Government fails to quell furore over 10p tax rate

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Indy Politics

The Government's compensation scheme for people hit by the abolition of the 10p tax rate is already unravelling, according to the Conservatives.

The Tories went on the attack after details of the package revealed by the Chancellor, Alistair Darling, fell short of the description given by Frank Field, leader of the Labour rebellion which secured the compensation pledge.

In an email to Labour colleagues about his discussions with Gordon Brown, Mr Field spoke of "a deal which covered everyone and was backdated to April this year".

Mr Darling has promised that that help for pensioners aged 60-64 will be backdated to the start of this financial year. But in the Commons yesterday, he declined to promise that all 5.3 million losers from the change would be helped, or that their compensation would be backdated.

Speaking about the non-pensioners who have lost out, Mr Darling said: "Our focus is to ensure that we allow the average losses from the abolition of the 10p band to be offset for this year." Treasury officials said that "offsetting" meant the same as "backdating" and insisted Mr Darling had declined to use this phrase because tax credits could not be backdated.

But the Tories accused ministers of using "weasel words" to leave themselves room to limit the cost of the scheme. George Osborne, the shadow Chancellor, said: "This entire humiliating U-turn is unravelling. The Chancellor refused to say that the whole compensation package would be backdated. Yet Frank Field says that that is exactly what he was promised by the Prime Minister. Who speaks for the Government, Frank Field or the Chancellor?"

Mr Field urged Yvette Cooper, the Treasury Chief Secretary, to make a clear statement about the scope of the package in a Commons debate on the Finance Bill on Monday. But Mr Field insisted: "The Government is not trying to wriggle out of this. The search is on to find the people who are affected, not to exclude them." He said the Prime Minister had "put his stamp" on an agreement that will be backdated to this month.

Further doubts about the scale of the package were cast by the Social Market Foundation think-tank, which warned that fewer than one in four of the losers might be helped. The foundation estimates that it would cost about £7.5bn to compensate 90 per cent of the losers, which would be too expensive.

The cost may not emerge until the Chancellor presents his pre-Budget report in October or November.

* The Conservatives have an 18-point lead over Labour, according to a YouGov poll for The Daily Telegraph. It is their biggest since the 1980s.

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