UK Labour government backbenchers are calling on the Prime Minister, Gordon Brown to rethink the government’s decision to double the rate of income tax for low earners.

At last years budget, Gordon Brown flashed a 2p tax cut for average earners from 22% down to 20% and tried to make all the political capital he could from it. However, the money to pay for it had to come from somewhere and Mr Brown apparently chose the lowest earners to pay for it. Of course, the government put maximal spin on it and said they were ’scrapping’ the 10% tax rate. This was disingenuous at best because what they were really doing is doubling the starting rate of tax from 10% up to 20%!

When originally challenged about this, the then chancellor Brown suggested the low earners might make up the difference in ‘tax credits’. The problem with this is that many low earners are still proud of the fact that they work and do not want to take benefits from the state, they just don’t want to be overtaxed either. Having seen the forms you need to fill out for such tax credit, I’d say that you need very good education to properly understand them and they ask excessively detailed questions about a person and their life (and the life of their relations). Furthermore, if you happen to be single and male, you’re pretty much out of luck by way of any tax credits, you just have to pay for everyone elses.

So, 12 months on as this massive tax increase comes into force for low earners, Labour’s back benchers look like they might start thinking for themselves and demand a rethink. If nothing is done, the poorest working people in society will see their income shrink while those that are better of will see it increase. It is possible that some of these low earners could actually be better off giving up work and living entirely on benefit.

Perhaps Labour isn’t working?

The thing most likely to cause a change in texture of a Northern Rock shareholder’s undergarments today was the news that the UK treasury would prefer nationalisation of Northern Rock over a private deal if the decision had to be taken today.

The BBC cites a ‘banker’ who is said to be ‘close to the negotiations’ who says that the Prime Minister Gordon Brow (rather than the chancellor, Darling) is calling the shots on any potential deal. Apparently, Brown isn’t averse to the nationalisation of Norther Rock ‘at any cost’ now. He is said to feel that a partial nationalisation deal with Virgin involved may be beneficial but he wants more money in exchange for the billions (£100billion?) in support already doled out to the Rock.

You can read more in Robert Peston’s: Rock Nationalisation ‘back on’ article.

Photo Credit: Alex Gunningham cc-by-2.0