The Big Question: Who wins – and who loses – with the abolition of the 10p rate of income tax?
Why are we asking this now?
Because it has suddenly become politically-charged. The Treasury Select Committee has criticised the Government for abolishing the 10p tax rate, a move pre-announced in Gordon Brown's Budget last year.
The committee says that those on lower incomes who will be affected disproportionately by the change represent an "unreasonable target for raising additional tax revenues ... While tax simplification is a laudable aim, it seems strange that the abolition of the 10p starting rate of income tax disadvantages mainly low-income households". If the 10p rate was such good idea in 1999, when Mr Brown introduced it, why is it a bad idea now?
Who is unhappy?
Discontent seems widespread, because of that most potent of complaints – fairness. The problem is that the cut in the basic rate of tax from 22p to 20p, which won Mr Brown favourable headlines a year ago, and an increase in the threshold for paying the higher rate of 40p in the pound, tends to benefit the affluent most, while dropping the 10p rate tends to hit the less well-off. It looks like a Robin-Hood-in-reverse approach. Even the Tory leader, David Cameron, has waded in, saying: "This is Alistair Darling's mess and it's up to him to sort it out. But our view is that this is not the right time to be hitting some of the poorest families."
More worryingly for ministers, Labour MPs are in revolt, especially after an apparent promise to rebels that the Treasury would reconsider matters was abandoned by government whips. The concern for Labour is that it will lose a Commons vote on an important part of the finance Bill – a grave embarrassment that has prompted a vote of confidence for governments in the past.
On the other hand, it is all a bit odd because the change was announced more than a year ago, in Gordon Brown's last Budget as Chancellor, and did not cause much of a fuss then.
But I thought nobody would be worse off?
Mr Brown claimed that, but such an absolute assertion may come to haunt him. Purely on that one tax change, there will be winners and losers, as there will with the Budget as whole (as, indeed, there are with every Budget).
So who loses?
About five million taxpayers. In its report, the committee claimed that households without children or anyone over the age of 65, and who earn less than £18,500 a year, would be the "main losers". The independent Institute for Fiscal Studies (IFS) estimates the losers will include 2.2 million single working people with no children, 1.2 million double-income couples with no children, 700,000 double-income couples with children, 500,000 non-workers, 400,000 single-income couples without children and 300,000 women aged 60 to 64. Changes in tax credits mean that some families with children and some pensioners – but not all – will be protected. However, that is provided they successfully apply for credits and benefits, a procedure that some find too challenging. The council tax benefit take-up rate was just 65 per cent in 2006, while that for working tax credits was about 80 per cent.
Is anyone else losing out?
Yes. A narrow slice of the population earning between £38,840 and £40,040 will be adversely affected by the alteration in the National Insurance rate, rising from one per cent to 11 per cent on this tranche of income – although this is relative. They will probably still benefit if the other changes are taken into account, but by less than other taxpayers. Non-doms will be stung by the £30,000-a-year fee they will have to pay to live in the UK. The losers under the changes to capital gains tax have been well-documented; anyone with a valuable (£1-plus) capital gain on a business they have owned for a long time has seen their potential tax liability rise by 80 per cent, though many have taken evasive action. Those who enjoy a smoke, a drink or drive a big car will also suffer.
Plenty. Generally, the richer you are and the more children you have, the better – though often by as little as £1 a week. Teetotal, non-smoking non-driving households will do best of all. Politically, taking the last two Budgets as a whole, it looks good for "middle England" – key, swing voters on between roughly £20,000 and £40,000 per year are gaining.
What about children in poverty?
Winners too. The Government's Budget changes, especially those in Mr Darling's first Budget this year, will indeed lift many children out of poverty. The IFS agrees that another 250,000 will benefit. According to the IFS, a relatively obscure measure – a change in the disregard of child benefit payments in claims for housing benefit and council tax benefit – will do most to help the Government towards its aim of halving child poverty (at 1998 levels) by 2010 and ending it by 2020. Then again, the IFS also says the Government will miss its 2010 target by 450,000 children.
What does the Government argue?
Apart from Mr Brown's adamantine claim (see above), ministers are relying on selective quotation from expert sources. The Cabinet Office minister Ed Miliband cites the IFS and says: "When you look at the overall effect of the last Budget, there are 16 million households who gain and the biggest gains go to the poorest 30 per cent of people in our society." Unfortunately for Mr Miliband, the IFS also says that only "on average" do lower income families gain, pointing out that the wealthy benefit too.
What is at stake?
The cost of reinstating the 10p rate would be £7bn to £8bn – money that has gone towards eradicating child poverty. The Government wants its opponents to say how they would fund that.
What's the bigger picture?
Confusing. Changes in disposable incomes are also influenced by wage increases, inflation, mortgage rates, increases in council tax and so on. Isolating the impact of a single Budget measure can be difficult, though it has to be said that, on most of these counts, households are facing a more intense squeeze over the next year or two as economic growth falters and the credit crunch persists. In the longer term, through policies that, for example, widen access to education and training and thereby raise productivity, tax rises can (arguably) make the nation as a whole better off.
So, even if tax hikes hurt some sections of the population today, it can be debated that one day they will create a more prosperous society through, say, a better educated workforce. Reducing child poverty, the main point of the 2007 and 2008 Budgets, can be expected to foster that.
Are the poor worse off without this tax band?
*Its removal has hit the poor as a means to raise greater tax revenues – not something a Labour government should be doing.
*Those benefiting from the changes will be the favoured swing voters from "Middle England".
*David Cameron, the Conservative leader, said it was "not the right time to be hitting some of the poorest families".
*Reinstating it could cost as much as £8bn, so anyone wanting to reinstate it will have to raise taxes elsewhere or cut spending.
*Its removal has been used to tackle child poverty, which will enrich the country over the long term.
*Looking at the Budget overall, ministers argue that the biggest gains went to the poorest 30 per cent of the population.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Npower customers waiting for complaints to be resolved must be given free energy, Ofgem rules
Switching your current account? Pick one that reflects the way you run your finances
Bargain Hunter: Win a trip to one of the Modern Wonders in a new 'seven-day' prize draw
10 tips for taking out a personal loan
Money: If you love her, share the bills
- 1 Kenya President Uhuru Kenyatta clashes with President Obama on LGBT equality: ‘Gay rights is really a non-issue’
- 2 37-year-old black woman found dead in police custody
- 3 Five-year-old boy forced classmate to simulate oral sex at primary school, claims mother
- 4 Game of Thrones season 6: New toy line suggests Jon Snow is not among the dead
- 5 Denmark bans kosher and halal slaughter as minister says ‘animal rights come before religion’
The 9 charts that show the 'left-wing' policies of Jeremy Corbyn the public actually agrees with
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
The last thing Labour needs is a leader like Jeremy Corbyn who people want to vote for
What the Labour party could look like under Jeremy Corbyn
I am the Jeremy Corbyn supporter that many will tell you doesn't exist
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
iJobs Money & Business
£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...
£20000 Per Annum: The Green Recruitment Company: Summary: The Green Recruitm...
£30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...
£90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...
Day In a Page
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.