The government has been criticised for its decision to scrap the ten per cent income tax rate.
The potential consequences of scrapping the ten per cent tax band have been discussed by an influential MPs' committee.
Ministers were urged to do more to recompense the low-paid workers who will be negatively affected by the tax reform, the Treasury Committee has said. The MPs also claimed that the government's decision will impact on 1.1 million Britons.
Gordon Brown's decision to reduce the normal rate of income tax from 22 per cent to 20 per cent - and to pay for this cut by doubling the income tax obligation of those previously in the ten per cent tax band - has proved very controversial, particularly among backbench Labour MPs. Responding to the outcry, the government said earlier this year that it will take steps to reimburse those who lose out from the reform.
However, according to committee chairman John McFall, this compensation does not go far enough. "There are still 1.1 million losing households, many of whom are on low-incomes and who are being hit hard by rising food and fuel prices and the slowdown in the economy," he said.
"The government's short-term priority must be to make every effort to compensate these people in full. The government must not let this issue slide into the background and will need to produce fresh proposals to fully compensate these 1.1 million households by the time of the 2008 Pre-Budget Report."
