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Field to go ahead with 10p revolt Ministers may see off tax revolt
(30 minutes later)
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. Ministers could be about to head off a damaging Commons defeat on compensation for low paid workers who have lost 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. Labour MP Frank Field has rejected warnings defeat for the government in a Commons vote could spark the collapse of the tax system and even the pound.
But Mr Field rejected Mr Darling's "nuclear button" claims as "ludicrous". He said he wanted to see more than "warm words" from ministers on 10p tax.
He said he still planned to table an amendment unless the government came up with more than "warm words" on 10p tax. But fellow rebel Greg Pope said he would not now vote against the government's Finance Bill.
Mr Field told MPs he welcomed a £2.7bn compensation package brought in following a similar rebellion last year. Earlier the chancellor told Mr Pope and Mr Field that he would consider new measures in his Autumn pre-Budget report, the BBC understands.
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. 'Nuclear button'
Treasury sources say Alistair Darling advised them 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.
Mr Field told MPs he had been warned that if the government was defeated it would be "pushing the nuclear button" on Britain's income tax system - and that no more revenues would be collected, leading to the collapse of the currency.
But he said if the government did not have a plan ready to deal with his proposed new clause, it would be "ludicrous" and "irresponsible".
He added: "I very much hope the Treasury bench when they contribute to this debate says more than we've actually heard from the unofficial sources during the day because if all that we're offered yet again is warm words then, Mr Deputy Speaker, my mind is that we should push for this new clause in the division."
Mr Field said he welcomed a £2.7bn compensation package brought in following a similar rebellion last year.
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.
"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."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.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. 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.
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.
Rethink demandedRethink demanded
Prime Minister Gordon Brown is trying to avoid a damaging Commons defeat when MPs vote on the Finance Bill 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.
We're taking all the action we can to help those people who are on low income through this recession Prime Minister Gordon BrownWe'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. Mr Brown has been 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 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 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.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.
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.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."