Tories cry ‘con’ as Brown and Darling offer a tax bribe

In the biggest by-election bribe since Harold Wilson announced the building of the Humber Bridge in 1966 to win Hull North, Gordon Brown is giving a tax cut to 17 million taxpayers as part of his efforts to defuse the row over the abolition of the 10p lower tax band for the lowest paid.

Alistair Darling, the Chancellor, shocked even Brown's critics by unveiling a mini-budget today and announcing that 22 million people on low and middle incomes will gain £120 extra this year. To pay for it, he is raising borrowing by about £2.7bn.

It was enough to buy off the backbench revolt and Frank Field immediately announced he accepted the package. He also took the unusual step of apologising to Gordon Brown, who was sitting on the front bench, for allowing his attack on the Government to get "personal" over the weekend when he predicted that Brown could be out by the end of the year.

That prediction is still a possibility. Because in spite of the size of the compensation package, Labour are still likely to lose the Crewe and Nantwich by-election on May 22. Brown has bought some time with the £2.7bn hand-out, but that is all.

George Osborne, the Shadow Chancellor, was left floundering, saying it was a "cynical press release in a by-election". He said: "First we had the tax con. Now we have the compensation con."

The Chancellor is also lowering the higher 40 per cent tax band to £40,835 from £41,435 to limit the pay-out. That will leave about 17 million tax payers better off though it could be clawed back next year.

It will still mean that around 1.1 million will still lose around £2.23 a week as a result of the abolition of the lower tax band of 10p in the pound, but that is half what they would have lost. They are mostly in the higher part of the pay band between £15,000 and £18,000 where the 20p tax band kicks in.

In all 4.2 million of the 5.3 million losers from the abolition of the 10p tax band will receive as much or more than they originally lost. It means, said Darling, that 80 per cent of households are fully compensated with 20 per cent compensated by at least half.

THE MOLE: MINI-BUDGET

FIRST POSTED MAY 13, 2008