Action call on 10p tax losers

Alistair Darling must do more to compensate the 1.1 million low-income households who remain worse-off by up to £112 a year as a result of the scrapping of the 10p starting rate of income tax, an influential committee of MPs said.

And the Chancellor must ensure that the £2.7 billion package he announced last month to mitigate the impact of the 10p decision is not simply a one-off gesture, said the House of Commons Treasury Committee in a report.

Changes to the tax system should be announced by the autumn to ensure that there are no losses in years to come for any of the 5.3 million households affected by the initial decision to scrap the rate.

The report said Mr Darling's May 13 decision to raise the income tax threshold by £600 was "probably the least bad option" to offset the impact of the abolition of the 10p rate, announced in Prime Minister Gordon Brown's final Budget as Chancellor last year.

The cross-party committee called for the creation of a Poverty Commission to examine the effect of public policy on the poor, as well as the inclusion of a Household Impact Assessment in future Budgets and Pre-Budget Reports to analyse the impact of their measures on individual and family finances.

But the package did not go far enough and was "not well-targeted", as £2 billion of the extra money went to middle-income workers who did not lose out from the 10p decision, while 1.1 million of those worst affected continue to be out of pocket.