Darling announces £2.7bn tax cut

Darling announces £2.7bn tax cut

Alistair Darling today announced plans to raise the personal allowance for basic rate taxpayers by £600 to compensate the 10p tax losers and avert a crushing byelection defeat next week.

The chancellor said the allowance for higher-rate tax payers would be reduced by £500 but he insisted the net effect for everyone on higher rate will be the same.

"I want to help families on low and middle incomes as soon as possible," Darling said.

Raising the basic rate allowance to £6,035 will cost the Treasury £2.7bn, and will be backdated to April 6 this year.

Ministers hope the announcement will reassure voters that the concerns of the 5.3 million families who will lose out from the abolition of the 10p tax band are being addressed.

The Conservatives have made the abolition of the 10p issue a central issue in next week's Crewe and Nantwich byelection, and Darling has been under pressure to reveal more about the compensation plans before polling day.

The prime minister's spokesman said Darling's statement would set out the government's "latest thinking" on the compensation issue in advance of an inquiry into the matter being conducted by the Treasury select committee.

But "full details' of the package were not due to be published until the Treasury's pre-budget report in the autumn, the spokesman said.

Gordon Brown hopes that today's announcement, and the unveiling of a draft Queen's speech in a Commons statement.....continued below

Advertisement starts

---

---

Advertisement ends

that he is making tomorrow, will help to revive his government's flagging fortunes.

The speech will include bills from the communities department, justice ministry, Home Office, and health and education, offering new rights to the public to scrutinise and seek redress from public bodies.

In a speech today, Hazel Blears, the communities secretary, trailed the empowerment theme by proposing that the cabinet should meet outside Downing Street in town halls and community centres across the country.

Ministers have a deadline of next month and the report stage of the finance bill to assuage backbench rebels concerned about the abolition of the 10p rate of tax.

But they have a more pressing political need to make the proposals public before the Crewe byelection next Thursday. David Cameron has promised to build the Conservative campaign in Crewe around the removal of the 10p tax bracket but ministers say the byelection can still be won.

The draft Queen's speech, an innovation started by Brown last year in an attempt to spread consultation, will contain measures such as a community empowerment bill covering not just local government, but also other public agencies such as the police and health department.

Brown will hope the draft speech will help his government begin a fightback which was once again undermined by over the weekend by revelations in memoirs from the former deputy prime minister John Prescott, the Labour fundraiser Lord Levy, and Cherie Blair.

The Department for Children, Schools and Families will put forward proposals for consultations on giving parents the right to information about their children, including new rights to sit on parents' councils.

Ed Balls, the schools secretary, will announce proposals to tackle failing schools on June 9.