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Kettering & Wellingborough Liberal DemocratsWorking for you, all year round - not just at election time! |
Reject Government "fudge" on 10p tax rate cut, local Labour politicians urged
April 24, 2008 2:30 PM
![Gordon Brown [Image: Rex Features]](/en/image/53s6VH/gordon-brown-image-rex-features.png "Gordon Brown [Image: Rex Features]")
Lib Dem campaigners have criticised an increase in income tax for low income workers that was announced by Gordon Brown in his last budget as Chancellor.
Local Labour politicians have been urged speak out to help thousands of people on low incomes hit by the abolition of the 10p rate of income tax, as Liberal Democrat campaigners in Kettering slammed last-ditch Government concessions on the change as "an unworkable fudge".
Lib Dem campaigner Chris Nelson said, "When the government doubled the 10p rate of income tax last year to pay for a pre-election bribe, they ignored the fact that this would be paid for by the 5.3 million people that have the lowest incomes."
"Having now been forced to change track, it is astounding that Government plans will still mean hundreds of thousands of people receiving no help towards the extra cost of living and that the majority of those that are helped may well receive nothing until November!"
"Rather than have the courage to admit his mistakes and reverse the policy, we are lumbered instead with an unworkable fudge that will still hit those least able to afford it. I call on Labour politicians in Northamptonshire to join with the Liberal Democrats by calling on the Government to take proper action to reverse this mess."
ENDS
Notes:
1. In the 2007 budget, Gordon Brown as Chancellor announced the abolition of the 10p starting rate of income tax which was used to reduce the basic rate of income tax from 22p to 20p, taking effect in 2008. Figures compiled by the Treasury Select Committee revealed that the main losers were single childless people with incomes under £18,500, losing up to £232 a year (http://news.bbc.co.uk/1/hi/uk/7334448.stm).
2. On Wednesday, the Treasury promised in a letter to the Chairman of the Treasury Select Committee to help low income families made worse off by the change, through changes to tax credits, the minimum wage and the winter fuel allowance.
3. On closer inspection, however, it is revealed that the Chancellor has not promised to ensure that all 5.3m people on low incomes who have lost out will be fully compensated.
a. For all people affected by the change to be fully compensated, the Exchequer would have to spend in total up to an additional £1.23bn.
b. For the winter fuel allowance to compensate all 60-64 year olds who have lost out, the allowance would have to be almost doubled from £250 to £482, at a cost of £120m.
c. For other workers, the Chancellor has stated that changes would be made to compensate childless workers through the tax credits system. This, however, is not available to part-time workers, workers aged under 25 or to single childless workers earning between £13,000 and £18,500 per year.
d. For workers outside the tax credit system, the Chancellor has suggested increasing the minimum wage:
i. The minimum wage for 16-18 year-olds is currently £3.40 per hour, or £6,630 per year (based on 37.5 hour working week)
ii. The minimum wage for 18-22 year olds is currently £4.77 per hour, or £9,301 per year (based on 37.5 hour working week)
iii. The minimum wage for 22 year olds and over is currently £5.52 per hour, or £10, 764 per year (based on 37.5 hour working week)
e. To ensure that all people on the minimum wage would no longer lose out from the 10p rate, the minimum wage would have to be increased for all people to £18,500 per year - or £9.49 per hour.
4. Furthermore, answering questions in the House of Commons today, the Chancellor has confirmed that only the winter fuel allowance will be backdated, with other issues remaining unchanged for up to 7 month (http://news.bbc.co.uk/1/hi/uk_politics/7364344.stm).
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