Worst affected by 10p tax rate abolition could receive compensation

Chancellor Alastair Darling has announced that those who have been worse hit by the abolition of the 10 pence income tax rate could receive compensation.

In a letter to John McFall MP, the chairman of the Commons Treasury Select Committee, Darling said he plans to assess the loss to pensioners aged between 60 and 64 years, low-paid families and young people, a move which many rebel Labour MPs will consider as a U-turn on the original tax policy.

In the letter, dated April 23, he said he would be investigating how pensioners who have lost out could be helped through an existing relief mechanism present in the Winter Fuel Allowance. To help low-paid families who don't receive working tax credits, meanwhile, Darling will focus on changing the tax credits system to offset losses caused by the removal of the 10p rate. He has also asked for an investigation to be conducted into what changes can be made to the minimum wage to support younger workers.

It has been reported that the exact measures the Treasury will take to compensate those who affected will be announced in the autumn, and any changes made will be backdated to April.