Rebel Labour MPs criticised Gordon Brown on Monday after the prime minister suggested precise measures to reimburse more than a quarter of the 5.3m losers from the 2007 Budget had already been announced.
Mr Brown’s comments add to confusion over the scope and nature of the aid package promised to low-paid workers and threatens to reignite a backbench revolt that appeared to be have been pacified last month.
Cabinet ministers have claimed Labour has “made amends” over the mistakes made in abolishing the 10p tax rate, but many MPs fear that without a simple message regarding compensation voters will use the Crewe and Nantwich by-election to again punish the party.
Frank Field, the leader of the rebellion, told the Financial Times he was “shocked” by figures cited by Mr Brown in a weekend interview that in effect suggested 1.5m of the households that lost out would be compensated through pre-announced government measures that take effect by 2011.
“If George Osborne was writing the script on these numbers, it could not have been more damaging,” Mr Field said. Women pensioners under 65 who are told their compensation is the £50 winter fuel allowance announced in the last Budget will just want to “punch us in the eye”, he added.
Mr Field plans to table a motion on Tuesday demanding a progress report from the Treasury on which groups they are seeking to cover, whether the payments will be backdated and the mechanism they are hoping to use. He will also call on the Treasury to publish data on households that lose out.
Mr Field said of the prime minister: “His future is crucially linked with a proper deal. I’m hoping [the Treasury] will come up with a proper statement by [Tuesday].” If Mr Field regards the plan as inadequate, he has warned he will submit a further amendment to block Mr Brown’s Budget when it reaches its final stages in the Commons in late June.
Mr Brown made the claim while disputing that 5.3m households would lose out from the 2007 Budget, even though the estimate has been confirmed by both the Treasury and the Institute for Fiscal Studies.
“What happened was the figure in April 2007 was 5.3m, it then came down as a result of the Budget 2007 to 4.3m, it is now going down again to 3.8m,” Mr Brown told Sky News. Officials say the 4.3m figure compares the 2007-08 financial year with 2008-09, taking account of measures in the last two Budgets, such as the increase in winter fuel allowance.
The further fall to 3.8m losers takes place by 2010-11, again from existing policies such as the uprating of tax credits and child benefit. Other rebel MPs took to the airwaves to call on ministers to flesh out the compensation package. “It is not good enough,” Fabian Hamilton, a Labour backbencher, told the BBC. “It has got to be more specific. People need to know when they are going to be compensated and how much it is going to be.”
Treasury officials are struggling to prepare an affordable compensation package that will reimburse households hit by the removal of the 10p rate within a politically acceptable time period.
Mr Brown has expressed his preference for using tax credits to “help” some of the low-paid workers without children who fall through the existing net of support. However, such compensation could take up to a year to reach a minority of those losing out from the change.
By contrast, the IFS and Mr Field argue the quickest way to reach the most losers for the least money is by raising income tax allowances – an option that would amount to a second political concession by Mr Brown.
