Money

How the 10p tax fiasco unfolded

This is how the row over the 10p tax band has developed: 1999 >March 9 - In his third Budget as Chancellor, Gordon Brown introduces a new 10p income tax band on the first £1,500 of taxable income - the lowest starting rate since 1962. 2007 March 21 - In his final Budget, Mr Brown abolishes the 10p rate, while cutting the basic rate of income tax from 22p to 20p. Both changes are due to take effect in April 2008. March 22 - The independent Institute for Fiscal Studies warns that 20% of taxpayers - over five million people - will lose out from the changes, particularly workers without children earning less than £18,000 and women pensioners aged 60-64. Conservatives condemn the changes as a "tax con trick" on the low-paid. April 23 - Former welfare reform minister Frank Field raises concern about the impact of the change, telling the House of Commons he will table an amendment when the measure is enacted in the following year's Finance Bill, to provide "transitional protection" for those made worse off. October 18 - The Treasury releases figures showing that childless people on low incomes could lose up to £200 a year as a result of the changes, while parents and those earning more than £20,000 will be better off. 2008 March 12 - Alistair Darling's first Budget leaves the decision to abolish the 10p band unchanged. March 31 - Mr Brown faces criticism over the 10p decision from MPs at a meeting of the Parliamentary Labour Party later described by one of those present as "sulphurous". April 2 - Labour MP Greg Pope tables a parliamentary early-day motion calling on the Government to compensate losers from the tax change. The motion gains the signatures of 26 Labour MPs before being withdrawn. April 6 - The new tax rates come into effect. April 7 - A report by the Labour-dominated Commons Treasury Committee brands the targeting of tax increases on the poorest workers "unreasonable". Conservative leader David Cameron says he would try to reverse the abolition of the 10p rate, but ministers argue this would cost an unaffordable £7 billion. April 17 - As more Labour MPs voice concerns about the 10p rate, Mr Brown calls Treasury aide Angela Smith from the White House, during his visit to see US President George Bush, to persuade her not to resign. Labour peer Lord Desai describes the PM as "weak" and "indecisive". April 18 - As Mr Field warns of "mutiny" after Parliament returns from its spring break, close Brown ally Ed Balls dismisses internal party criticism of the Prime Minister as "indulgent nonsense" in the run-up to the May 1 local elections. April 21 - In a bid to head off rebellion as MPs return to Westminster, Chief Secretary to the Treasury Yvette Cooper announces a review of the impact of tax changes on the childless poor. Mr Brown makes a unscheduled address to the Parliamentary Labour Party, assuring MPs he is listening to their concerns. Despite the PM's conciliatory tone, Mr Field tables an amendment to the Finance Bill after it completes its second reading in the Commons. The rebel motion is signed by 39 Labour MPs - enough to ensure Government defeat the following week. April 22 - Mr Darling and Chief Whip Geoff Hoon meet around 50 members of Labour's Treasury backbench committee, with the Chancellor promising that compensation will be delivered within this financial year. The Treasury Committee launches an inquiry into the impact of the tax changes on the poorest households, to report by July ahead of the completion of the Bill's passage through Parliament. April 23 - Mr Darling announces, in a letter to Treasury Committee chairman John McFall, that assistance will be given to low-paid workers without children and pensioners aged 60-64, backdated to the start of this financial year. Mr Field withdraws his amendment, now bearing the signatures of 45 Labour MPs. At Prime Minister's Questions, Mr Cameron denounces the move as a "panic concession" to save Mr Brown from his first Commons defeat. The PM insists the poor are better off overall as a result of Labour reforms. April 27 - Shadow foreign secretary William Hague claims voters are raising the issue of the 10p tax with him "as soon as they open the door" as he campaigns ahead of the local elections. May 1 - Labour experiences its worst local election results in 40 years, slumping to a 24% share of the vote and losing the London mayoral contest to the Conservatives. May 3 - Mr Field threatens to restart the Labour backbench tax revolt if Mr Brown does not make clear exactly how he will compensate the losers from the scrapping of the 10p rate. May 13 - Mr Darling announces in the Commons that he will help low-paid workers hit by the scrapping of the 10p rate by raising this year's personal tax allowance by £600. He says the £2.7 billion cash injection means 22 million people on low and middle incomes will get an extra £120.

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07-07-2011