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Ministers face new 10p tax fight Ministers face new 10p tax fight
(30 minutes later)
MPs are debating the bill which enacts the Budget, amid new pressure over the abolition of the 10p income tax band.MPs are debating the bill which enacts the Budget, amid new pressure over the abolition of the 10p income tax band.
Two Labour MPs have proposed amendments to help 1.1m people not compensated by the government's £2.7bn package.Two Labour MPs have proposed amendments to help 1.1m people not compensated by the government's £2.7bn package.
Minister Jane Kennedy said "concrete" proposals, "implementable as soon as possible" would be brought forward by the time of the pre-Budget report.Minister Jane Kennedy said "concrete" proposals, "implementable as soon as possible" would be brought forward by the time of the pre-Budget report.
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 on a scale unprecedented" in recent history.
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.
'Rabbit out of hat'
But 21 MPs have signed amendments to the Finance Bill by two Labour MPs to help 1.1 million people not covered.But 21 MPs have signed amendments to the Finance Bill by two Labour MPs to help 1.1 million people not covered.
'Blunderbuss' approach
The amendments have been tabled by North-West Leicestershire MP David Taylor and Birmingham Selly Oak MP Lynne Jones.The amendments have been tabled by North-West Leicestershire MP David Taylor and Birmingham Selly Oak MP Lynne Jones.
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. 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.
He believes this would compensate all of those who lost out from the 10p change were compensated.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
He told BBC Radio 4's Today programme that the compensation package announced by Mr Darling had been a "blunderbuss" approach, £2bn of which had gone to people who had not lost out in the first place. 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.
He said he hoped to get a commitment from the Treasury that all of those who lost out would be compensated within this financial year. "We will bring forward proposals, they will be concrete proposals, they will be implementable as soon as possible."
No changes 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".
And he told the BBC later that more than 20 MPs had signed his amendment adding: "There is a similar number that have indicated they will back me in the lobbies if it comes to a division." Taper mechanism
Ms Jones' plan would let people choose whether to opt in or out of the 10p rate. She later told the BBC the whole tax system needed a "complete overhaul" - with a higher threshold at which people start to pay tax. 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.
On Saturday, the Commons Treasury select committee criticised the chancellor's compensation package. He said the Conservatives would not restore the rate, should they win the next election - as they agree the tax structure should be simpler but added: "What the government has to do is deliver it in a way that is not carried on the backs of the poorest taxpayers."
If there was a single way of solving the entire problem we absolutely would have done it Kitty UssherEconomic Secretary to the TreasuryIf there was a single way of solving the entire problem we absolutely would have done it Kitty UssherEconomic Secretary to the Treasury
It said it would make up the losses of most of the 5.3 million affected by the 10p decision, but leave 1.1 million of the poorest workers out of pocket by up to £120 a year. 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.
But committee chairman, the Labour MP John McFall, told the BBC some of the amendments were "a bit too soon" and he was happy to wait for an announcement in the autumn, at the pre-Budget report. He believes this would compensate all of those who lost out from the 10p change were compensated and told the BBC earlier he hoped to get a commitment from the Treasury that all of those who lost out would be compensated within this financial year.
Downing Street has indicated that no further changes were planned to income tax arrangements for this financial year. Ms Jones' plan would let people choose whether to opt in or out of the 10p rate.
Tory amendment 'Key message'
On Saturday, the Commons Treasury select committee said the £2.7bn package would make up the losses of most of the 5.3 million affected by the 10p decision, but leave 1.1 million of the poorest workers up to £120 a year worse off.
Economic Secretary to the Treasury Kitty Ussher told BBC Radio 4's World at One programme: "If there was a single way of solving the entire problem we absolutely would have done it.Economic Secretary to the Treasury Kitty Ussher told BBC Radio 4's World at One programme: "If there was a single way of solving the entire problem we absolutely would have done it.
"We felt that this [the compensation package] was the right thing to do to return money to people in the current international economic circumstances.""We felt that this [the compensation package] was the right thing to do to return money to people in the current international economic circumstances."
Shadow chief secretary to the Treasury Philip Hammond said the Conservatives would put forward their own amendment to "force the government to come back to Parliament with a full report on proposals" to help the 1.1m. 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.
I find it difficult to see how they could now, in retrospect, get a simple coherent package to sweep everyone up Vince CableLib Dems Vince Cable, Treasury spokesman for the Liberal Democrats, said the "key message" was that in future the government had to be clear, about which households benefit and which households lose out under tax changes.
He said their proposal would mean Parliament would vote on that package of measures at the time of the pre-Budget Report in the autumn, when Mr Darling will announce plans for future years.
And Vince Cable, Treasury spokesman for the Liberal Democrats, said the "key message" was that in future the government had to be clear, about which households benefit and which households lose out under tax changes.
He said it would be hard now to compensate everyone who lost out as they were from different groups - from low-paid workers to some pensioners.
"I find it difficult to see how they could now, in retrospect, get a simple coherent package to sweep everyone up. It would be nice if they could but I doubt that it's practical," he told the BBC.
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%.
In addition to the row over the 10p tax rate, changes to vehicle excise duty on the most polluting cars are also likely to be scrutinised, as the Finance Bill returns to the Commons on Tuesday and Wednesday.In addition to the row over the 10p tax rate, changes to vehicle excise duty on the most polluting cars are also likely to be scrutinised, as the Finance Bill returns to the Commons on Tuesday and Wednesday.