Business Secretary John Hutton yesterday ruled out a rethink on the decision to scrap the lowest tax band, amid claims that the Brown government has abandoned low-paid workers.
Many of the changes announced by prime minister Brown while he was still chancellor of the exchequer came into force yesterday with the start of the new tax year.
Standard income tax is being cut by two per cent to 20 per cent but the lowest 10p band is being scrapped entirely, hitting low-paid working class families the hardest.
The income tax changes are expected to result in about 5.3 million people paying more per year.
Hutton told the BBC’s Andrew Marr Show that he did not think it possible to go back on a decision to scrap the 10p rate, despite Labour MPs’ unhappiness.
This was in reference to last Friday’s confrontation with prime minister Brown at the parliamentary Labour Party meeting, when the prime minister said he would look again at the impact of removing the 10p rate.
Hutton said yesterday: ‘I really don’t think it is possible to do that.
‘We have made the decisions now on the Budget. This package of measures was voted on and debated last year.’
Liberal Democrat leader Nick Clegg told the BBC it was a ‘cheap political stunt’ to allow a 2p cut in the basic tax rate at the expense of the poorest people.
Questioned about Clegg’s remarks, Hutton said the tax changes were part of a ‘balanced package’ which had cut the main rate of income tax and which he claimed left families with children ‘significantly better off’.
Clegg had told the BBC earlier: ‘Over five million of the poorest people, it’s estimated with incomes between £5,000 and £18,000, are suddenly finding their starting rate of tax is doubling, why?
‘So Gordon Brown could offer a 2p cut in the rate from 22p to 20p for the following day’s headlines.
‘I think that is an outrageous political stunt at the cost of the poorest in British society.’
Hutton insisted: ‘Overall it can’t be disputed that people on low and fixed incomes are significantly better off.’
He added that for those who were worse off: ‘We are talking in the worst case scenario about half a per cent of net income being the scale of the maximum loss that someone might have.’
Hutton acknowledged there were concerns that had been raised with ministers, adding: ‘Obviously it is right and proper that ministers engage in a debate with our concerned colleagues about this.’
But there are new rules which benefit big business, with capital gains tax set at a flat rate of 18 per cent.
‘Non-domiciled’ tax payers, – those who live in the UK, have international wealth, but are allowed to pay tax only on UK earnings – will have to pay a nominal £30,000 annually, or else declare their total worldwide income to be taxed in the UK.
