1.1 million low-paid still losing out after Labour's by-election budget

11.48.00pm UTC (GMT +0000) Wed 14th May 2008

Labour's '10p tax rate' u-turn still leaves 1.1 million people worse off, Lib Dems have warned.

Local Liberal Democrats have accused the Government of panic over plans to tackle the effect of the "10p tax rate" fiasco on the low paid by rushing in measures to raise the personal tax allowance by £600 - despite the fact that 1.1 million of the lowest paid workers will remain worse off.

Local spokesperson Chris Nelson said, "When Gordon Brown announced he would scrap the 10p tax rate as Chancellor over a year ago, the Lib Dems were the first party to warn of the effect of these changes on the lowest paid."

"While we therefore welcome moves to put money back into the pockets of those from which it was taken, it is astonishing that just a quarter of the money being spent will go to those affected by the scrapping of the 10p rate whilst 1.1 million workers remain up to £100 out of pocket!"

"Clearly this action has been driven more by panic over the prospect of Labour losing next week's parliamentary by-election than by working out an effective way of compensating everyone affected. Yet again Labour's desire to control the news agenda after a poor set of elections has meant higher tax bills for some of those least able to afford it."

ENDS

Notes:

1. Even after the announcement, 1.1 million people earning between just over £6,500 and £12,800 will still lose out under Labour's doubling of the 10p rate.

2. Of the 1.1. million losing out, some will still lose up to £100 per year.

3. Of the £2.7bn spent on increasing the allowance, only around £630m - less than a quarter - will actually go to the 5.3 million people who lost out under the 10p rate, making the policy extremely poorly targeted.

4. The additional spending will mean that net government borrowing for the year will rise to £45.7bn, a 6% increase on what was predicted two months ago and a 50% increase on what was estimated just one year ago.