David Cameron has promised to join forces with rebel Labour MPs in an attempt to reverse Gordon Brown's decision to abolish the 10p lower rate of income tax.
His intervention put more pressure on the Prime Minister and increased the prospect of a Commons defeat on the issue later this month. However, Labour MPs hope the Government will offer concessions to soften the impact of the change on low-paid workers.
Ed Miliband, the Cabinet Office minister, expressed regret about the overhaul's 5.3 million losers. "When you make a big set of changes in the tax system, some people do lose out. That is a matter of regret, of course it is. But overall these changes make the tax system fairer," he said.
Mr Brown ruled out a rethink and accused the Tories of "false promises" as reversing the decision would cost between £7bn to £8bn. "Over the past 10 years, we have taken more people out of poverty than any previous government and we have seen rising living standards," he said.
In a live webcast last night, Mr Brown faced hostile questions from the public. He insisted low- and middle-income earners would be the main winners from the tax shake-up and claimed the 10p rate was a "transitional measure" while tax credits were introduced. But Arabella Weir, the actress and comedian who read out the questions, admitted after his explanation: "I still can't quite get my head round it."
The Tories will seek to exploit the issue during the campaign for the 1 May local elections. They have issued a leaflet claiming nursery nurses will pay £154 more a year, bar staff £67, catering assistants £161, retail cashiers £185 and sales assistants £227. Mr Cameron said the measure, which took effect on Sunday, would mean "kicking people when they are down". He added: "Now is absolutely not the time to be hitting 5.3 million families with an extra tax burden."
The Tory leader told a press conference that his party would be happy to work with Frank Field, the Labour MP and former welfare minister, who will table an amendment to the Finance Bill to bring in transitional relief for people who lose out from the shake-up.
But Mr Cameron repeatedly refused to say how the Tories would find the money to pay for reversing the rate. He said it was up to the Government to get itself out of a "mess" Mr Brown made as Chancellor.
"Our approach must be to do what we can to stop this tax-grab on some of Britain's poorest people," he said. The Tories would set out their detailed tax plans when a general election was called.
Mr Field criticised the Tories for abstaining last June when he proposed a relief scheme in the Commons that was defeated by 269 votes to 67. "It is all very well to hear them saying they are going to move an amendment. They could have prevented this happening a year ago and they didn't," he said.
Although only four other Labour MPs backed his move last year, 73 have now signed motions expressing unease about the decision – potentially enough to defeat the Government.
Fifty-three Labour backbenchers called for changes to ensure those on low incomes pay less tax. Another motion, signed by 43 Labour MPs, expressed concern that the abolition of the 10p rate will "have a detrimental impact on a low-income groups, particularly pensioners".
Tony Lloyd, chairman of the Parliamentary Labour Party, told BBC Radio 4's Westminster Hour that the protests were "real and deeply felt".
* A Populus poll for The Times last night put the Tories on 39 per cent, Labour on 33 per cent and the Liberal Democrats on 17 per cent, with Gordon Brown's ratings at their lowest level. A third of voters see him as worse than Tony Blair.
Pressure from Labour's backbench
Tony Lloyd, chairman of the Parliamentary Labour Party
"What Gordon Brown has got to do, and what the whole Government has got to do, is to clarify what it's there for and to make it clear to all groups of people in our society that in fact Labour hasn't changed now that Gordon Brown has moved from the Treasury to 10 Downing Street."
Gwyn Prosser, MP for Dover
"[The 20p rate] is a regressive measure and I hope it's not beyond the wit of ministers to come forward with a formula that goes some way to easing its effect.
"We haven't had a brilliant three months. But in general I'm happy with how things are going and, to coin a phrase, things can only get better."
Lindsay Hoyle, MP for Chorley
"It's become more apparent that those who are on low incomes are suffering [because of the new tax rate] ... We need a rethink on this.
"The new tax arrangements are in place, but perhaps there could be [more] tax credits given. If there's a mistake being made we should certainly look at it."Reuse content