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More must be done to compensate households who will continue to lose out as a result of the abolition of the 10p tax rate, MPs have concluded.
A new Treasury Committee report claims that there remains a pressing need for the Government to seriously examine ways in which to fully compensate the 1.1 million households not covered by measures announced last month.
The committee also recommends the Government ensures that the 5.3 million households originally affected by the abolition of the 10p rate do not suffer in the future.
The report — entitled Budget Measures and Low-Income Households - observes that the Government's chosen compensation was probably 'the least bad option', but adds that £2 billion of the £2.7 billion committed to that measure in the current financial year is not devoted to compensating losers from abolition, and as such is not substantially well-targeted.
The committee does, however, welcome the fact that the 13 May measures have the benefits of simplicity, transparency and greater incentives to work — and it goes on to state that there are important lessons that the Government must learn from the abolition of the starting rate relating to budgetary processes.
The reports calls on the Government to publish a household impact assessment alongside future Budgets and Pre-Budget Reports, to analyse the impact on individual, family and household finances of Budget measures and other changes to the welfare system.
The committee also recommends that the Government to re-establish the consultative nature of the Pre-Budget Report, stating that for personal tax decisions, the sudden and final nature of Budget decisions has been 'less about the need to prevent forestalling activity than it has been about the perceived benefit of seeming to pull rabbits from the hat'.
The new report is 'a devastating criticism of the Government's tax policy', said Liberal Democrat shadow chancellor Vince Cable.
He added: 'The reference to the short term benefits of “pulling rabbits from the hat” is an accurate-but-cutting description of Gordon Brown's abortive attempt to use his last Budget for political gain.
'The Pre-Budget Report should be regarded as a consultative document, as was its original purpose.
'I fully support the recommendation… that the Government should publish a household impact assessment.'
