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Basic rate taxpayers to get £120 Basic rate taxpayers to get £120
(30 minutes later)
Chancellor Alistair Darling has put up the personal tax allowance by £600 - meaning every basic rate taxpayer will pay £120 less tax this year. Chancellor Alistair Darling has put up the personal tax allowance by £600 - meaning anyone earning up to about £41,350 will gain £120 this year.
Mr Darling, who said the package would cost £2.7bn, added that the 40p rate threshold would change so that higher earners' tax bills would be unchanged. Mr Darling's £2.7bn tax cut for this year came as part of measures to help those hit by the 10p tax rate's axing.
The Commons announcement came as part of Mr Darling's package to help those hit by the axing of the 10p tax rate. He told MPs he would lower the level at which 40p tax is paid - so higher earners' do not gain from the change.
Tory George Osborne accused Mr Darling of "cynicism" and "total incompetence". Tory George Osborne accused Mr Darling of "cynicism". Lib Dem Vince Cable feared it was a "short-term gimmick".
"Let no-one be fooled why you are making this statement today - not because you wanted to.... but because this divided, dithering and disintegrating government are panicking in the face of the Crewe and Nantwich by-election," the shadow chancellor said."Let no-one be fooled why you are making this statement today - not because you wanted to.... but because this divided, dithering and disintegrating government are panicking in the face of the Crewe and Nantwich by-election," the shadow chancellor said.
'Fairest way''Fairest way'
Vince Cable, the Lib Dems' treasury spokesman said: "I hope this is not just another short-term gimmick."
Mr Darling said the change was the "fairest and most effective way" to help those who lost out from the scrapping of the 10p tax rate.Mr Darling said the change was the "fairest and most effective way" to help those who lost out from the scrapping of the 10p tax rate.
He said it means 22 million people on low and middle incomes will gain an additional £120 this year - with a £60 lump sum in September pay packets, plus £10 a month until the end of the year. For future years our aim is to continue the same level of support for those on lower incomes and I shall bring forward proposals to do this at the Pre-Budget Report Alistair DarlingChancellor class="" href="/1/hi/uk_politics/7399057.stm">In full: Darling statement
He said it meant 22 million people on low and middle incomes will gain an additional £120 this year.
The money will come via a £60 lump sum in September pay packets, followed by a £10 monthly increase until the end of the year.
"At a cost of £2.7bn, I will increase the individual personal tax allowances by £600 to £6,035 for this financial year, benefiting all basic rate taxpayers under the age of 65," he said."At a cost of £2.7bn, I will increase the individual personal tax allowances by £600 to £6,035 for this financial year, benefiting all basic rate taxpayers under the age of 65," he said.
Some 4.2m households will receive as much or more than they lost when the 10p starting rate of tax was axed. Of the 5.3 million households which had lost out, 4.2m will receive as much or more than they lost when the 10p starting rate of tax was axed.
Field apologyField apology
Mr Darling added: "The remaining 1.1m households will see their loss at least halved.Mr Darling added: "The remaining 1.1m households will see their loss at least halved.
"In other words, 80% of households are fully compensated, with the remaining 20% compensated by at least half."In other words, 80% of households are fully compensated, with the remaining 20% compensated by at least half.
"And in addition, 600,000 people on low incomes will be taken out of income tax altogether.""And in addition, 600,000 people on low incomes will be taken out of income tax altogether."
Mr Darling said the measures would be funded through borrowing so as not to take money out of the economy while it was slowing.
Ex-minister Frank Field, who had led the rebellion against the scrapping of the 10p tax rate, welcomed the announcement and apologised for his remarks about the prime minister in a BBC interview on Sunday.Ex-minister Frank Field, who had led the rebellion against the scrapping of the 10p tax rate, welcomed the announcement and apologised for his remarks about the prime minister in a BBC interview on Sunday.
"Over the weekend I allowed my campaign to become personal. I much regret that and I apologise without reservation," he said."Over the weekend I allowed my campaign to become personal. I much regret that and I apologise without reservation," he said.
Union welcome
Mr Darling replied: "It is not every day that honourable members have the courage to say what you said and it's appreciated."
Meanwhile, the unions welcomed the chancellor's tax allowance changes.
Paul Kenny, general secretary of the GMB, said: "The prime minister and chancellor are to be congratulated for listening to the public and changing tack on this."
Dave Prentis, general secretary of Unison, said: "This is a very welcome move. It shows that the prime minister is listening to the concerns of low paid workers who have lost out by the abolition of the 10p rate."
Tony Woodley, joint leader of Unite, added: "Reconnecting with Labour's social conscience in this way is a major step towards reconnecting with voters generally."