Abolition of the 10p Tax Rate

Published on Mon 28th Apr 2008

I don't normally receive much local mail about tax issues. But I have been deluged with angry letters about the end of the 10p rate. Ironically, most people benefited from the budget because of the 2p cut in income tax. But it was the losers who noticed. And most of the losers are not well off.

There are women aged 60 to 65 with low salaries or pensioners; large numbers of carers (with carer's benefit) who are not allowed to work over 14 hours a week and have small incomes; and young couples or single people without children working for low wages. In Britain, 5 million people will lose on average £200 a year: all of them poorer people.

Gordon Brown says most will be compensated by tax credits. However, most people prefer to keep their own money, not apply for help via complex forms and blundering government departments. I once had a row with him when he refused to believe my accounts of people in Twickenham struggling with tax credit 'over payments' and the hopeless telephone 'help lines'.

He now promises bigger winter fuel payments to compensate. But these are only for one year and go to lots of people (like me) who don't need them. He also promises a higher minimum wage which is scarcely relevant in a relatively high wage area. Nevertheless, a carer could be earning £12 an hour, almost double the minimum wage, but have a part-time income of only £8,500 a year, paying more tax because of the loss of the 10p tax rate.

The fair way to cut the income tax rate would be to finance it from the very well off (who now pay only 18% on large capital gains, as against 40% for middle income earners) not from the lowest earners in society.