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Anybody who has seen Gordon Brown lose his temper does not easily forget it. The image of an angry bear springs to mind, except angry bears cannot usually get their hands on items of office equipment to fling around. The prime minister is said to be very angry at the media this weekend for creating a political storm in what he regards as a tax teacup. He is angry with the independent experts who have calculated that 5.3m families will lose out as a result of the abolition of the 10p income tax band.
Mr Brown is also angry with his own back-benchers, who he thinks are too dim-witted to have understood his government’s efforts on behalf of the poor of Britain, from his system of complex tax credits to introducing and increasing the minimum wage. There is surprise as well as anger in the prime minister’s response. He had got so used to being attacked for redistributing away from the better-off and the middle classes that he had not expected to leave himself vulnerable to the charge of deserting Labour’s core supporters.
One source of Mr Brown’s anger can be easily dismissed: the idea that his critics have got their numbers wrong. When the Institute for Fiscal Studies first produced its figure for the 5.3m families losing out, Mark Neale, a senior Treasury official, told the Commons Treasury committee that its estimates were “in the right ball-park” and consistent with Mr Brown’s own assessment that four out of five households would gain or be no worse off as a result of the change. By implication the rest, one in five, would lose.
The losers typically earn between £5,000 and £18,000, the very group the 10p tax band was intending to benefit. Damagingly for the government, they are spread far and wide by age, family type and where they live. Every MP will have losers in his or her constituency. There are 2.2m single working people who do not qualify for tax credits because they earn slightly too much or do not work enough hours; 1.2m working couples without children who are also outside the tax credit net or choose not to claim it; 700,000 two-earner couples with children, 300,000 women aged between 60 and 64, and so on.
Had Mr Brown deliberately set out to sow discontent in every corner of the land he could not have done better. The losses are not large, probably averaging £2 a week and less than £1 billion in total. But they rankle hugely. The prime minister believes the losers should take the long view and appreciate what 11 years of Labour has done for them in making them better off. The “concession” in the coming days to buy off the rebels will be a pledge to look after them in future.
The trouble is that things have moved on. When he announced the abolition of the 10p rate in March last year, the credit crisis had yet to explode and the squeeze on family incomes was in its infancy. Since then world oil prices have doubled, gas and electricity bills have shot up and there has been a double-figure increase in the cost of a week’s food shopping. There is never a good time to hit anybody with a tax rise but this is a terrible time to be hitting the low paid.
Mr Brown will adopt his best head-down approach, twisting the arms of ministerial aides who threaten to resign and promising jam tomorrow for his increasingly restive MPs. He has no alternative. Compensating the losers would be fiendishly complicated and abandoning the abolition of the 10p rate would cost the Treasury more than £7 billion a year.
The prime minister should think back to how this problem arose. It was when he was chancellor, desperate to go out on a high note from the Treasury en route to No 10 and seeking a flurry of favourable headlines. He wanted to be seen as a dynamic tax reformer by cutting the basic rate of tax to 20p, paid for by abolishing the 10p rate. Sadly for him, he did not even get the good headlines. That is where his anger should be directed.
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Re. the compensation measures announced yesterday, yes what about all those who do not (and still will not) be able to obtain compensation via the Tax Credit System, Fuel Allowance and Minimum Wage ?
Such groups include early retirees and childless people working under 30 hours per week.
shielein fraere, Reading, England
So the 10% tax losers are to be compensated by increasing the minimum wage, extending tax credits and winter fuel allowance ?
What about all those who are not eligible for ANY of the above, such as early retirees under 60, childless people working less than 30 hrs pw etc etc ??
Pathetic.
harlan lever, Bath, GB
I think when Gordon Brown says we are, "living under the most generous Labour Government", I think he must mean the most generous Government with MPs salaries, tax-free perks and fraudulent expense claims. I note that none of those items are being reduced, and in fact the new tax rules mean ALL Government Ministers will in fact be better off. Why are we all sitting here putting up with it - we should take to the streets. It certainly worked with Thatcher's poll tax. She didn't survive in politics much longer either.
Neil, Gloucestershire, England
It is said that it would cost £7 billion a year to compensate those low wage earners who are having their income stolen from them in order to help the wealthy obtain their tax breaks. Surely, this is chicken feed Brown can come up with billions of pounds overnight when he wants to invade other people's countrys or to rescue failed banks.
Neil, Gloucestershire, England
10% of not a lot isn't very much. 10% of the salary and perks enjoyed by Labour MPs is a much more significant sum. How about Gordon and all the other Labour MPs and councillors contribute an additional 10% tax on most of their income (salary and perks) ..... then he might START to understand.
