Labour MPs join attack on Chancellor's tax reforms

Gordon Brown denied that his Budget was a "con trick" as he came under fire for raising taxes for some low-paid workers while helping the middle classes by lopping 2p off the basic tax rate.

The Chancellor described his package yesterday as a tax-reforming rather than a tax-cutting Budget and conceded that some low-paid people without children would be worse off.

But he said it was "undeniable" that the average benefit from his income tax changes was £100-a-year per household. For a family with children, it was £250-a-year. He insisted that low-paid workers would be helped by £1bn in working tax credits. "I have tried my best for that low income group."

But the Tories and some Labour MPs expressed concern that the Chancellor would hit poor people by abolishing the bottom 10p starting rate of tax from April next year. They warned that some of those Mr Brown had not intended to lose out would do so because they would not claim their tax credits.

George Osborne, the shadow Chancellor, told the Commons: "The Chancellor taxed the low paid to fund his con trick on Middle England. That is how desperate he has become."

In an attack aimed at denting Mr Brown's credentials before he becomes Prime Minister, Mr Osborne said the Budget revealed him as "stealthy, sneaky, unable to tell the truth". He added: "He's not the man who can restore public trust in government because he's the reason people don't believe a word they say any more."

Lynne Jones, a Labour MP, said the money saved from abolishing the 10p rate should have been used to raise the threshold at which people start to pay tax - which would take low earners out of the tax net. She said: "We have to some extent neglected poorer people who haven't got children. There are many people who are single who are struggling on very low incomes."

The independent Institute for Fiscal Studies predicted that two million people on below average wages would be worse off, the main losers being single adults earning £12,000 to £18,500 who do have have children and do not receive tax credits. Some two-earner families who do not receive enough in extra tax credits to compensate for a rise in income tax would also lose out, it said, while the main winners would be in the £18,000 to £39,000 annual income range. The institute forecast that one in five people would lose money as a result of the tax shake-up, while two in five would be better off and two unaffected.

Robert Chote, the institute's director, said: "It is somewhat unfair to criticise the Chancellor for having given with one hand and taken with another in this Budget. It is not one of Mr Brown's Robin Hood Budgets, deliberately taking from the rich to give to the poor. Most losers are in the middle of the income distribution, but lose only small amounts."

Vince Cable, Treasury spokesman for the Liberal Democrats, said low-paid workers would be hit "quite badly", particularly if they were single, and tax credits were not the answer as they were a "means-tested benefit".

A Budget brainteaser

Gordon Brown's promise that four in five households would be better off because of his budget was impossible to prove, leading accountants said yesterday. The missing information includes:

* The level of income at which basic-rate tax will become payable from 2008-10

* The level of salary above which NI is payable for that time

* Increases in personal allowances for people under the age of 65 from 2008-10

* When higher-rate tax becomes payable in 2008-09

* Details on who is able to claim working tax credits or child tax credits and how much

* Levels of inflation Treasury has assumed for its figures

* No commitment to provide this information in next week's Finance Bill, which will only cover tax changes in 2007-08

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