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Tax wrangle: PM faces party rebels

By Roz Upton

Updated on 19 April 2008

Brown stamps out suggestions the government would compensate low-paid workers who've lost out by the end of the 10p tax rate.

With up to 70 Labour MPs threatening to rebel a week on Monday, the official line of reassurance from the treasury was only "we'll continue to look at how we can help the low paid".

Instead of basking in the diplomatic success of his trip to America, the prime minister returns to the UK fuming about the rebellion that's brewing over his decision to abolish the 10p starting rate for income tax.

Even while he was at the White House, Gordon Brown dismissed questions about his tax reforms.

Mr Brown announced the end of the 10p rate in his last budget as chancellor, but it's only now coming into effect and low paid workers are feeling the pinch.

Charlotte Bucknell, a hairdresser, is typical of the kind of tax payer who'll be worse off.

She has no children; no-one in her household is over 65, so she'll have £125 a year less to spend.

The 10p rate was introduced in 1999 to motivate benefit claimants to seek employment, but its withdrawal has left workers like Miss Bucknell disenchanted.

'This is a genuine issue on the doorstep.'
A parliamentary aide

Last night, the junior treasury minister Angela Eagle appeared to allude to a concession. Eagle said: "watch this space".

This was enough to force the treasury to deny any imminent change to fiscal policy. Rejecting reports it's considering pooling money from unclaimed tax credits to fund a compensation package, which would reportedly cost up to £800m.

The treasury select committee wants the treasury to commission research into whether the abolition of the lowest tax rate has created a disincentive that could frustrate the government's welfare to work objectives.

The Conservatives say the government should reinstate the 10p tax rate - a move which would cost £8bn.

And dissent has spread within the Labour party while MPs have been in their constituencies during the Easter recess, 70 malcontents have signed an early day motion calling for changes to the tax regime to ensure those on low incomes pay less tax.

Five parliamentary aides have put their heads above the parapet: Angela Smith, Steven Pound, Geoff Ennis, Celia Barlow and Dave Anderson.

The prime minister says the discontents been whipped up by the media, but one parliamentary aide who's involved in local election campaigning told Channel 4 News that "this is a genuine issue on the doorstep" and she added she'd be "astonished" if it didn't come up at Monday's parliamentary Labour party meeting.

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