Philip Webster, Political Editor
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Only a quarter of the people expected to lose out as a result of the abolition of the 10p income tax band will get help from Gordon Brown’s compensation package if it contains the options indicated by ministers, a leading independent think-tank has found.
As Alistair Darling appeared to have reassured Labour MPs finally that low-paid workers would have their compensation backdated to the start of this financial year, the Social Market Foundation’s figures highlighted the limitations of the rescue efforts.
In a report rushed out after Mr Darling’s climbdown on Wednesday, the SMF said that the Chancellor’s proposals, which are aimed at helping the worst-hit losers, were constrained because of a shortage of cash and the difficulty of targeting losers. Ministers have suggested privately that the package will cost less than £1 billion.
Mr Darling has said that he wants to compensate pensioners aged 60-64, low-paid workers without children, and other younger workers. The SMF says that if he does that, as expected, using winter fuel payments, the national minimum wage and working tax credits it will cost from £500 million to £1 billion, and help fewer than a quarter of the worst-hit.
The report illustrates the difficulties facing the Government in trying to come up with a package that MPs will be happy with. After confusion overnight about the extent to which the face-saving deal would be backdated, the Chancellor told MPs in the Commons yesterday that the average losses suffered this year by low-paid workers as a result of the tax changes would be “offset”.
He omitted to mention “backdating” the payments, although his officials were less reticent and said that the average losses, compensated for in tax credits, would cover April 1 to March 31 this year. The effect would be backdating, they said.
The row, which Gordon Brown thought he had defused, threatened to erupt again after Yvette Cooper, the Treasury Chief Secretary, suggested in a late-night television interview that only the compensation for pensioners under 65 would be backdated.
Frank Field, who led the threatened Labour backbench rebellion, accused her of being “badly briefed”.
In an interview with the BBC Radio 4 Today programme, yesterday morning he said that he had an assurance from Mr Brown that the entire package would be backdated to April 1 — the start of the current tax year.
“This is an agreement that the Prime Minister actually put his stamp on,” he said. “There will be a compensation package, it will be backdated.”
Tory leader David Cameron said that the Government was in a “complete shambles” on the issue. “Even when it comes to making a U-turn, this Government is incompetent. With this Prime Minister and with this Chancellor you have always got to check the small print,” he said.
Concern continued to surface over the way Mr Brown had handled the issue. Ian Gibson, the Norwich North MP, said he had six months to show that he was in touch with public concerns. “He has got to listen to who is suffering. All this stuff about 10p makes it sound as if he doesn’t really listen,” he told The World at One.

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I am a 44 year old war pensioner who gets a 12 year Army pension which was taxed at the 10p rate. Pre budget I was getting £226.45 after the annual rise and the tax rate adjustments I now get £215.57 per month. Am I in Mr Darlings compensation plans ? £120 a year means a lot to me and others like me
John McClelland, Coleraine, Northern Ireland
Growing up under a Thatcherite Britain, I respected a Labour party that stood for the working-class man, the underdog and the disadvantaged.
How sad that we are now faced with just two shades of the Tory party, their only interests being the advancement of the wealthy and themselves.
Richard, Bristol, UK
Bailout the greedy (banks) and to hell with the needy. Caring Labour, who needs them. Bring on the next election.
Tom O'Neill, Ballymena,
I retired 8 years ago at 49 to look after my wife who has Huntington's Disease. I had to take a big drop in pension from my employer but needs must. At 57 years old I don't seem to come into the reckoning for compensation, I'm not alone. I do hope my contribution is going towards MP's expenses.
Ken Robinson, Preston, Lancashire
The poorest in the country dont want to claim tax Credits, which has a massive error rate for payments,.what they want is money in their pay,.theses are some comments from a online petition..
......................................................................................................
I am constantly being harrassed to repay overpayments, every year. When I received a citation to appear in court I got my local MP involved, it was found the Inland Revenue had done it's sums wrong and actually owed me money.
Rober, Bristol,
Why don't we just have all our income paid to the government and they can then give it back in had outs.
Pete, Barry, Wales
There is some sophistry in the Governments's presentation of this issue because they ignore the index-linking of personal allowances. At the crossover point of £15,075 a year you pay no extra tax but you should have had a reduction. And there is no working tax credit at this income level either.
Roger S, Esher, UK
"The question remains: Was Frank Field's 'threatened revolt' a stage managed production by Downing Street Fantasy Land Films?
Surely, Field is not so naive as to have had his principles bought off so cheaply and with such vague promises?
Is the public being sold a pig in a poke?
Edwin, Bucharest,
Mid 30's? Married? No Kids as you thought it more prudent to wait until you could afford them?Reasonable jobs?Apparently this is the perfect set up to enable the government to reduce our income. We're hardly starving to death, but it's unfair to tax the responsible. We're entitled to a life too.
Christine, Newcastle,
If removing the 10% Income Tax Band won't affect pensioners over 65 how come my Pension has gone down? Oh, I forgot - I was stupid enough to work all my life and do without to get a small private pension as well as my State Pension, silly me. VOTE LABOUR OUT ON 1 MAY 2008!!
