Jeremy Browne speaks for the Liberal Democrats during the committee stage of the Finance Bill

Labour MPs last night voted through the doubling of tax on people on low and modest incomes with not a single Labour MP opposing it. The debate could have seen an embarrassing defeat for the Government. But Labour MPs withdrew a rebel amendment on the promise of a compensation package from the Government at some later date.

As well as passing the proposal itself Labour MPs rejected an opposition proposal for a ‘sunset clause’ on the doubling of the 10p rate, that said the lower rate would be restored at the start of next year unless MPs have voted to approve a compensation package they judge to be adequate before then.

Speaking for the Liberal Democrats during the debate, Shadow Chief Secretary to the Treasury, Jeremy Browne, highlighted that there were questions regarding the Government’s compensation package which remained unanswered:

“First, what is going to be backdated in this package of proposals? As I understand it, the specific measures aimed at trying to assist pensioners between the ages of 60 and 64 will be backdated, but there is dispute - and it remains unresolved - as to whether other people will receive backdated compensation. Indeed, the right hon. Member for Birkenhead said that the Chief Secretary was “badly briefed” on the backdating of the compensation package. I wonder whether the right hon. Lady, even though she is not speaking for the Government in this debate, has had time to swot up. It is extraordinary that she should have to be briefed at all on these matters, as one would think that she was at the centre of trying to decide the Government’s taxation policy.

“Secondly, even if those measures are backdated for everybody, there is the issue of cash flow. There are many people on low and low-to-middle incomes, and if they receive money in November that is backdated six months, it will not pay today’s supermarket, gas or council tax bill, and those are the problems that the Government have not identified or addressed.”

On the length of the compensation packages, Mr Browne said:

“We have not heard about how long the compensation packages will last. Will they apply for one year only, as some Government measures do? For the people affected, losing the 10p rate is not just for Christmas, but for life.

“Not only low earners are involved. Many in the London media commentating classes make the mistake of thinking that anybody who earns £14,000 to £17,000 a year is a low earner. For many constituents of mine, that is a typical wage. People who work as hotel receptionists or on farms or who have secretarial jobs do not regard themselves as low earners or as people who need to be beneficiaries of the largesse of the state. They want to get on with paying a reasonable proportion of their salaries in tax to fund public services, but they also want to be able to provide for themselves and their households. The issue affects millions of people - including, but not exclusively, the poorest.”

On the Government’s failure to accurately compensate affected taxpayers, Mr Browne said:

“The Government have not addressed a fourth point to our satisfaction. They have all this talk about compensating people who are “average” losers, which seems an entirely nebulous concept. If one person has no money and another is a millionaire, their average wealth is £500,000, but that figure does not reflect the circumstances of either person. The Government talk about “average” losers, but some people may be overcompensated and end up with more money as a result of the package than if the 10p rate had been kept in place. Other people will not be adequately compensated. We need to hear further details about precisely how the compensation will work.”

“On face value, the package of proposals put before us as a result of the lively meeting between the right hon. Member for Birkenhead (Mr. Field) and the Prime Minister leaves far too many questions unanswered to be satisfactory to any self-respecting Labour MP.”

Mr Browne concluded:

“The truth is that Labour MPs have been fooled twice on the 10p rate. They were fooled on 21 March 2007, when they waved their Order Papers and decided that the Prime Minister was somebody they could place their faith in to lead their party, and they were fooled again last Wednesday when the Prime Minister wobbled in the face of their threats and they thought that they had achieved a victory, which has turned out to be built entirely on sand."

“Labour Members have an opportunity to show this evening that they have not been fooled by the concessions that were made on Wednesday, which will not achieve what the Government claim: that millions of people on low to middle incomes who have been adversely affected by the doubling of the 10p rate will be compensated. Those hon. Members who have expressed their concerns through early-day motions, media interviews and other forums need to put their money where their mouth is and vote accordingly.”

A Liberal Democrat amendment tabled for yesterday was not accepted for debate. But a Conservative amendment was debated and voted on. This would have introduced a ‘sunset clause’ for the doubling of the 10p rate. It would be automatically restored in January 2009 unless MPs voted for a government resolution approving a compensation package that they judged to be adequate before then. Liberal Democrat and Conservative MPs voted for this. Labour MPs voted against it.

The amendment was defeated, with 264 voting for and 307 voting against.

There was then a further vote on the doubling of the 10p rate. This took the form of ‘clause three stand part’ (i.e. whether clause three should remain part of the Bill). Labour MPs voted for this (i.e. for doubling tax on the low paid). Liberal Democrat and Conservative MPs voted against it.

The clause was voted through, with 304 voting for and 262 voting against.

Click here to read Jeremy Browne’s speech in full