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Darling warns 10p tax rebels Field to go ahead with 10p revolt
(about 1 hour later)
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. Labour MP Frank Field has vowed to push ahead with a revolt over 10p tax despite a warning it could lead to the collapse of the income tax system.
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. Fellow rebel Greg Pope said he would not vote against the government's Finance Bill after the warnings from Chancellor Alistair Darling.
They are threatening to join forces with the opposition to vote down the government's Finance Bill. But Mr Field rejected Mr Darling's "nuclear button" claims as "ludicrous".
But Chancellor Alistair Darling has warned them against such a move. He said he still planned to table an amendment unless the government came up with more than "warm words" on 10p tax.
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. Mr Field told MPs he welcomed a £2.7bn compensation package brought in following a similar rebellion last year.
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. But he said the increase in personal allowances still did not compensate the very lowest paid who were still losing out and would take out their "grievance" over it at the next election.
Rethink demanded "The relative tax burden that the abolition of the 10p rate has placed on the lowest earners in our country has not been rectified," Mr Field told MPs.
He said that half a million households would lose out in 2011/12 - about 1.3m individuals - due to the abolition of the 10p rate and it would cost them £2 to £3 a week.
Mr Field will wait to hear what the Treasury Minister Stephen Timms tells MPs about the government's plans for further compensation for those who have lost money as a result of the abolition of the 10p tax rate.
Earlier the chancellor told Mr Pope and Mr Field that he would consider new measures in his Autumn pre-Budget report, the BBC understands.
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.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.
It is claimed that this may persuade them to reconsider their position. Rethink demanded
We're taking all the action we can to help those people who are on low income through this recession Prime Minister Gordon Brown Prime Minister Gordon Brown is trying to avoid a damaging Commons defeat when MPs vote on the Finance Bill later.
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.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. We're taking all the action we can to help those people who are on low income through this recession Prime Minister Gordon Brown
Mr Brown is telephoning would-be Labour rebels in an effort to persuade them to back the government, says the BBC's Political Editor 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.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."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 Mr Field said that, according to the Institute of Fiscal Studies, 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. The rebels say that 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."