Funnily enough, Gordon Brown didn’t exactly spell out that he was effectively doubling income tax for 5 million low paid workers last year. Instead he announced “I can now return income tax to just two rates by removing the 10p band on non savings income”. It all sounded like a minor technicality. Mind you, he also claimed it was a budget to expand prosperity and fairness. The FSA should go after him for mis-selling.
Lib Dems saw the problem from the start. But some people were suckers for this dodgy deal from Gordon the bank manager. Like Islington South Labour MP Emily Thornberry. Speaking in the 2007 Budget debate – and challenged by David Howarth MP on the 10p rate – Emily said “I am proud to sit on the Government Back Benches when my Government do things like that. We had a progressive Budget that is doing the right thing for poor working families…” And even more for rich ones.
Local low earners who are hit hard don’t share her enthusiasm. One woman I met this week is typical: she’s on a low income but doesn’t qualify for tax credits, her bills are going up, and she’s frightened about the future. Now those same Labour MPs who supported the budget are frightened too, and with by-elections looming, the Government has backed down. As Andrew Duffield put it, not so much a tax cut as a Crewe cut….
But the reality is no joke. We still don’t know what the cost of borrowing the £2.7bn for this bailout will be. Only £630 million will actually go to the people who lost out when the 10p rate was abolished.
We don’t know how long these tax allowances will last. And that still leaves over 1 million low earners who are still losing out.
Maybe some voters will be bought off. But many will find it hard to forgive Labour for hiking up taxes on the poor in the first place.