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Government 'must help' 10p tax losers

28/06/2008

The government must do more to help 1.1 million households who lost out from the scrapping of the 10p tax, a group of MPs has said.

The treasury committee found that although the government helped some through the measure announced on May 13th, including increasing the personal allowance, 1.1 million households will still lose out.

Committee chairman John McFall said: "The May 13th measures whilst welcome, do not go far enough.

"There are still 1.1 million losing households, many of whom are on low-incomes and who are being hit hard by rising food and fuel prices and the slowdown in the economy.

"The government's short-term priority must be to make every effort to compensate these people in full."

The report concluded that those already on a low income will struggle amid rising fuel bills and inflation.

However, the committee welcomed the step to raise the personal allowance, calling it "a welcome first step towards creating a simpler tax system".

The MPs also described a rise in child and pensioner poverty as concerning and called for a Poverty Commission to ensure the government's target of halving child poverty by 2010-2011 can be met.

Gordon Brown's proposal to scrap the 10p tax caused uproar when it was brought in earlier this year. The government was forced to do a U-turn on the issue, introducing measures to cushion the blow for the lowest paid.

The committee said there are "important lessons" to be learned from the episode, and suggested the government publish a Household Impact Assessment alongside future Budgets and Pre-Budget Reports and a proper consultation to avoid future problems.