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Govt to extend 10p tax compensation to future years

The Government has committed to extending its £2.7bn package to compensate those set to suffer as a result of the abolition of the 10p tax rate to future years.

A report by the Institute for Fiscal Studies published today, shows 18 million families would be worse off by an average of more than £150 a year as a result of tax and benefit changes over the next two years. The IFS called on the Government to extend the one-off income tax cut and continue topping up the winter fuel allowance.

In response, the Treasury has confirmed that “for future years its aim is to continue the same level of support”.

The Chancellor announced a £2.7bn package earlier in May to compensate some of the 5.3 million people affected by the abolition of the 10p tax.

Conservative Shadow Chancellor George Osborne says: “Here is independent evidence of Gordon Brown’s compensation con on the 10p tax rate. His cynical manoevre to save his own political skin will leave 18 million people facing a tax rise next year. This is what happens when short term politics gets in the way of the long term interests of the country.”

A Treasury spokesman says: “The increase in the personal allowance will mean that 22 million people will gain an additional £120 this year, including those on middle incomes. And we are providing support at a time when families are facing additional costs. As the Chancellor said in his statement to the House of Commons, for future years our aim is to continue the same level of support for those on lower incomes. We will set out our plans for future years in the pre-Budget report along with our fiscal projections, consistent with the fiscal rules and in line with the requirements of the Code for Fiscal Stability.”

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