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10p tax repair

Nick Robinson | 14:59 UK time, Tuesday, 13 May 2008

Stand by for the announcement of the Treasury's 10p tax repair. The word from Whitehall is that it will be "significant", "costly" and will "fix the political problem".

Alistair DarlingThe chancellor's been determined to come up with a package that does not involve individual payments to individually identified losers, does not fall apart under scrutiny and which can be presented as a long-term policy rather than a short-term fix. He has also insisted that he will not unveil his plans in full until all the details are worked out ie in his pre-Budget report in the autumn.

Long term, Alistair Darling knows he needs to re-establish Labour's narrative of helping "the many not the few" with a strategy of help for the poorest - via winter fuel payments, the minimum wage and even, possibly, changes to tax allowances.

Today's statement is being described as a "ground clearing" job so that the list of bills the PM will unveil tomorrow get a hearing.

PS. When listening to arguments about gainers and losers, bear in the mind the following:

The Treasury estimates that 5.3million people lost as a result of the abolition of the 10p tax rate.

When the prime minister claimed recently that the figure "came down as a result of the Budget 2007 to 4.3m, it is now going down again to 3.8m" (Sky News, 5 May 2008) he was taking into account other measures in the last two Budgets such as the rise in winter fuel allowance and the planned up-rating of tax credits and child benefit".

The Treasury states that "for households that are worse off, the average loss is about £2 per week" and the "maximum amount any single individual could be worse off by is £232 per year (£4.46 per week).

UPDATE, 03:30PM: It is to be increases in tax allowances which will affect pay packets from September and will be paid for by greater borrowing.

Comments

  • Comment number 1.

    £4.46 per week is what we are talking about. Look out for some draconian measures to establish a layer of bureaucracy that will probably pay this back but may not.

    Too little too late by autumn though. Damage is done, time's up Labour - and Nantwich is almost certainly lost.

  • Comment number 2.

    You and every other journalist or reporter are still referring to the "abolition" of the 10p rate. Were the rate abolished, then we would pay no tax on that first tranche of income. The government did, in fact double the rate. Pedantic, maybe but certainly accurate.

  • Comment number 3.

    Just what the countriy needs......MORE DEBT...mind you I would have been shocked had this incompetant calamity that passes for a government not come up with a solution along those lines, as it appears to be the answer to everything.

    Why care about where it is comming from and how it will be payed back as we'll be turfed out come the next election so it will be somebody elses mess to clear up is what they must be thinking.

    I always have to laugh when some government minister comes on attacking the Tories for having uncosted plans for this and that, as there couldn't be a more prominant example than 'the pot calling the kettle black' than this shower of chancers and scoundrels who have wormed their way into government

    Roll on the next election for goodness sakes and throw them out.

    Where has all the money in the order of 51% increase in taxation since 1997 gone to Mr Brown?

    To quote the words from the film 'Jerry Maguire'

    "Show me the money"

  • Comment number 4.

    Financed by yet more borrowing.

  • Comment number 5.

    Forgive me if my maths are wrong - but the personal allowance went up by a couple of hundred pounds (£210) and the national inurance threshhold by £60 a year. Add these two together you get £270 - more than offsetting the 'loss' of the 10p change.

    OK I may have missed some calculations in the detail - but to me there are no losers - just some who dont benefit as much - but many of these groups have been benefitting from minimum pay increases and other payments over the last few years which are now forgotten about.

    I guess it depends on how things are reported.

    When you're down you're down.

  • Comment number 6.

    This is not full compensation for anyone.

    People are still paying more tax.

    From September, they will be paying slightly less than they were paying before that - but still more than the same point less year.

    It is cynical and too late.

    This country is already hiding a huge amount of national debt (PFI) and is now adding £2.7billion to the published debt.

    How will we ever afford it?

  • Comment number 7.

    The question should be: “Why are these people on such low income paying tax (and National Insurance) at all?” And not “Should it be 10% or 20%”

  • Comment number 8.

    The Speaker has just slapped wrists because the press were given copies of the statement before they were made available to the house.

    That is dreadful and shows contempt for both parliament and the country as a whole.

    This is an exercise in cynical manipulation - not helping people who are being hammered by a government out of control.

  • Comment number 9.

    1.1 million are still without compensation

    that is a vast number of people

    and he has no answer for those who will feel the full force of the initial cut.

  • Comment number 10.

    If the personal allowance is raised then 40% tax payers get an extra £240 this year, i.e. more than 20% tax payers. Or is the allowance only being raised for basic rate tax payers - I doubt it given the bureaucracy involved. Strange.

  • Comment number 11.

    I have not read about 'the repair' ... and I'd respectfully suggest that you don't have to either.

    All we really need to do is accept that in England, we are very, very poor at doing 'bureaucracy'.