Anil Chatterjee, Manchester,
I'm also suspicious of Frank Fields involvement in all of this. again, this govt thinks that the entire population of the country is stupid and will simply buy anything they are told, but this time it looked like we had one of their own on our side. Has he been taken for a mug like the rest of us?
Paul, London, London
They managed to GIVE billions to Northern Rock, and then expect US THE PEOPLE to finance them for their generosity to the rich.
Who the hell do they think they are.
They are gonna get a massive shock in the local elections.
Cameron - get your finger out and do what we ask. Vote of no confidence.
Neil Brown, Maidstone,
What this shows is that ,THE MORE POLITICIANS YOU HAVE, THE MORE TAX YOU WILL PAY AND THE MORE REGULATION YOU WILL SUFFER.
Answer: vote for anyone who will cut tax and the number of politians in our political system.
Paul, Lincoln, England
I hadn't realised that Brown & Darling were actually the Chuckle Brothers, only this ridiculous idea isn't funny. Brown is now deliberately trying to confuse us and Frank Field should have pursued this further.
Yvette Cooper is out of her depth too, if only they had Vince Cable on board.
Paul, West Midlands, UK
Well instead of watching the slag Cooper on Newsnight ducking the questions, let me clarify the position for all of you.
Gordon Brown and Darling are giving back 1 billion or less, after the tax changes they brought in costing the People 7.5 billion.
Theft on a grand scale indeed.
Mike, Edinburgh, Republic of Scotland
Mark.
Women are still entitled to retire at 60. 'Retired but under 65' refers to them, and to men who have had to take early retirement for reasons of ill health and are living on their private/company pensions, and not yet got a state pension.
tris, Dundee, Scotland
Time for New (lol) Labour to stand down they are driving this country into the ground,soon even Zimbabwe will look as good prospect compared to the United Kingdom!
Corinne, Blackpool, England
So the over sixty five will not be effected by the 10p rate abolition? The government say that they were given an allowance rise so they will not be effected. But hold on!
Allowance rise and then no 10p tax rate = a cut or am I missing something? See what happens in the local elections
Mr Darling.
Adam, Bishop Auckland, Co Durham
When I was little, if I was caught out being' devious' my mum used to say 'Oh what a tangled web we weave, when first we practice to deceive.' What a pity Gordon's mum didn't teach him that when he was a child. Then perhaps we wouldn't have had the tax/con budget last year and the fiasco this year!
Donna Walker, Effingham, Surrey
Oh dear, PANIC. No time for a review committee before the local elections...
Mike L, Chippenham, Wilts
Tax Credits are, of course , an employer subsidy.
Why should taxpayers contribute to the profits companies make by paying wages people can't live on without a state top-up?
bill watson, huyton, liverpool
i agree wiyh james in london increase the personal allowance threshold for 20p tax payers and decrease the allowance for 40p tax payers problem solved the poor pay less the rich pay more
sue, barnstaple, devon
This Government cannot be trusted and will NOT offset the increased tax burden on the low paid. If they were honest, all they had to do was increase the Personal Allowance by £900.
james, london,
What happens to the pensioners over 65 who are paying income Tax on their pensions. I have a coiple of small pensions (and I mean small) which I have to pay Tax on. Before Broon got rid of the 10p band I was paying part of my Tax at that level ,now I am paying it all at 20%, thus worse off.
AMAC, St.Austell, England
Im not supprised that he didn't clarify the compensation package, on balance there was nothing in it to clarify!!
D George, Redditch, UK
This is a cynical strategy thought up by Brown to push more and more of the electorate into claiming tax credits which will ensure that the poor stay poor and be very grateful to the Brown administration for keeping them out of poverty. This is gerrymandering on an epic scale.
Mike Lincoln, Wakefield,
There is no intention to compensate everyone who loses out on the abolition of the 10p rate. If there were, the simple solution would be to restore it, not make up ever more complicated ways to compensate some of the people affected. I thought that the purpose of this was to simplify the tax system!
David, Caerphilly, UK
The people will tell them what they about Labour in 6 days time.
Tony, machester, uk
So far all I have heard from "NU-labour" on the 10p tax abolition is that, "it's the right thing to do"! Can anyone tell me why? And now they will take the money, only to give it back later in the year! What another fiasco!
Rece Porter, Orlando, USA
Why not a flat rate tax? Brown rubbished the idea by saying that high earners would pay the same as nurses and teachers. True - they pay the same RATE but not the same SUM. If it was 20% then a 20,000 a year nurse would pay 4,000 a year; a 500,000 a year executive would pay 100,000 in tax.
Jonathan Mills, Brighton,
Will back-dating include the opportunity costs of those funds? Not a philosophical question if to make ends meet until the funds arrive the recipient has to resort to overdraft, credit card or doorstep lenders.
Simon Bee, Wokingham, UK
Tax collected and adjusted as much as possible through a PAYE type scheme (and using other methods already listed) is far cheaper to collect and administer. Tax Credits (etc) is a great way for organisations such as Capita to earn more money.
