Press Room
Chancellor's 10p concession unlikely to return all £7bn owed to
low income earners
Leading business and financial adviser, Grant Thornton, warns
that the total cost of the abolition of the 10p starting rate (£7bn
this tax year) is unlikely to be returned to all those low income
earners affected, because the revenue earned by the Treasury from
the measure was used largely to fund the reduction in the basic
rate of income tax from 22p to 20p.
Francesca Lagerberg, head of Grant Thornton's national tax
office, welcomed the Chancellor's announcement, but is dubious
about the prospect of the government giving back £7 billion to low
income earners through a scatter gun method of winter fuel
payments, adjustments to the minimum wage and the tax credit
system.
Lagerberg says, "You have to ask whether it is possible for the
Chancellor to fully compensate every individual negatively affected
by the abolition of the 10p rate? The answer is probably no,
because with money from the abolition of the 10p rate already
spent, it will be difficult to find £7bn from elsewhere in the
Treasury's coffers to give back to low earners."
"The Chancellor's announcement showed intent, but fell far short
of a promise. Therefore, it is unlikely that an individual
suffering the worst of the effects of the abolition can expect to
see the full sum of the loss returned to them. It is simply too
difficult for the government to give back all of what it has taken
and already spent."
She concludes, "Detail of the concessions will probably not be
available until the pre-budget report in Autumn this year, so until
this time, low income earners affected by the removal of the 10p
starting rate will have to support themselves on less income than
they were used to."