Income tax compensation plans unveiled
Alistair Darling attempted to draw a line under the 10p controversy today by announcing a series of financial packages intended to help those affected by income tax rate changes.
Speaking confidently in a packed House of Commons, Mr Darling said tax credits would fully compensate 80 per cent of those affected while the 20 per cent remaining would be compensated to nearly half the amount.
But Tory shadow chancellor George Osborne launched an angry attack on the chancellor, saying the tax credit scheme would constitute a one-off payment which did nothing to help those affected by the changes in the long term.
“This help is for one year only,” Mr Osborne said.
He described the chancellor’s statement as cynical and incompetent and said about Mr Darling: “How humiliating for him to come to the House with a mini-Budget to clean up what the last chancellor did with his budget.”
Mr Darling’s proposals involve putting up the personal tax allowance by £600, saving a basic rate tax payer £120 in tax this year. He said the package would cost the government £2.7 billion and that the 40 per cent tax threshold would change so that high-earning individuals were unaffected.
Mr Darling insisted his measures would help those affected by the changes and he received strong support from the Labour backbenches, who appeared desperate to stop the rut in support for Labour largely caused by the original dropping of the 10p rate.
The persistent and vocal cries of support from behind Mr Darling also reflect how determined Labour MPs are to show party unity following a devastating start to the week for their leader, Gordon Brown.
He had to endure three separate autobiographies – by Cherie Blair, John Prescott and Lord Levi – painting him in a less than flattering light, as well some highly damaging statements from 10p Labour rebel Frank Fields.
But the Conservative front bench – jubilant after their impressive local election results and a torrent of disastrous headlines for the government – poured scorn on the proposals.
Mr Osborn added: “Let no one be fooled why you are making this statement today – not because you wanted to…. but because this divided, dithering and disintegrating government are panicking in the face of the Crewe and Nantwich by-election.”
Liberal Democrat economics spokesman, Vince Cable, said: “This government’s tax policy has descended into a complete farce.
“The abolition of the 10p rate was designed to help Labour win the election that never was. Now this by-election budget is designed to help them cling on to Crewe in next week’s vote.
“We can have no confidence in either a prime minister or a chancellor who continue to make tax policy on the hoof, while still leaving the poorest out in the cold,” he concluded.
