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Darling speaks to 10p tax rebels Darling warns 10p tax rebels
(about 3 hours later)
Chancellor Alistair Darling is meeting organisers of a planned Commons revolt over the abolition of the 10p starting rate of income tax. Backbench rebels have been told that if they defeat the government in a vote later no further income tax could be raised this year, the BBC understands.
Ministers are facing a possible defeat later, with up to 30 Labour MPs threatening to join the opposition parties in demanding a rethink. The rebels, led by Labour MPs Frank Field and Greg Pope, claim low paid workers are still losing out over the abolition of the 10p tax rate.
The government announced a £2.7bn compensation package in the face of a similar rebellion a year ago. They are threatening to join forces with the opposition to vote down the government's Finance Bill.
But former minister Frank Field says many low earners are still losing out. But Chancellor Alistair Darling has warned them against such a move.
Mr Field and fellow Labour MP Greg Pope have threatened to block this year's entire Budget in a vote in the Commons on Tuesday. BBC Political Editor Nick Robinson said Mr Darling met the two MPs earlier to discuss their attempt to block the passage of the legislation enacting his Budget.
'Worse off' The MPs want him to come forward with proposals to compensate all those who had lost from the abolition of the 10p starting rate of income tax.
Both the Conservatives and the Liberal Democrats say they are backing an amendment tabled by the rebels. Rethink demanded
Critics say millions of people on low incomes are worse off since the change. Treasury sources say Mr Darling advised them that his legal advice was that their amendment to the Finance Bill would invalidate the collection of income tax - and that all income tax paid since 6 April might have to be re-paid.
But the government has defended the actions it has taken to support those people hit by the abolition of the 10p tax rate. It is claimed that this may persuade them to reconsider their position.
The prime minister's official spokesman said: "The government believes that we have set out the best and most affordable way of providing support to lower and middle income households." We're taking all the action we can to help those people who are on low income through this recession Prime Minister Gordon Brown
The spokesman failed to answer questions over whether some people were still worse off as a result of the 2007 tax change which raised the starting rate of tax to 20p in the pound. Prime Minister Gordon Brown is trying to avoid a damaging Commons defeat when MPs, who are currently debating the finance bill, vote on it later.
Up to 40 Labour MPs are threatening to join the Conservatives and Liberal Democrats in demanding a rethink on the scrapping of the 10p starter rate.
Mr Brown is telephoning would-be Labour rebels in an effort to persuade them to back the government, says Nick Robinson.
Speaking at a press conference earlier, Mr Brown said the government had raised personal allowances to "help people who might otherwise pay income tax" which he said would help "nearly a million people" out of income tax and had also made changes to tax credit and child benefit.
"We are taking all the action that we can - of course we'll listen to what people have to say on this - but we're taking all the action we can to help those people who are on low income through this recession and that's the message we'll be giving to people in the House of Commons this afternoon," he added.
'Toxic''Toxic'
The government announced a £2.7bn compensation package in the face of a similar rebellion a year ago but Labour rebels and opposition parties say some low paid people are still losing out.
The decision to abolish the 10% starter rate of income tax was included in Gordon Brown's final Budget as chancellor.The decision to abolish the 10% starter rate of income tax was included in Gordon Brown's final Budget as chancellor.
It came into force in April last year - alongside a reduction in the basic rate of tax from 22% to 20%.It came into force in April last year - alongside a reduction in the basic rate of tax from 22% to 20%.
The government headed off an earlier revolt in 2008 by promising compensation for those who lost out by the decision to scrap the lowest tax band, including larger personal tax allowances.The government headed off an earlier revolt in 2008 by promising compensation for those who lost out by the decision to scrap the lowest tax band, including larger personal tax allowances.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
But the rebels say that at least 1.3 million people are still worse off by more than £1 a week, with more out of pocket by less than £1 a week.But the rebels say that at least 1.3 million people are still worse off by more than £1 a week, with more out of pocket by less than £1 a week.
They say if their motion is passed ministers will have to produce proposals to ensure no person was worse off before the Commons would grant the government powers to continue levying income tax.They say if their motion is passed ministers will have to produce proposals to ensure no person was worse off before the Commons would grant the government powers to continue levying income tax.
Lib Dem Treasury spokesman Vince Cable said those on very low incomes were paying too much.Lib Dem Treasury spokesman Vince Cable said those on very low incomes were paying too much.
He added: "This is a situation that Gordon Brown has made even worse, despite the temporary measures he brought in to try to fix a problem of his own making."He added: "This is a situation that Gordon Brown has made even worse, despite the temporary measures he brought in to try to fix a problem of his own making."