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
Crowd-to-let: How crowdfunding sites can give investors a slice of the property market for £500
After the election: What will Britain's financial future look like on 8 May?
General Election 2015: How you vote next week could affect your finances
Social tenants locked into energy tariff for 40 years
Five Questions On: GB Energy's new tariff
- 2 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 3 University student in court for allegedly covering housemates' food in window cleaner and spit
- 4 Ryan Gosling posts tribute to 'Ryan Gosling Won't Eat His Cereal' creator Ryan McHenry
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...
Day In a Page
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.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
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, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
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 four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
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.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
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.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
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.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
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
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings