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What happened to redistribution?

Nia Griffith finds abolition of the 10% tax rate is penalising the poorest

There you are sitting in your MP's surgery and the constituent sitting opposite you places his bank slips in front of you.

“I'm sorry to bother you,“ he says, “but I feel really strongly about this. It's these tax changes; abolishing the 10% rate is going to leave me £15 a month worse off. I know it's not big money, but it's still £15 a month.”

And you look down and you see it in black and white. Out of a monthly works pension of £372.10, last month £41.07 was taken in tax, leaving him £331 and, this month, after the abolition of the 10% rate, £56.80 is being taken out in tax, leaving him £315.30.

He continues, “If it was the Tories doing this, you'd expect it like, but you don't expect Labour to do this to you”.

You know you are sitting opposite someone who votes Labour for the same reasons as you do – who's been a trade unionist all his working life, who understands the difference between a Tory government, which destroyed the coal industry and much more besides, and Labour politicians who fight for redistribution of wealth and stand up for the less well-off.

We can all do it, we know the doorstep script, we are used to defending our many excellent policies against the onslaught of Tory-press-inspired comments, even if we know our words will have little effect.

But how do you sit in front of a 62-year-old ex-factory worker and explain his monthly loss of income? He is not a youngster who has opportunities ahead of him to get promotion or a better-paid job, he is not on an incremental payscale which would cushion the blow. He is on a fixed income and he will be £15 worse off per month, £180 per year. You can mutter something unconvincingly about how the abolition of the 10% had passed with little comment last year. We had all assumed that the various tax credits and the possible adjustment of threshold would have meant that we would not end up damaging those on the lowest incomes. You can remind him that he will be getting an extra £50 winter heating allowance, but somehow your words sound hollow.

The most infuriating part of all of this is that I did raise it last year, thanks to a very vigilant 60-year-old constituent who came to see me in April. He had listened more carefully than most of us to the 2007 budget. He noticed the abolition of the 10% rate, whilst the rest of us were gawping in disbelief and admiration at the reduction for the standard rate from 22p to 20p in the pound. He brought me his calculations showing that he would pay more tax. I wrote to the Treasury on 25th April 2007 with his figures and the reply waxed lyrical about our achievements but did not answer the question. I did continue to pursue it but to no avail, and, perhaps in the back of my mind, I too, thought that this constituent was an exceptional case, who just happened to fall on the wrong side of a cut-off point and who just happened not to be eligible for any mitigating measures such as tax credits. I thought I must have other constituents in a similar position, especially in an area where the loss of many manufacturing jobs has left many workers retiring early and the principle seemed so wrong to me, so inconceivable, that I assumed we would have protected those on low incomes, but I had no idea of the numbers of people that would be affected.

The one argument I've heard from the Treasury that does make some kind of sense is that the 10% was only ever introduced as a temporary measure until the tax credit system was fully developed and implemented and that it was never intended to be a permanent feature – but how many of us knew that? And, once it is there, how can you take it away?

So where do we go from here? Clearly any change in the tax system needs a long run-in, and, most importantly, has to be paid for. That is really the only honest answer you can give, that it is there now for this year, but we really do need to think about what would be the most viable way of restoring the progressive and redistributive effects of the 10% tax rate, so that we do not penalise the less well-off. After all, isn't that why we're in the Labour Party?

Nia Griffith is Labour MP for Llanelli