1 Introduction
1. "Having put in place more focused ways
of incentivising work and directly supporting children and pensioners
at a cost of £3 billion a year, I can now return income tax
to just two rates by removing the 10p band on non-savings income."[1]
With these words, in the 2007 Budget statement on 21 March 2007,
the Rt. Hon. Gordon Brown MP, the then Chancellor of the Exchequer,
announced that the 10 pence rate of income tax would be removed
with effect from April 2008. That decision, and the reduction
of the basic rate of income tax to 20 pence, also with effect
from April 2008, which was announced in the same Budget, initially
attracted only limited debate and controversy. However, since
late March this year, the abolition of the 10 pence rate and its
consequences have become central to political and public debate.
2. In this Report, we seek to contribute to that
debate by—
- setting out the background
to the abolition of the 10 pence rate of income tax;
- analysing the effects of the abolition of the
10 pence rate of income tax as initially implemented on individuals
and households, particularly considering the impact on low-income
households;
- exploring policy options for implementation in
2008-09, including the changes to personal allowances announced
by the Government on 13 May 2008;
- analysing the broader context in which decisions
relating to future years will need to be taken;
- identifying improvements to budgetary processes
to prevent a repetition of the recent difficulties; and
- exploring policy options for future years and
making recommendations.
3. We announced our inquiry on 22 April, indicating
that we expected to complete our inquiry and report in advance
of the report stage of the Finance Bill in the House of Commons.[2]
On 30 April, we set out the terms of reference for our inquiry
and invited written evidence.[3]
On 15 May, we invited additional written evidence arising from
the Government's policy announcement on 13 May relating to personal
allowances for 2008-09.[4]
On 21 May, we took oral evidence from the Institute for Fiscal
Studies (IFS), Citizens Advice, the Low Incomes Tax Reform Group
(LITRG) of the Chartered Institute for Taxation, the Social Market
Foundation (SMF), the Institute for Public Policy Research (IPPR),
the Child Poverty Action Group (CPAG), Age Concern England (the
National Council on Ageing), the Trades Union Congress (TUC) and
the New Policy Institute (NPI). On 4 June, we took oral evidence
from the Rt. Hon. Alistair Darling MP, Chancellor of the Exchequer.
4. We received a great deal of valuable written
evidence, including letters highlighting individual concerns about
the effects of the abolition of the 10 pence rate of income tax.
Some of this evidence is published with this Report, and the remainder
has been made available for public inspection.[5]
In preparing this Report, we have also taken account of the statistics
published by the Department for Work and Pensions on 10 June 2008
relating to Households Below Average Income, although we have
not had an opportunity to take evidence on those statistics. We
are most grateful to all those who gave evidence in the course
of the inquiry, and in particular to the IFS for its provision
of invaluable quantitative evidence and associated analysis which
greatly assists us and others interested in the development of
public policy in this area.
1 HC Deb, 21 March 2007, col 826 Back
2
Treasury Committee Announcement, "Treasury Committee announces
new inquiry: Budget Measures and Low-Income Households",
22 April 2008. All announcements referred to are available on
the Committee's website at the following address: http://www.parliament.uk/parliamentary_committees/treasury_committee/treasury_committee_press_notices.cfm. Back
3
Treasury Committee Announcement, "Treasury Committee invites
written evidence for inquiry into Budget Measures and Low-Income
Households", 30 April 2008 Back
4
Treasury Committee Announcement, "Forthcoming evidence sessions,
publication of written evidence and call for additional written
evidence", 15 May 2008 Back
5
For a list of published memoranda, see p 119; for a list of unpublished
memoranda reported to the House and details of how they may be
inspected, see p 120. Back
|
