In the budget last year, the Government introduced a major simplification of the tax system. The basic rate was cut from 22p to 20p-the lowest rate in 75 years. Allowances for pensioners over the age of 65 were increased, as were the Working Tax Credit, the Child Tax Credit and Child Benefit. As a result of these changes 16 million households have gained and 600,000 more pensioners will pay no tax at all. The changes announced in 2007 and in this year’s budget will lift around half a million children out of poverty.

But many people were worried about the abolition of the 10p tax band. The great majority of those affected would still be better off because of the cut in the basic rate, or the increase in tax credits or the cut in tax for pensioners.

Some, though, were not covered by these measures and stood to lose an average of £120 a year. We’ve recognised that this was a mistake and action is now being taken to tackle it.  At the same time, we’re giving more help to millions more families worried about the effects of the international rises in the cost of food and fuel.
 
The measures that Chancellor of the Exchequer Alistair Darling has introduced this week will mean 22 million people on low and middle incomes will gain an additional £120 this year.  People aged between 60 and 64, whose average loss was £100, will not only get the  increased personal allowance worth up to £120 but will also receive the additional £50 Winter Fuel Payment for this year.  This was announced in the Budget to help with the international increases in fuel and food costs.  And, in addition, 600,000 people on low incomes will be taken out of tax altogether.

For all their grandstanding on the 10p tax rate, the Conservatives (who had previously called for the abolition of the 10p tax rate) have refused to say what they would do, with David Cameron failing to give a straight answer three times in a row at his recent press conference.  They claim to care about people on low incomes.  But they opposed every major measure this Government has introduced to help low income people. They opposed the introduction of the Minimum Wage. They opposed tax credits. They opposed more help for pensioners.

I believe that the Chancellor’s actions show that our Labour Government is willing to listen to people and not afraid to take action when necessary.