 |  Business
Darling's 10p tax options
21 Apr 08 |  UK Politics
Darling: I can't rewrite Budget
20 Apr 08 |  UK Politics
Miliband urges party unity on tax
20 Apr 08 |  UK Politics
Downing St denies 10p tax rethink
19 Apr 08 |  UK Politics

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