    A myriad of failed Government bureaucracies bears a sad testament to wasted lives and tax payers money.

    Once Government accepts this basic premise, then certain decisions naturally flow.

    For example, a greatly simplified tax regime.

    Get the idea or is it 'too radical' (sic).

  • Comment number 12.

    re: posting 2; I agree....
    Nick, please stop calling it the abolition of the 10pct rate; it was an explicit doubling of the 10pct rate and you and your colleagues need to refer to it as such.
    Calling it an abolition is at best misleading, at worst a blatent lie.
    This is a critical point; if the BBC doesn't understand that 10 plus 10 equals 20, then you have no business reporting the news.

  • Comment number 13.

    I really don't believe this!!

    The true cost is surely way more than £2.7bn if you take into account the cost of reproducing the annual employers packs CD's etc etc. For the third time.

    And then there is the cost to industry - the tax software houses will have to update software yet again, someone will have to run courses to explain how on earth you can give £120 to lower paid people through allowances but get it back off higher raters through the PAYE system without issuing millions more tax returns!

    When will someone stand up and shout for no confidence in this bunch of total losers - as soon as times get difficult they completely lose the plot.

  • Comment number 14.

    Announcing the figures in a by-election leaflet is one of the most cynical moves I have ever seen.

    I have nothing but contempt for this shameless government.

    They are leaving the lowest paid without the compensation they need

    This is yet more evidence of their lack of concern for the reality of the lives of the public.

  • Comment number 15.

    The sad thing is that the Government have done an awful lot to help the poor since 1997. It's a complete shame that this is going to overshadow everything else they've done.

    I'm not saying that it's unfairly being made an issue. It's certainly an almighty cock up by Gordon Brown (and I'm amazed that it was forgotten about my pretty much everyone for the past year until this year's budget), but it is a great shame that this will no doubt go down in history as the most remembered thing about Gordon Brown.

  • Comment number 16.

    What a mess. This whole episode has embarrassed the Chancellor and shattered any chance he might have had for building a reputation. Gordon Brown doesn't look great either.

    http://lettersfromatory.wordpress.com

  • Comment number 17.

    Why no mention of the losers in any of these articles? if you are a higher rate tax payer you are now worse off as the re-creation of the 10% band is paid for by the lowering of the higher band, so what you used to pay 20% for is now 40%. Therefore you pay 10% more tax on the difference. great...

  • Comment number 18.

    Lets look at headlines as they unfolded.

    Low paid hit by tax changes
    Darling - I cant rewrite budget
    Brown acts to head off tax revolt
    Brown defends U turn on 10p tax
    Brown admits mistakes over tax
    Darling assures 10p tax rebels
    Crewe within tory grasp
    Darling briefs ministers on tax

    Yep certainly looks like effective leadership to me.

    Am I being cynical or is this the taxpayer paying for NuLabours election in Crewe.

    I can only hope that the voters in Crewe and Nantwich see through this blatant NuLabour scam.

  • Comment number 19.

    I hope the voters aren't tricked by this move.

    I may be a cynic, but it wouldn't surprise me if this whole debate was well thought out by spin doctors to initially upset the neutral voters, but actually gain their vote by fixing the problem!!!

    Let's remember that no one is actually better off as a result of this change compared to before the budget.

    If Brown and Darling come out of this smelling of roses fair play to them for pulling off a PR stunt of the highest order, but I won't be conned.

  • Comment number 20.

    So the £232.00 per year loss is going to be reduced by £120.00 leaving 5 million people only £112.00 per year worse off. This will be paid for by dragging more people into the upper tax bracket, hitting the middle-classes that labour where trying to bribe.

    This will not repair the damage done to the working poor by a party that doubles the income tax of the poor whilst bailing out billionaire bankers.

    They are desperately trying to buy the Crewe and Nantwitch by-election and this will not do.

  • Comment number 21.

    I don't think the red rose of new labour will ever regain a pleasant scent.

    Student Tuition Fees
    Iraq
    Northern Rock
    10p Tax Rate

    etc
    etc
    etc

    There are points in electoral history when the tide turns and you can do nothing about it.

    I honestly believe that we have now gone beyond the turning point.

    Watching Gordon trying to outdo Canute will be entertaining - in a Schadenfreude sort of way.

  • Comment number 22.

    When you go into any supermarket and spend you £150 on shopping, remember that despite this 'windfall' for low AND middle earning people, remember the person who fill the shelves while you shop, or helps you find something, or the person or the checkout. or the junior supervisors, or the people going around with those trollies with blue boxes doing your online shopping or many of the warehouse people out of sight are all earning between the £6,500 to £13,500 that are still worse off.

    I am one of them. Working on a supermarket checkout because at 51 no one will employ me for the I.T/office jobs I have experience for.

