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Darling 'U-turn' on 10p tax rate Darling 'U-turn' on 10p tax rate
(21 minutes later)
Pensioners and young people who have lost money as a result of the abolition of the 10p tax rate are to be given compensation, Alistair Darling says.Pensioners and young people who have lost money as a result of the abolition of the 10p tax rate are to be given compensation, Alistair Darling says.
In what will be seen as a U-turn forced by Labour rebels, the chancellor said he would assess the loss to pensioners aged 60-64 and childless people.In what will be seen as a U-turn forced by Labour rebels, the chancellor said he would assess the loss to pensioners aged 60-64 and childless people.
He will announce in the autumn what the Treasury will do to compensate them, with the money backdated to April. The compensation deal will be unveiled in the autumn and backdated to April.
It comes as the ranks of Labour rebels concerned by the measure rose to 46. Labour's Frank Field said an amendment calling for compensation and backed by 46 Labour MPs would be withdrawn.
Gordon Brown is likely to be pressed on the issue in the House of Commons in Prime Minister's questions from noon.
Winter fuel paymentsWinter fuel payments
His official spokesman said: "There is no question of not going ahead with the abolition of the 10p tax rate. It was the right thing to do." The prime minister's official spokesman said: "There is no question of not going ahead with the abolition of the 10p tax rate. It was the right thing to do."
Mr Darling outlined his proposals in a letter to John McFall, the Labour chairman of the Commons Treasury Select Committee.Mr Darling outlined his proposals in a letter to John McFall, the Labour chairman of the Commons Treasury Select Committee.
He said he would be looking at changes to the winter fuel payment system, tax credits and the minimum wage in order to compensate those losing out from the ending of the 10p rate.He said he would be looking at changes to the winter fuel payment system, tax credits and the minimum wage in order to compensate those losing out from the ending of the 10p rate.
The Treasury Committee has announced an inquiry into the effect of the Budget measures on low-income households. The Treasury Committee has announced an inquiry into the effect of the Budget measures on the low paid.
In his letter, Mr Darling said the introduction of a "more generous" tax credits system had meant the 10p tax rate, as a means of helping low-income households, had outlived its usefulness.
Government's intent
"The main two groups we now want to do more to help are, first, other low paid workers without children, and, second, pensioners under 65," he said.
"For pensioners aged 60-64, whose incomes tend to be more stable, we have put in hard work to see if those households who have lost out from the removal of the 10p starting rate of income tax can be helped through the mechanism that already exists to pay the Winter Fuel Allowance,
"As a sign of the government's intent, we do not wish to wait unnecessarily until November.
"Whatever conclusions we come to, all the changes will be backdated to the start of this financial year."
Mr Darling said he had also asked the Low Pay Commission to report on what changes could be made to the minimum wage regime to support young workers.