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Tax 'U-turn' attacked as vote-buying move

23 April 2008
Categories: News , Employees , Income Tax
Treasury pledges to compensate groups affected by loss of 10p band

The Treasury's new pledge to examine ways in which to compensate low-income earners for the loss of the 10p starting tax rate has been described as 'cobbled together' and a 'vote-buying exercise'.

In a letter to the chairman of the Treasury Select Committee, Alistair Darling said that the Government would examine all practical propositions, with the focus on potential changes to the tax credit system to allow the average losses from the removal of the 10p tax band to be offset.

Responding to ministers during Prime Minister's Questions, Gordon Brown said there were 'better ways' to lift people out of poverty than having a lower tax rate of 10p.

He added that the abolished band had been set up as a 'transitional measure' in 1999, and now the Government will do more to protect low-income families and combat poverty through measures such as working tax credits.

Reiterating the announcement made by Alistair Darling's letter, Mr Brown said the Government was looking at specific measures to compensate those groups that may be affected by the changes, especially low-income families without children and pensioners in the 60-64 age range.

Any resulting payments will be backdated to the start of the financial year.

However, this supposed U-turn has been called a typical politician's move. Tax partner Mike Warburton of Grant Thornton said: 'This looks like a vote-buying exercise'.

Although he conceded: 'If I were the Chancellor, I'd do the same: help the people most likely to vote — and it's the elderly who are most likely.

'It looks as if the Treasury has cobbled something together to get itself out a whole… but I'm can't see what is being done to help people who work fewer than 16 hours a week and are too young to claim tax credit.

'It looks as if they'll lose out.'

The Chancellor, in fact, said that for such people, he will consult the low pay commission on possible changes to the minimum wage.

This and the Government's other new pledges have led to the PM being accused by Opposition leader David Cameron of 'weakness, dithering and indecision'.

Meanwhile, the Liberal Democrats warned that 'to ensure that all people are fully compensated from the abolition of the 10p rate, the Exchequer will have to spend up to an additional £1.23bn'.

Sections - income tax and NI

Categories: News , Employees , Income Tax
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