The Clunking Fist

Frank Field writes:

A home-made time bomb is ticking away under the government timed to explode just before the local elections. The time bomb has written on its side "the withdrawal of the 10p tax rate" and was constructed in last year's budget.

Gordon Brown introduced a 10p rate in order to reduce the tax burden on the lowest paid as part of his strategy to make work pay. As a brilliant stunt to wrong-foot the Tory opposition for a day, the would-be prime minister was prepared to compromise his crucial "make work pay" strategy to clobber 5.3 million low-paid workers into the bargain. Unlike his momentary triumph, the 5.3 million lower-paid workers will be reminded every week of the government's crassness.

Immediately after last year's budget, I asked for information on how many people would be disadvantaged by the abolition. The Treasury repeatedly refused to answer, despite numerous requests, until the very last day of the budget debate when I was moving an amendment to counter it. Only the Liberal Democrats and a handful of Labour MPs joined me in the lobby.

Fortunately, more Labour members are waking up to the injustice the government is about to inflict on the low paid. The low paid were much quicker off the mark, if the letters and emails I received after last year's Finance bill are anything to go by. "How could a Labour government do this to us" was their theme.

What can the government do? Last year's vote was crucial. Once the government had authority for abolition the new arrangements were set in hand to come into force in the new tax year starting this month. The first pay cuts will occur two weeks before the local elections.

Only one line of action is open to the government. On average, lower-paid workers without children can lose around £440 a year.

Families with children will be eligible for tax credits, but will still be losers. Thirty-six per cent of eligible families do not claim child tax credit. The government needs to announce before May 1 that all low-paid working households will receive a lump sum payment, with a higher sum going to households without children. Mechanically, these payments can only be made later in the year but they would do much to restore Labour's claim of helping decent working families.

They might also, hopefully, abate the anger that will be inflicted on innocent Labour councillors standing in this year's local elections.