10p tax – Round 2

The 10p injustice returns to practical politics this week with Wednesday’s Budget. This long drawn out and wretched saga, acts like a cautionary tale of the Government’s loss of direction.

The story is well known. In his last Budget Gordon Brown announced a 2p reduction in the standard rate of tax to be paid for, substantially, by the abolition of the 10p starting rate. While most people gained, there was a very significant number of lower paid workers who lost out.

The Government, at first, thought it could bluff its way out of the crisis. Parliamentary questions were simply not answered and then, after threats of raising the issue with the Speaker, replied to at the very last possible moment, i.e. minutes before I was due to move an amendment calling on the Government to progress over the next 12 months a full compensation package. No such package was forthcoming.

The Government has been less than frank in another respect. The Labour Party champions individual taxation believing that it strengthens the position of women in households. The Government has refused to present information on the number of individual losers from the 10p rate’s abolition: it only gives the number of households made worse off by its move.

This statistical sleight of hand minimises the number of losers. Most of those who lost out from this tax change were women for the very simple reason that they are, generally speaking, on lower earnings.

Many of the losers live in households where, again generally speaking, male workers gained from the reduction of 2p in the standard rate. If the total household income showed a plus, the Government excludes it from its official data on those households who lost out – where one member, usually the woman, lost out.

A diary highlighting the main events in the 10p saga is appended. Under pressure the Government brought forward a compensation package that was so cack-handedly constructed that, despite spending £2.7 billion, 1.1 million households and 6 million individuals were still left worse off.

Given the amount the Government was spending on the rescue package I did not believe it expedient to proceed with a blocking motion to the Budget. I also doubted whether I would carry enough Labour MPs with me to take the Government to the wire. I also believed the reassurances Government ministers gave that they would do all in their power, later, to compensate fully the losers.

Some Labour MPs were critical of my tactics and they have been proved to be right. The promise that this issue would be dealt with as fully as the Government could in the November 2008 Pre Budget Report proved bogus. So today, 32 Labour MPs have signed an Early Day Motion Greg Pope and I have tabled calling for action in Wednesday’s budget. The EDM’s wording is:

That this House records with real disappointment that up to 3.8 million individual taxpayers are still worse off as a result of the abolition of the 10 pence tax rate; registers that the two measures the Government have since announced do not yet compensate them fully; and calls on the House to secure justice for this group of low tax paying workers at the next Budget.

Aneurin Bevan once remarked that the language of socialism was priorities. I want to believe that Wednesday’s Budget will show such a great ranking of priorities that ensures justice for all the 10p tax losers.

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3 Responses to “10p tax – Round 2”

  1. Nick Says:

    It sad. 10p is in fact an irrelevance. The real issue is raising the tax threshold to the povertly line. The poverty line should then be indexed linked.

    It’s immoral to tax people in poverty.

    It’s immoral to make complex system like tax credits that don’t work.

    For a long time, its completely moot. The spending splurge and the 175 bn a year overspend means no tax cuts, huge spending cuts in a stealth and not so stealth way.

    For the longer term, the state pension systems with no assets are going to make it worse.

    It’s a nightmare scenario

    Nick

  2. wendy Says:

    All those with incomes of less than £10,000 p.a. should be exempted.
    This would benefit the growing numbers of those in poverty:youngsters struggling on a derisory minimum wage;part-time workers;many women in poorly paid work;those on certain benefits.
    The 50% tax rate is welcome and long overdue but the failure to redress the damage caused by the weasely withdrawal of the 10p rate is a disgrace.

  3. Dermaptera Says:

    I retired last year and I have a state pension and a small occupational pension. That state pension is slightly more than the personal allowance (or was – I don’t know what’s happened since April 5th) and that means I’m taxed at 20% on all of my occuptional pension and part of my state pension. It’s a ludicrous situation.

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