The saga of the 10p tax rate has been an object lesson in bad government. Every chapter has illustrated the deficiencies of ministers and even, at times, our political system itself. Gordon Brown abolished the bracket and also cut the basic rate of income tax last year in his final budget as Chancellor in an attempt to wrongfoot the opposition and to give himself some momentum for his planned move to 10 Downing Street. But in his haste Mr Brown did not think through the consequences of his actions. Nor, it seems, did his officials at the Treasury.
Labour backbenchers cheered loudly when the former Chancellor made his announcement. But they did not scrutinise the detail; if they had, there would have been few cheers. Instead, the partisan nature of British politics triumphed over any constitutional responsibilities to hold the executive in check.
When the penny finally dropped, and those jubilant Labour MPs realised that hundreds of thousands of their low-earning constituents would lose out thanks to the changes, they began to complain. But by then Mr Brown was Prime Minister and refused to bow to his backbenchers. Worse, the Prime Minister refused even to admit that low-earners would be worse off, insisting, in spite of all the evidence to the contrary, that his complicated tax credits would provide compensation. And in doing so, with an unfortunate mixture of hubris and stubbornness, he undermined his premiership.
In the end, following a vigorous campaign by the rebels led by Frank Field, the Chancellor, Alistair Darling, was forced to unveil a promise of recompense for the losers. Mr Brown even admitted he had made a mistake. But the rescue plan was still suspiciously vague. And the public were not convinced. Labour's disastrous showing at the local elections two weeks ago was partly attributed to voters' disaffection over the matter.
And so we had yesterday's desperate package from Mr Darling, putting up the personal tax allowance. If Mr Field's initial response to the detail of the plan is anything to go by, it appears to have put an end to the revolt and saved the Finance Bill from defeat in the Commons. Yet it looks unlikely to rescue the Government from defeat in the forthcoming Crewe and Nantwich by-election. And the Government will have to borrow some £2.7bn to pay for the package, which means taxpayers must pick up the tab in the years to come.
What began as a cynical attempt to curry favour with the middle-classes has backfired in the most explosive manner, sowing discord in the Government and alienation among the public. Mr Brown has learnt the hard way that trying to use tax policy for short-term party gain is playing with fire.Reuse content