Downing Street Says » 10p Tax Rate

Asked for detail as to how the decision about the 10p rate came about, the PMS replied that the key thing was that the fundamental principles of the 2007 Budget were intact. The Prime Minister continued to believe that the abolition of the 10p rate was the right thing to do and there seemed to now be a general acceptance of this. As the Chancellor had said in his letter, the 10p rate was a transitional measure and as tax credits became more generous and more extensive over time, they became a more effective way of supporting people on low-incomes. The issue was how to deal with people who were affected by the removal of the 10p rate and we had put a considerable amount of money, in the order of around £2.5 billion, into helping those affected in the 2007 Budget. This money included increases in the pensioner allowance, the working tax credit and the child tax credit, however that was never going to be the end of the story. In the 2008 Budget we spent an extra £1 billion on increasing child tax credit and as we had been saying today, by giving some indication today of what further support might be available, the Government was determined to continue to provide support for low-income households and pensioners.

Asked if the decision had evolved after the meetings the Chancellor had had with MPs last night, the PMS said that he did not want to get into internal Government processes and that journalists would not expect him to do so. What the Treasury was doing today was setting out more details on the kinds of areas they were looking at following the announcement by Yvette Cooper on Monday, which was how the help we offered low-income households with children could be extended to all low-income households.

Asked if there was an estimate as to how much what was announced today would cost and how many people would benefit, the PMS said that there was not an estimate as to how much it would cost as that was for the Treasury to announce in the normal way. The Chancellor’s letter had referred to our focus being on the potential changes to the tax credit system to allow the average losses from the removal of the10p starting rate of income tax to be offset.

Put that the Prime Minister had been telling Labour MPs at the Parliamentary Labour Party (PLP) meeting that he was "unsympathetic" and that he had told journalists during the US trip that there was "no problem", it was asked how this "transformation" could be explained. The PMS said that he had not been present at the PLP meeting but that he had been present on the other occasion and that he would not necessarily accept the journalist’s characterisation of what the Prime Minister had said. The key thing was that we were going ahead with all the key measures in Budget 2007, and the only outstanding issue was whether or not we could do more to help those people in low-income households. This was not something which could be done in one Budget and then forgotten about; in every Pre-Budget Report (PBR) and Budget the Prime Minister, when he was Chancellor, had been looking for ways to increase support for low-income households and the Prime Minister and current Chancellor would continue to do that in the future.

Put that while in the US the Prime Minister had said that there were only one or two Labour rebels but that on Monday night there were 39 and asked if that had anything to do with the "transformation", the PMS said that he did not remember the Prime Minister saying that and that as far as he was aware there was no record to that effect. The Prime Minister had always been clear that it was the intention of the Government that he was responsible for, to do whatever we could to help those people on low-incomes.

Put that the Government should have some sense of how much this would cost and where the money was going to come from, the PMS said that issues such as that would be addressed by the Treasury in the normal way. The Treasury would not have written a letter of this kind unless it was confident that any commitments made could be funded.

Put that the Prime Minister had said at Prime Minister’s Questions that 70% of the people who were losing out from the Budget were on incomes above £20,000 and asked what figures he had been referring to, the PMS said that it was best to check those details with the Treasury.

Asked if this had been a long-planned measure rather than a "u-turn", the PMS said that what was long-planned was the intention that this Government would always do whatever it could in order to help people on low-incomes and what we were doing today was setting out in a bit more detail, the sorts of issues that were being considered in advance of the PBR in November.

Asked if the Prime Minister was pleasantly surprised by how easily the threatened rebellion had been defused, the PMS replied that the Prime Minister had always been of the view that once people properly understood the rationale for the 2007 Budget and once people had properly understood the nature and strength of the Government’s commitment to helping people on low-incomes, then people would support his position.

Asked if that was an attack on the Treasury for not getting the message across fast enough, the PMS said no, not at all.

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» Wednesday, April 23, 2008

10p Tax Rate

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