The Government has effectively backed down in the face of a revolt by backbench Labour MPs over the 10p tax rate. The rate will not be restored, but there will be a set of compensatory payments:
How all this is going to work is not quite clear. Apparently, retired people between 60 and 64 will be assisted by changes in the winter fuel payment, although quite how that will operate is unclear. Will I, as a higher rate taxpayer over 60, get an even bigger payment? It seems a blunt instrument to me.
Similarly, manipulating the minimum wage is also a blunt instrument and could have unintended consequences, e.g., setting the rate too high could have an adverse effect on jobs.
It would also appear that the working families tax credit would be extended to childless couples and presumably to single people (the distinction between these two categories is unclear given the large numbers of people who cohabit). Presumably this would not be at the same rate as for families.
The $64,000 dollar question is where is the money going to come from these compensatory payments before the end of the financial year? Through public expenditure cuts or tax increases elsewhere? We got into this mess in the first place by treating cuts in the standard rate as a political virility symbol.