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Low-paid hit by tax changes - MPs Minister defends tax rate changes
(about 2 hours later)
The decision to abolish the lowest income tax band penalises childless people in low-paid jobs, MPs have said. 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.
The Treasury Select Committee warned the "main losers" could be deprived of as much as £232 a year. Cabinet Office minister Ed Miliband said reversing the policy would be "wrong", making the system "less fair".
Chairman John McFall said they were an "unreasonable target" for the tax simplification measure. 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 called the change a "tax-grab". But the government said it was an "integral part" of a "coherent package of reforms". The Conservatives said this was a "tax-grab" on the lowest paid.
Standard income tax has been cut from 22% to 20% and tax credits increased, but the lowest 10p band has been scrapped entirely. 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.
'Laudable aim' The changes came into force at the weekend.
In its report on the Budget, the committee said households without children or anyone over the age of 65, and on incomes of under £18,500 a year, would lose out. 'Unreasonable target'
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". 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".
Our approach must be to do what we can to stop this tax-grab on some of Britain's poorest people David CameronConservatives class="" href="/1/hi/business/7333357.stm">Treasury faces 'challenge' 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".
Mr McFall, a Labour MP, 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." 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."
He 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". This is a group we should be saluting Frank Field MP class="" href="/1/hi/business/7333357.stm">Treasury faces 'challenge'
Last week, former Labour whip Greg Pope tabled a Commons motion calling for action, signed by 30 Labour MP. 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".
This was withdrawn after he was "given assurances" by ministers they would examine its impact. 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.
'Wrong time' "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.
Speaking at his monthly news conference, Conservative leader David Cameron said the tax changes were coming "at the wrong time to ask the lower paid to pay higher taxes". "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 commentsHAVE 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".
The prime minister's spokesman said: "The reform we made to the 10p rate was an integral part of last year's Budget. 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.
The chairman of the Parliamentary Labour Party, Tony Lloyd, said he did not believe Labour backbenchers would vote against the Finance Bill, which confirms the tax changes.
"Labour MPs, in the end, are going to support the thrust of the government's policy because it's the government that will get them elected as Labour MPs," he said.