New tax rate is ‘robbing the poor to pay the better-off’
Last updated 13:36, Thursday, 10 April 2008
Labour this week faced claims it was plundering the lowest paid workers in the country to fund tax-cuts for the better-off.
The scrapping of the 10p tax rate for the lowest paid, to help pay for a 2p cut the basic rate came into force on Monday.
It means many early retirees who have returned to work, part-time workers and students face paying double the amount of income tax they did previously.
Business Secretary and Barrow MP John Hutton said there was no chance of a rethink despite growing opposition from the public, opposition parties and backbench Labour MPs.
Lib Dem leader Nick Clegg said it was a “cheap political stunt” to allow a 2p cut in the basic tax rate at the expense of the poorest people.
Mr Hutton said the move had to be seen as part of a wider package of tax cuts.
From Sunday, standard income tax is being cut by 2 per cent to 20 per cent but the lowest 10p band is being scrapped entirely.
Mr Clegg said: “Over five million of the poorest people, it’s estimated, with incomes between £5,000 and £18,000, are suddenly finding their starting rate of tax is doubling, why?
“So Gordon Brown could offer a 2p cut in the rate from 22p to 20p for the following day’s headlines. I think that is an outrageous political stunt at the cost of the poorest in British society.”
Last week Mr Brown said he would look again at the impact of the changes – announced in last year’s Budget – amid fears of a backbench revolt over the decision.
But Mr Hutton told BBC1’s The Andrew Marr Show it was not possible to go back on the change.
“I really don’t think it is possible to do that. We have made the decisions now on the Budget. This package of measures was voted on and debated last year,” he said.
He said the changes were part of a “balanced package” which had cut the main rate of income tax and which left families with children “significantly better off”.
For those who were worse off, he said: “We are talking in the worst case scenario about half a per cent of net income being the scale of the maximum loss that someone might have.”
He said changes made by the Labour government over its 10 years in power had meant low income families were about £10 a week better off and other changes – like the introduction of the minimum wage – had benefited people on low incomes.
“Overall, it can’t be disputed that people on low and fixed incomes are significantly better off,” he said.
He acknowledged there were concerns that had been raised with ministers, adding: “Obviously it is right and proper that ministers engage in a debate with our concerned colleagues about this.”
Later, Conservative leader David Cameron said the Budget had not been “right” at a time when British families were “finding it tough”.
“My response to the Budget was don’t kick people when they’re down and we voted accordingly in the Commons.”
Other changes announced by Mr Brown while he was still Chancellor of the Exchequer include new rules for “non-domiciled” taxpayers – who live in the UK, have international wealth but are allowed to only pay tax on UK earnings. They will have to pay £30,000 annually, or else declare their total worldwide income to be taxed in the UK.
Capital gains tax is to be set at a flat rate of 18 per cent.
The Confederation of British Industry (CBI) has also criticised the Government for penalising business with tax rises in the Budget, which it says will harm the economy.