    Millions more will still be worse off, but because it's now only around £60 a year, and because it's only a couple million low earners that are effected now, the news will be of a successful change that solves all the problems.

    I am on £11,800 for a full time 39 hour job. £60 is not a small amount of money to me. I have had that taken away to pay for a tax cut for those making more than £18,500.

    WEnjoy your tax cut middle England. You have it on the necks of the low paid helping you eat your fill when you spend that £60+ I have lost on that meat and veg and fruit that the person serving you cannot afford.

  • Comment number 23.

    Why on earth should we congratulate GB for borrowing more money and putting the country further into debt? The coffers are bare and we all know who is to blame for that!

  • Comment number 24.

    I earn £42,000 a year. I'm not married and I don't have any children. Will I now be worse off and if so by how much? Thanks

  • Comment number 25.

    mslittlejess - on 42,000 you will be 120 pounds better off this year. On 11,850 I will be 60-70 pounds worse off this year. If that doesn't get this nation angry, I don't know what will.

    Next year who knows? You will probably come out even in the long term, I have my doubts that as a low paid worker I will.

  • Comment number 26.

    A nice little cash compensation (err "bribe") but of course that is all it is. Given that it is announced just before a by-election (or should that now actually be 'Buy-election') I think it would not be unexpected if the voters had some cynicism about the process. I don't think Crewe and Nantwich will be bought but still.
    It was said by GB yesterday in the commons that this had to be done now to go in to the Finance bill being debated but will that not be agreed until September? If agreed sooner why do these people have to wait to September to see their hard earned cash returned? Thats a lot of interest building up on the unpaid amounts.
    I note also its not quite as good as the government aided and abetted by the cheering 'nodding dogs' on the labour back benches would have first thought. At least a million will still loose out with no re-payments made and as I understand it its only "a one off payment" this year. There are other descriptions for such payments as these ("bung").
    At least some have got only some of their money back. This of course will be just in time for them to give it back to the government in the form of the increase car tax due next year but announced this year which leaves the government out of pocket only a few months. The devil as always with Nu Labour and any labour government, is always in the detail.
    As regards Mr Frank Field MP (Impressed I originally was with this man) who now allows this short term 'political fix' to pass un-challenged then it would be fair to say from "hero to zero is but a very short fall" don't you think?
    Kind regards
    Baron VonRipWinkle

  • Comment number 27.

    Why does the pound sign not work on this forum?

  • Comment number 28.

    The thing that astonished me the most is that, as an accountant, it took me about twenty minutes on budget day 2007, yes 2007, to calculate that the abolition of the starting rate of 10% and the lowering of the basic rate bands to 20% would hit anyone on low earnings and no benefits, and would equally benefit anyone earning more than around 18,000 per annum.

    I saw it coming 12 months ago. Why didn't the government ?Who was advising them, and what did they expect people to say ? This is such a simple piece of mathematics and it defies belief that the government were too thick to see it coming, and also that their spin people/advisers were too thick to see it coming.

    What has been announced this week is that personal allowances will increase by 600 pounds. The effect of this is that everyone paying at the basic rate of tax, will actually get just 120 pounds back. NOT the 223 pounds they lost (based on last year's starting rate band.) Again, no one seems to have seen it. This is NOT a like for like replacement. Someone earning 7,665 pounds will still be 103 pounds worse off.

    All middle income tax payers (18,000 and over) will now be even better off.

    But just to correct an earlier post, the increase of the personal allowances will not affect higher rate payers, as the level at which people pay 40% has fallen by a compensating amount. 40% payers are still better off than they were last year, (because of the fall in basic rate) but are no further better off as a result of this new development. They are no worse off either.

  • Comment number 29.

    Budget in April "We don't have any money to finance tax cuts without jeopardising the long-term stability of the economy"

    Mini-Budget in May "We are going to rectify the position for the 10p tax losers by borrowing £2.7bn to finance a tax cut"

    Announcement in May "The reason we have lifted the personal allowance threshold is that it is a simple way of addressing the problem"

    Spin in May "We are increasing the personal allowances to give everyone a tax rebate to stimulate the economy as has happened in the US"

    Incompetence, naked lies, political short-termism or all three?

  • Comment number 30.

    Nick

    Why is it the pound "£" sign does not work on this blog?

    Surley your not using this server on a american keyboard?

  • Comment number 31.

    I like the comment in one of The Sundays this morning. " Why should anyone be pleased if their wallet is stolen and only their library card is returned?" The tax rebate GB thought we would be grateful for and would tthereby change our voting intentions as a result of is a drop in the ocean compared to the increased household bills we are all paying. On the contrary although 50% of people think he was right to do so 60% thought it was an electoral bribe. On the back of this The Opposition poll lead has doubled in the space of a week! He must think we are all stupid!

  • Comment number 32.

    No 30 I already posed that same question on another thread. Strange isn't it?

 

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