Darling's £120 a year tax bombshell

Last Modified: 13 May 2008
By: Gary Gibbon, Cathy Newman

The chancellor calculates that increasing personal allowances by £600 a year for basic rate taxpayers will help to get Labour out of a massive electoral hole.

An extra £120 a year in your pocket - Labour's tax bombshell for everyone on the basic rate as the chancellor unveiled what was, in effect, a mini-budget.

But there was just one measure: personal allowances are to rise by £600 a year. Mr Darling said it was the fairest way to compensate those hit by the abolition of the 10p tax rate.

And he is borrowing £2.7bn to pay for it.

Labour's tax giveaway

The point at which you start paying tax has increased by £600. You are now taxed on earnings over £6,035.
600,000 people will no longer pay any tax at all. A further 21.5 million will pay less tax.
For the nearly four million paying the highest rate of tax, there will be no change in the amount they pay.

Labour are down in the polls, facing a difficult by election and a dicey budget vote.

So it was an unusual sight on the government's benches this afternoon: Labour MPs cheering as Mr Darling announced his compensation scheme.

Even Labour's most intransigent rebels have offered their "unequivocal" support.

But will the rest of the country buy it too? Or have voters grown cynical about chancellors' giveaways?

Cathy Newman looks back through recent history to find out if money really is what people want.