Spinning chancellor gets Labour tied in knots

12.00.00pm BST (GMT +0100) Thu 24th Apr 2008

Brown's last budget has tied the government in knots

The Chancellor today pledged to help low income families who were made worse off as a result of the doubling of the 10p tax rate - a spinning yarn that has tied the Labour government in knots.

Despite press reports suggesting otherwise, the Chancellor has not promised to ensure that all of the 5.3m people on low incomes who have lost out as a result of the Budget will be fully compensated.

The Liberal Democrats have revealed that if the Chancellor is to ensure that all people are fully compensated from the abolition of the 10p rate, the Exchequer will have to spend up to an additional £1.23bn

• Alistair Darling has said he will see if 60-64 year-olds who have lost out can be compensated through the winter fuel allowance. To ensure that all 600,000 people receive full compensation, the winter fuel allowance would have to be almost doubled from £250 to £482 at a cost of £120m

• He announced that he would investigate changes to tax credits to compensate people. However, currently people under the age of 25 are not entitled to tax credits. Furthermore, take up of tax credits by eligible people without children (one of the key groups who lose from the doubling of the 10p rate) is just 22%

• The Chancellor has said that for people currently outside the tax credit system, he will consult the low pay commission on possible changes to the minimum wage:

o The minimum wage for 16-18 year-olds is currently £3.40 per hour, or £6,630 per year (based on 37.5 hour working week)

o The minimum wage for 18-22 year olds is currently £4.77 per hour, or £9,301 per year (based on 37.5 hour working week)

o The minimum wage for 22 year olds and over is currently £5.52 per hour, or £10, 764 per year (based on 37.5 hour working week)

• To ensure that all people on the minimum wage would no longer lose out from the 10p rate, the minimum wage would have to be increased for all people to £18,500 per year - or £9.49 per hour.

For all the spin the facts are clear. Those unable to claim tax credits or Pension Credit and earning less £18,500 are now seeing their income tax bill rise. For a Labour government to have a tax policy the penalises the worst off is an absolute disgrace.