Tax cut for 22m in "panic budget"

May 14 2008 Liverpool Daily Post

UP TO 22m people were handed a shock £120 tax cut yesterday when the Government was forced into a panicky “mini-Budget” to try to kill off anger over the 10p tax rate blunder.

Chancellor Alistair Darling announced he was putting up the personal tax-free allowance as the quickest way to compensate most of the 5.3m losers from the scrapping of the 10p rate last month.

The measure, which Mr Darling appeared to rule out just three weeks ago, succeed-ed in averting a fresh revolt by Labour backbenchers, which had threatened the Government with a devastating defeat.

Frank Field, the leading rebel and 10p critic, rose to tell the Chancellor: “Can I congratulate you for putting an end to this issue.” The Birkenhead MP then dramatically apologised to Gordon Brown for allowing his campaign to “become personal”.

In a weekend interview, Mr Field described Mr Brown’s career as “tragic”, said he was prone to “tempers of an indescribable nature” and predicted he would be replaced before the next election.

Yesterday, he said: “I allowed my campaign to become personal. I much regret that and I apologise without reser-vation.” Mr Brown acknowledged the apology with a nod.

However, Mr Darling was immediately embroiled in a fresh row over the timing of the announcement – just nine days before a possible Labour defeat in the crunch Crewe and Nantwich by-election.

Hiking the tax allowance by £600 to £6,035 will deliver a £120 bonus to every basic rate taxpayer, backdated to April 6. A £60 lump sum will arrive in September pay packets, with a further £10 in each month through to March.

Top-rate taxpayers will not gain, because threshold at which the 40% rates kicks in will be cut by £600 to leave them unaffacted.

Critics also leapt on con-firmation that the £2.7bn cost would be met through extra borrowing, when the Govern-ment’s finances are already slipping heavily into the red.

In the chamber, Mr Darling said the change was the “fairest and most effective way” to help those who lost out through the scrapping of the 10p rate, now recognised as a momentous mistake.

The announcement was cheered by relieved Labour MPs, who fear the 10p fiasco is the key issue in dismal polls suggesting the Tories will snatch the Crewe seat from Labour next week.

But Shadow Chancellor George Osborne branded it a “mini-Budget to clear up the mess”, pointing to Mr Brown’s previous opposition to raising tax allowances.

Mr Osborne said: “First we got the tax con and now we are getting the compensation con. This help is for one year only.”

And he added: “This divided, dithering and disintegrating government is panicking in the face of the Crewe and Nantwich by-election.”

Mr Darling said his package would fully compensate 80% of the 5.3m 10p losers, while the remaining 1.1m households would “see their loss at least halved”.

Meanwhile, the prime minister will today further move to revive his government’s flagging fortunes by unveiling a draft Queen’s speech, setting out a legislative programme for the autumn.