More help needed for 10p tax losers

Chancellor Alistair Darling must do more to compensate the 1.1 million low-income households, MPs have said.An influential committee of MPs have also said Mr Darling must ensure that the £2.7 billion package he announced last month to mitigate the impact of the 10p decision is not simply a one-off gesture.The cross-party committee called for the creation of a Poverty Commission to examine the effect of public policy on the poor, as well as the inclusion of a Household Impact Assessment in future Budgets and Pre-Budget Reports to analyse the impact of their measures on individual and family finances.The House of Commons Treasury Committee report said Mr Darling's May 13 decision to raise the income tax threshold by £600 was "probably the least bad option" to offset the impact of the abolition of the 10p rate, announced in Prime Minister Gordon Brown's final Budget as Chancellor last year.But the package did not go far enough and was "not well-targeted", as £2 billion of the extra money went to middle-income workers who did not lose out from the 10p decision, while 1.1 million of those worst affected continue to be out of pocket.And the MPs noted that the Government has yet to make clear if the help - funded by extra state borrowing - will be repeated in years to come.Experts at the Institute for Fiscal Studies have warned the Chancellor could bust his own sustainable investment rule if it is.Committee chairman John McFall said: "The May 13 measures, whilst welcome, do not go far enough. There are still 1.1 million losing households, many of whom are on low incomes and who are being hit hard by rising food and fuel prices and the slowdown in the economy."He added: "The Government's short-term priority must be to make every effort to compensate these people in full. The Government must not let this issue slide into the background and will need to produce fresh proposals to fully compensate these 1.1 million households by the time of the 2008 Pre-Budget Report."Most of those affected were childless younger workers on low incomes, but the worst-hit group were women aged 60-64 with modest occupational pensions, many of whom would have seen their income tax double without the Chancellor's compensation package.The report found that Mr Darling was right to ditch his initial proposals to use changes to the minimum wage, winter fuel payment and tax credits to offset the 10p decision. Any future change to help the 10p losers should be made through the tax system, it suggested.

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ITN | June 28, 2008

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