Friday, April 25, 2008

The 10p tax row - the problem is not over

Gordon Brown's U-Turn on the abolition of the 10p tax band may have forestalled an embarrasing defeat in the House of Commons next week but it has not solved the problem which this regressive tax increase has imposed on 5 million less affluent people.

Many of those affected may get a backdated compensation payment later this year, but for the moment they are paying the extra tax. Since the precise details of the compensating measures have not been agreed - and at least some of those who lose out through the abolition of the 10 tax band will not benefit from the proposed corrective measures - those who are affected will suffering a significant degree of uncertainty about how much of their money Gordon will give back in the Autumn. The fact that some of them will get some jam tomorrow does not alter the fact that all 5 million of those who lose out from the change are experiencing unnecessary government-inflicted hardship now.

And in the meantime all the civil servants who are frantically working out how to undo the damage, and who will then have to do the work to provide the backdated benefits, could have been doing something useful rather than picking up the mess from Brown's last budget as chancellor.

Gordon Brown gained the position of Prime Minister partly on the basis of a supposed reputation as a good Chancellor - a reputation which had more than a little to do with the strong economy he inherited from Kenneth Clarke and beyond this was largely based on one excellent decision - delegating the control of interest rates to the Bank of England. But the 10p mess has demonstrated how bad some of his other decisions as Chancellor were. And he is no better as Prime Minister.

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