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Minister defends tax rate changes | |
(about 2 hours later) | |
The government has defended its decision to abolish the lowest 10p rate of income tax after a committee of MPs said it would hurt low earners. | |
Cabinet Office minister Ed Miliband said reversing the policy would be "wrong", making the system "less fair". | |
But the Treasury committee warned that, under government changes, childless single people earning less than £18,500 would lose up to £232 a year. | |
The Conservatives said this was a "tax-grab" on the lowest paid. | |
In last year's Budget, the then chancellor Gordon Brown cut the basic rate of income tax from 22% to 20% and increased tax credits. But he also scrapped the lowest, introductory -10% - rate of income tax. | |
The changes came into force at the weekend. | |
'Unreasonable target' | |
In its report, the committee claimed households without children or anyone over the age of 65, and on incomes of under £18,500 a year, would be the "main losers". | |
Chairman John McFall, a Labour MP, said they seemed an "unreasonable target for raising additional tax revenues to fund the benefits of tax simplification and meeting the needs of children in poverty". | |
He added: "While tax simplification is a laudable aim, it seems strange that the abolition of the 10p starting rate of income tax disadvantages mainly low-income households." | |
This is a group we should be saluting Frank Field MP class="" href="/1/hi/business/7333357.stm">Treasury faces 'challenge' | |
Mr McFall said "appropriate help" must be given to ensure they get the right benefits and called the report a "sober analysis" which had "reminded the government of its responsibilities". | |
But Mr Miliband, a close ally of Mr Brown, told BBC Radio 4's World at One: "When you look at the overall effect of the last Budget there are 16 million households, who gain, and the biggest gains go to the poorest 30% of people in our society. | |
"Now, of course we could reverse all the changes made in that Budget but I think it would be the wrong thing to do, because I think it would make the tax system less fair than it is at the moment. | |
"And I think all the changes taken together make the tax system fairer and benefit the bottom third of our society, which is what a Labour Budget should do." | |
Last week, former Labour whip Greg Pope tabled a Commons motion calling for action, signed by 30 Labour MPs. | |
Amendment | |
This was withdrawn after he received "assurances" from ministers that they would examine its impact. | |
However, former Labour minister Frank Field is proposing an amendment to the Finance Bill - which confirms the tax system changes - asking for the low-paid workers affected to be compensated. | |
He said: "This is a group we should be saluting, who do some of the best jobs in our society for the least money." | |
Conservative leader David Cameron said the tax changes were coming "at the wrong time to ask the lower paid to pay higher taxes". | |
He added: "People are seeing it when they are shopping, running a car or paying a mortgage... | He added: "People are seeing it when they are shopping, running a car or paying a mortgage... |
"Our approach must be to do what we can to stop this tax-grab on some of Britain's poorest people." | "Our approach must be to do what we can to stop this tax-grab on some of Britain's poorest people." |
HAVE YOUR SAYNew Labour's vicious tax policies have increased the burden on the poorest among usSteve, SunderlandSend us your comments | HAVE YOUR SAYNew Labour's vicious tax policies have increased the burden on the poorest among usSteve, SunderlandSend us your comments |
Lib Dem leader Nick Clegg said the abolition of the 10p rate had been a "cheap political stunt" to allow Mr Brown to take 2p off the basic rate of income tax "for the following day's headlines". | Lib Dem leader Nick Clegg said the abolition of the 10p rate had been a "cheap political stunt" to allow Mr Brown to take 2p off the basic rate of income tax "for the following day's headlines". |
But the prime minister's spokesman said: "The reform we made to the 10p rate was an integral part of last year's Budget. | |
"That Budget included a reduction by 2% in the basic rate of income tax from 22% to 20% which will benefit millions of people. | "That Budget included a reduction by 2% in the basic rate of income tax from 22% to 20% which will benefit millions of people. |
"It will lead to a significant increase in pensioner tax allowance, a widening of the working tax credit and increases in child benefit and child tax credit." | "It will lead to a significant increase in pensioner tax allowance, a widening of the working tax credit and increases in child benefit and child tax credit." |
Asked if changes could be made, he said: "This was a coherent package of reforms." | Asked if changes could be made, he said: "This was a coherent package of reforms." |
The prime minister was in touch with Labour MPs "all the time", he added. | The prime minister was in touch with Labour MPs "all the time", he added. |