10p-tax row refuses to die

Tuesday, 1 July 2008 12:02 AM

Labour MPs are bringing the 10p-tax rate row to the centre of the political agenda again today.

Seventeen MPs are said to be backing a proposal by David Taylor calling for compensation for the 1.1 million people left out of Alistair Darling's compensation package for those affected by the 10p tax rate debacle.

The push comes as part of an amendment to the finance bill, being debated in the Commons today.
Mr Taylor says £66 million is required to compensate the remaining people, but that figure is being treated with caution by Robin Williamson, director of the Low Income Tax Reform Group.

"If that is right then it's quite a low figure," he told politics.co.uk

"Our own solution involves targeting those people at the lower end of the income spectrum, and targeting them by precisely the amount they lost out. That would have worked out at around £1 billion, still considerably less than the £2.7 billion which the chancellor spent on personal allowance - less than £1 billion of which went to compensating those who needed to be compensated."

Mr Taylor is being supported by Lynne Jones and Michael Meacher, who have tabled an amendment and an early day motion to force Mr Brown's hand on the issue.

The rebellion follows a treasury committee report over the weekend which said Mr Darling should compensate those people who did not benefit from his package.

But analysts are still unsure what route the Treasury will take.

"It's very difficult to predict really," continued Mr Williamson.

"They have the option of following what the Treasury committee recommended, which was to seek a solution to compensate the 1.1 million households who haven't been fully compensated yet. On the other hand, they could reject that advice and go down the route of tweaking the working tax credit in order to bring more people in. But if you do that you've still got the disadvantage that not everyone claims tax credits, so some will still be left behind.

"Nobody knows which way the government is going to jump until they've formally responded to this report."

Tags:
• economy
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• economy and finance
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• income tax
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• taxation