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Ministers face new 10p tax fight Ministers see off 10p tax fight
(about 2 hours later)
MPs are debating the bill which enacts the Budget, amid new pressure over the abolition of the 10p income tax band. The government has headed off a threatened Commons revolt over the scrapping of the 10p tax band.
A Labour MP has proposed an amendment to help 1.1m people not compensated by the government's £2.7bn package. About 20 Labour MPs were threatening to rebel unless extra compensation was given to 1.1 million low-paid people who have lost out from the move.
Minister Jane Kennedy said "concrete" proposals, "implementable as soon as possible" would be brought forward by the time of the pre-Budget report. But they backed down after Treasury Minister Jane Kennedy promised the chancellor would deal with the issue in his pre-Budget report in the autumn.
The Tories said the Budget had been a "fiasco" which had "unravelled on a scale unprecedented" in recent history. The Tories said the Budget had been a "fiasco" which had "unravelled".
In May, Chancellor Alistair Darling quelled a possible backbench rebellion when he announced a £2.7bn compensation package for those who lost out. In May, Chancellor Alistair Darling quelled a possible backbench rebellion when he announced a £2.7bn compensation package for those who lost out by the ending of the "starting rate" of income tax.
'Rabbit out of hat'
But 21 MPs have signed an amendment to the Finance Bill by North-West Leicestershire MP Labour MP David Taylor to help 1.1 million people not covered.
Birmingham Selly Oak MP Lynne Jones, who also put forward an amendment, has told MPs she will not put it to the vote but is seeking "cast iron" assurances that the 1.1m people will be compensated.
Opening the debate for the government, Ms Kennedy said the existing compensation package had reduced the number of households who had lost out from 5.3m to 1.1m, and halves the loss for the 1.1m.
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Asked by Labour backbencher Frank Field, who led the rebellion which prompted the £2.7bn package, for some news on what the government planned to do for the remaining 10p tax losers, she said: "Can I reassure him that as the chancellor has said ... we will return to this issue at the pre-Budget report.
"We will bring forward proposals, they will be concrete proposals, they will be implementable as soon as possible."
But shadow chief secretary to the Treasury Philip Hammond spoke of the "fiasco of the 2008 budget and finance bill" which he said had "unravelled on a scale unprecedented in modern political history".
Taper mechanismTaper mechanism
However, Labour MP David Taylor said he wanted compensation for the 1.1 million people who were not helped by the government's package, otherwise he would force a vote on his amendment.
The cost of the help under his taper mechanism would be £66m, with the 1.1 million people receiving an average of £60 in compensation.
The chancellor will bring forward proposals. They will be concrete proposals. They will be implement-able as soon as possible Jane KennedyTreasury Financial Secretary
"This is not some enormous sum - this is a sum of the kind the chancellor might find down the back of a metaphorical settee at the time of making his Budget. It really is a trivial sum," he said.
However, he decided not to press his amendment to a vote after the government insisted it was working to compensate households which lost out.
Pressed on the issue by Labour ex-welfare reform minister Frank Field, who led the first rebellion, Ms Kennedy promised: "We will return to this issue at the pre-Budget report.
"The chancellor will bring forward proposals. They will be concrete proposals. They will be implement-able as soon as possible."
Mr Taylor conceded that he was taking it on a "huge amount of trust and goodwill" that the government's pledge would hold firm.
'Rabbit out of the hat'
Labour's Lynne Jones, who also put forward an amendment, told MPs she would not put it to the vote but was seeking "cast iron" assurances that the 1.1 million people would be compensated.
Mr Field has warned of a possible censure motion in the autumn if ministers did not make good on their promises.
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But shadow chief secretary to the Treasury Philip Hammond spoke of the "fiasco of the 2008 Budget and Finance Bill" which he said had "unravelled on a scale unprecedented in modern political history".
He said the £2.7bn package had not been a well-thought through measure but a "rabbit out of the hat", shortly before the Crewe and Nantwich by-election.He said the £2.7bn package had not been a well-thought through measure but a "rabbit out of the hat", shortly before the Crewe and Nantwich by-election.
If there was a single way of solving the entire problem we absolutely would have done it Kitty UssherEconomic Secretary to the Treasury Jeremy Browne, for the Liberal Democrats, told MPs that even a moment's examination of the 10p tax abolition would have shown it would be "disadvantageous to millions of people". He accused Mr Brown of trying to ape the Conservatives by "achieving the Thatcherite dream" - a 20p basic income tax rate - and said it was a "manifestly political move" about "positioning" as Mr Brown sought to succeed the then prime minister Tony Blair.
Jeremy Browne, for the Liberal Democrats, told MPs that even a moment's examination of the 10p tax abolition would have shown it would be "disadvantageous to millions of people". MPs also voted through the government's measures to raise the personal allowance to £6,035 and reduce the higher rate threshold to £34,800 as part of the rescue package announced in May.
He accused Mr Brown of trying to ape the Conservatives by "achieving the Thatcherite dream" - a 20p basic income tax rate - and said it was a "manifestly political move" which was about "positioning" as Mr Brown sought to succeed the then prime minister Tony Blair.
Mr Taylor's amendment - signed by 21 MPs, 19 of them Labour - would introduce a taper mechanism into the £600 increase in personal allowances for income tax offered by the chancellor.
'Copper-bottomed guarantee'
He believes this would compensate all of those who lost out from the 10p change but during the debate said it was just one "suggestion" for the government to consider as they prepare the pre-Budget report.
He said he would only put his amendment to the vote if the government was not able to reassure him adding: "I will be waiting to hear an absolute copper-bottomed, concrete rooted guarantee that the government and the Treasury team in particular are focused on this 1.1m [people]."
The Commons Treasury select committee said the existing £2.7bn package would compensate most of the 5.3 million affected by the 10p decision, but leave 1.1 million up to £120 a year worse off.The Commons Treasury select committee said the existing £2.7bn package would compensate most of the 5.3 million affected by the 10p decision, but leave 1.1 million up to £120 a year worse off.
The Conservatives are putting forward their own amendment to "force the government to come back to Parliament with a full report on proposals" to help the 1.1m - which Parliament would then vote on in the autumn.
The chancellor's compensation package was produced after Labour backbenchers had threatened to block the Budget by preventing the Finance Bill passing through Parliament.The chancellor's compensation package was produced after Labour backbenchers had threatened to block the Budget by preventing the Finance Bill passing through Parliament.
The decision to scrap the lowest 10p tax rate, made by Gordon Brown in his last Budget as chancellor in 2007, came into force in April this year - alongside a reduction in the basic rate of tax from 22% to 20%.The decision to scrap the lowest 10p tax rate, made by Gordon Brown in his last Budget as chancellor in 2007, came into force in April this year - alongside a reduction in the basic rate of tax from 22% to 20%.