Karen, Oxford, UK
How could they not have spotted this issue earlier? I know that politicians are supposed to be stupid but this is just ridiculous! They introduced the 10p tax band because it was "necessary to help the poorest members of society" and then a few months later contradict themselves by taking it away!
Luke Graves, Cambridge, England
Either Frank's been taken for a ride or the whole rebellion was a put up job from start to finish to make us think the 10% shambles was going to be fixed, which it isn't. I prefer to think that Frank has integrity, so I think he's been had. Read Darling's letter, it contains no promises.
Henry, London,
Pensioners under 65?
I thought you were a pensioner when you were 65 (Male) and over?
So, is this for the people who can afford to retire before 65?
Mark, Yorkshire,
I along with thousands of other 60-65 year old pensioners are living outside the UK at the moment and are therefore not entitled to winter heating allowances. We will therefore still take a direct hit in the pocket with no redress. Why has our vindictive Prime Minister not thought about this?
john, myyrmaki, finland
If they are only going to "offset the average losses" it is quite likely that they will only have placated half the voters they have upset with their shambolic policies.
Roger, Shipley,
What a fiasco....Frank Field must feel like he has been conned.......As for Yvette Cooper on Newsnight...Hapless and hopeless.
M Alexander, Aberdeen, Scotland
The question remains - why bother aboloshing a tax rate that will demand the arranging compensation packages for those who lose income due to the abolition of said tax? If this happened in 'real' business, it would be called 'justifying your budget by pushing paper around'.
Julian, Twickenham, UK
Darling just has to be the most inept chancellor ever. It seems even Osbourne can put one over on him.
Overall it does seem that they can't even manage a U-Turn.
Pathetic. Time they were gone. They have no authority and will be no use to the country for the next two years.
tris, Dundee, Scotland
So they tricked their own MP's into backing down on their tabled amendment and actually had no plans - as usual, all talk and no substance. Why don't they ask the Tories what they would do, and then they can nick their policy again?
CA, Manchester, UK
Frank Field is either hopelessly naive or as politicly fickle as the rest of them. It's a shame, he seemed to be one of the few people in that party with a functioning conscience.
David Masu, Zürich,
Frank Field should be congratulated on forcing the U turn on the 10p issue but should have nailed Brown to a concrete promise to compensate the losers.
As it is the Government will wait for the fuss to die down and then attempt to renege on their rather vague promises.
bill watson, huyton, liverpool
Please, please, put Darling out of his misery. This is just plain embarrassing.
Simon Booker, Surrey, UK
Is it just me who sees it this way? - Chancellor Brown makes a huge noise about lowering the 22p rate to 20p when what he actually did was to ABOLiSH the 22p rate whilst then DOUBLING the 10p rate !
Keith Farndale, York, UK
It is clear that Darling is Chancellor in name only. Gordon Brown, the control freak, still holds all the levers of power in the Treasury.
This government is doing so much spinning and making U-turns. No wonder everyone is confused.
R.M., London, England
Have Frank Field and the rebels been sold a "pup" by Brown? It would come as no surprise to me!
R.B., Leicester,
Unfortunately Ron I think the others will be just as bad. Why do we even have a tax credit system anyway? Why take money from people as tax revenue only to give it back later - ultimately costing more tax revenue to implement. Surely people would be better off simple not paying as much originally?
Ben, Bath, UK
No matter what happens now , Brown and Darling will be for ever remembered for 'robbing the poor to give to the rich'. Whilst there may be many backbenchers in New Labour who still have Socialist ideals the actions of B&D have destroyed any link between Socialism and New Labour.
Alan Booth, derby, uk
The aim is to make this complex so that 60% of the people eligible for rebates won't bother appying.
Trevor Ellis, Rugby, UK
the labour dream at work...... they take a large amount of YOUR money, then spend a huge amount of YOUR money on a complicated system that YOU need to go through to get a smaller amount back than what they took in the first place, THEN they make you feel grateful by calling it "credits"...
john g, london, uk
JOKERS JOKERS JOKERS. More mistakes and more red tape for business.
Jim, Blackpool,
So, for rpensioners it will be paid through the winter fuel allowance scheme. Seems to suggest then that pensioners will have to wait until the coldest months of the year before getting the money they need now! Just how are they supposed to compensate for the loss of income in the meantime?
Ron, Milton Keynes, Bucks
Another point, how will those of us who are not in the abysmal Tax Credit system know if we are eleigible under the new rules? This is a half-baked, knee-jerk reaction by GB & AD. The quicker we get rid of this mal-administration the better - unless of course the others are just as bad!
Ron, Milton Keynes, Bucks
They make things complicated so that ordinary people will be put off claiming,and they will save money.
Michael Smith, Southampton, UK
Why do they make things so complicated the solution basically is so simple for goodness sake just raise the threshold level to above the combined threshold and 10% level. For good measure add a further £2500 to remove tax from all low income earners. Then the benefit would be felt by everyone.
Tony , Leigh-on-Sea, Essex