Donna Walker, Effingham, Surrey
I know this will sound fiendishly complicated to the IT consultants employed by HMG and probably worth a multi-billion-trillion pound contract, but two lines of code in the software used to calculate tax codes (assuming that HMRC don't still use pencil and paper).
If gross income less than £18,000 and not in receipt of working family tax credits then do
add to unadjusted tax-code (£1200 - (gross income - unadjusted tax code)/10)
That has just taken me all of 10 minutes to work out the maths so that the 20% who are net losers cease to be. So much for GB being a monster brain. Although it does assume that the tax code calculation sofware can access tax credit information - bet it can't.
Gis a job!
Eddie Reader, birmingham, england
Gordon Brown should direct his anger at his political opportunism
in wanting to shoot the Tory's tax fox ahead of the election he intended to call, before the changes were implimented ,and his cowardice in not calling it .
This man does dither and he is out of touch.He lacks political courage and the character needed in a leader.
robert everitt, wolverhampton,
Point sort of taken, David W of MH, but if the additional, compensatory tax credits were withdrawn at the same time as the 10p band was restored, then presumably the net cost would be much less than 7bn (while keeping the new 20% rate). Unless, of course, the Treasury is relying on less than 100% take-up of said new credits, something I think the Red Book hints at.
Not that I would ever accuse this administration of deviousness or obfuscation.
W Martin, Tenterden,
Gordon Brown said to journalists that we should realise we are "living under the most generous Labour government that there has ever been". "Generous" government?! It is our money, not Government's or Brown's money!
And Brown's view of "generosity" centres on hand-outs to the poor, in the form of state benefits. But these are destroying the former "working" class, by co-opting it into being a new work-shy underclass â paradoxically, shamed, humiliated and resentful. And worse still, generating even more resentful children, rebellious and violent, that now have a "kick" out of kicking heads â sometimes to death (and sometimes using the now fashionable âstampingâ).
To really help the poor Brown should instead have trimmed benefits and invested in training. He should have pushed people into good jobs. And the working class would be working now, much better-off, and with pride and self respect. Hand-outs may make Brown feel âgenerousâ, but they are destroying Britain.
Laura Fox, Chichester, West Sussex, UK
Chris W and W Martin wonder where the other 6 billion is going. The answer is that it is funding the 2p reduction in the standard rate of tax which was supposed to establish Labour's claim to be a tax cutting government.
David W, market harborough, UK
So if the treasury retained the 10p tax rate they would lose £7 billion a year. How much more of our money does this thieving robber-baron government want?
Martin, Cambridge, UK
What is amazing is that the backbenchers now in revolt over the abolition of the 10p rate were the same people who were cheering and goading the Tories when Brown announced it to the Commons last year.
As with most of Brown's economic policies, they sound great at first mention but unravel pretty quickly when exposed to even a modest amount of scrutiny.
james potts, cardiff, UK
I cannot make sense of the maths in this article.
5.3 million families paying an average of £2 per week equates to £551.2 million, which is 'significantly' less than £1 billion in total that you refer to.
Whichever figure is correct, why would it cost the Treasury £7 billion to abandon the abolition of the 10p rate that only raises a fraction of this amount?
Chris W, Kendal,
"The losses are not large, probably averaging £2 a week and less than £1 billion in total."
and
"abandoning the abolition of the 10p rate would cost the Treasury more than £7 billion a year."
So the other £6bn is what, admin costs?
W Martin, Tenterden,
I fear that the exercise was yet another step on the path of extending the payroll / dependency vote. Let them means test.
Mike, West Midlands, UK
I am sure that when Brown said at the budget last year that he was reducing the 22p tax rate to 20p without mentioning the taking away of the 10p rate, he thought that he would be in No10 and holding an election last year, before anybody realised the full consequences of what he had done. This was just a pre-election ploy.
Because he dithered over and then bottled the election he has been well and truly caught out in a mess completely of his own making. He has shown just how out of touch he is with the vast majority of the generally fair minded British people, who would not want to benefit by the unfairly taxing of the poor until 'the pips squeak' .
He should feel ashamed of himself ,as indeed should anybody who voted for this vile, and heartless government.
When Brown gets voted out as he most certainly will, it will be very much a case of good riddance to bad rubbish.
The only sadness is that he has two years to further ruin Britain. If he had any decency he would resign now.
roger, lagos,