10p tax losers ‘need more help’

Alistair Darling must do more to help the 1.1m low-income households still losing out as a result of the scrapping of the 10p tax rate, MPs have said.

A £2.7bn emergency package announced by the chancellor last month did not go far enough, the cross-party Commons Treasury committee said in a report.

The money had not been “well-targeted”, with £2bn going to middle-income workers who had not lost out, it added.

Mr Darling has said he wants to do more to help those not already compensated.

The committee’s report said the chancellor’s decision to raise the income tax threshold by £600 in May, at a cost of £2.7bn, was “probably the least bad option” to mitigate the impact of the abolition of the 10p rate.

It found the 5.3m losers from the initial decision were people on low incomes for whom the loss of up to £232 a year had dealt a “significant” blow to their finances.

This, it noted, came at a time of sharply rising prices for essential goods and services.

Some people were still estimated to be up to £112 a year worse off, the report said.

Bank mortgage lending falls 20%

Mortgage lending for house purchase by the UK’s main banks has fallen to its lowest level on record.

The British Bankers Association (BBA) said that in May, the number of new mortgage approvals to home buyers fell to just 28,000.

That was a 20% fall in just one month and 56% down from May last year.

The BBA said the number of new approvals was the lowest since its records started in 1997 and warned that the market would stay subdued.

“Measures of mortgage activity were lower in May as a result of tighter lending criteria and economic pressures on households,” said David Dooks of the BBA.

“Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders,” he added.

BBA members account for about two-thirds of total UK mortgage lending.

10p tax help too slow - Darling

Chancellor Alistair Darling has admitted to MPs that ministers should have moved “faster” to compensate those who lost out over the 10p tax rate.

And he said he wanted to do more to help the million people not compensated by his £2.7bn emergency package in May.

He said compensatory measures for the over-65s and many parents were brought in when the tax rate was scrapped.

But he said: “Should we have gone faster and further? Yes we should, which led to my announcement in May.”

Mr Darling was answering questions from MPs on the Treasury Select Committee which is holding an inquiry into the effects of the 10p tax band being axed.

Fiscal rules

Before he announced concessions in May, it was estimated that 5.3m low-paid people would have been left worse off by the change - which threatened to provoke a backbench rebellion by Labour MPs.

He told MPs he did not accept he had put the government’s own fiscal rules, which require public sector borrowing to be held below 40% of national income, at risk by his concessions.

He said it would have been wrong to take the money out of the economy, by tax increases elsewhere, at a time the economy was slowing.

In May, just weeks after the Budget and following a rebellion by Labour MPs, he announced a £2.7bn package effectively giving an extra £120 this year to all basic rate tax payers.

Conservative MP Philip Dunne quoted an interview Mr Darling did shortly after becoming chancellor, in which he said that any tax changes should be “made at the proper time, in the context of the Budget, or the pre-Budget report”.

Supermarkets to battle on prices

Supermarket giants have announced price promotions to outflank discount stores, which have risen in popularity.

Shoppers feeling the pinch have moved to no-frills stores, experts say, with Aldi and Lidl seeing strong growth.

Now Asda is selling 10 staple items such as bread and eggs for 50p over the weekend, and Tesco says it will cut the cost of 3,000 items on Monday.

Rising food prices were the biggest contributing factor to a big lift in consumer inflation in May.

Price cuts

Asda, owned by the US giant Wal-Mart, is advertising a promotion of basics, including sausages and bananas for 50p, from Friday to Sunday.

 

House prices ‘unchanged in May’

House prices in England and Wales were unchanged in May and up 1.8% over the year, the Land Registry says.

But it said that sales volumes during March were half of the number of March 2007, at 53,080.

The figures, which are based on completed property sales, come after sharp falls in house prices were reported by the UK’s major lenders.

The Registry said annual price growth fell for the ninth month running. The average cost of a home was £183,266.

Price changes

The data shows that London has the biggest year-on-year growth in property prices - up 6.9%.

There were also rises in prices in the East Midlands, the East, Yorkshire and Humber, the South East and the North West.

But average prices fell over the last 12 months in the North East, South West, Wales and the West Midlands.

At a more local level, Monmouthshire saw the highest annual price growth in May - at 6.9%, whereas in Ceredigion prices fell the most, by 7%.