Hayes and Harlington Labour MP John McDonnell yesterday called for the 10p tax rate to be restored in full.
He was speaking after Prime Minister Brown was forced to make a retreat and announce that Chancellor Darling was preparing a package of measures to compensate the 5.3 million low-paid workers who are losing out over the abolition of the 10p tax rate.
McDonnell, who unsuccessfully sought to stand against Brown for the Labour leadership when Blair stood down last year, told News Line: ‘Cutting the 10p rate was an attack on the poorest.
‘The compensation package by Darling still means that there’ll be poor people losing out. The only solution is to restore the 10p rate in full.’
In the face of working class fury and a mounting rebellion of Labour MPs frightened of losing their parliamentary seats, Brown told MPs at prime minister’s questions that Darling had written to the House of Commons treasury select committee with his proposals.
Brown said that for ‘pensioners of pensionable age, 60-64, who were benefiting from the 10 pence rate, we will bring forward proposals – perhaps using the mechanism of the winter allowance – so that they have additional money and it can be paid back to April this year.’
He added that ‘on the working tax credit, where there are issues about young people and issues about part-time workers, we will also bring forward proposals soon, in time for the pre-budget report.
‘We are determined to take action because we are the party of fairness tackling poverty.’
Darling’s letter said the government will look ‘at potential changes to the tax credits system’ and ask the Low Pay Commission ‘to report on what changes could be made to the minimum wage regime to support younger workers’.
A TUC spokesman said: ‘We’ve urged ministers to compensate those people who have missed out and this is a welcome step forward. We are now waiting to hear more details.’
A spokesman for the UNITE trade union said it had not commented on the issue so far and was unlikely to do so.
Just before yesterday’s announcement, it had emerged that 47 Labour MPs had signed up to an amendment from right wing Labour MP Frank Field to the Finance Bill that demanded a compensation package be put in place before the parliament sanctions the 10p rate abolition.
Field said he is now withdrawing his amendment, adding: ‘It’s a good day for our constituents, it’s a good day for many Labour MPs who made their views known on this issue and also a good day for the government, because I think we have turned a corner.’
Norwich Labour MP Ian Gibson told News Line: ‘It’s a victory for rank and file pressure, from the voters on the streets, to the Members of Parliament who listen, and from there it went to prime ministers and chancellors and whips.’
He added: ‘Let’s now think about care for the elderly, decent pensions, affordable housing, and many other pledges which should come from this victory.’
Another Labour MP Clive Betts told News Line: ‘There will eventually be good news for people, in that those who’ve lost out will have their losses recompensed.
‘My only concern is it will take some months from this statement to when the low paid workers get the compensation pledged to them.’
‘And that’s the issue I will still be pressing the government on.’