From panic, and not thought through

Those millions who will lose because of the abolition of the 10p tax band by Gordon Brown will not have been heartened by yesterday's fiasco. The rushed change of mind, just minutes before Prime Minister's Non-Answers probably was born of desperation to avoid a feared public dissection by Cameron.

The problem is that if all losers are fully compensated for deterioration in their position the extra stealth tax from the sleight of hand last year will be gone, since those people were the only losers and higher income groups all won.

Worse, there does not seem to be any adjustment, short of reversing all last year's changes, which will not cause further loss of tax. To raise personal allowances, for instance, will benefit all income groups and not just the poorest. To reverse last year's changes will mean lost of face, and "as you were " will mean wiping out the gains expected by higher income groups.

The lower income groups and their protectors will have noted the phrase "For this year", with the thought that it may be one-off, and the mention of backdated compensation in November means that poorer people will have a small cash-flow problem until November at a time when indebtedness is already causing problems.

In addition, perhaps reflecting what I have written above, there is talk of using the tax credit system or minimum wage to help them. If the tax credit system is used some may well not be eligible, because they are working or because they have no children. If, unbelievably, the minimum wage is raised we shall have the situation of all employers of people on low wages finding that all their cost planning has been in vain, having taken on workers at one level and discovering later in the year they must pay more backdated. Any rise in minimum wages could well have an upward pressure on wages immediately above and all differentials.

It is not surprising that after many days of discussion and sleepless nights no solution could be found which did not have very unwelcome implications for the Government.

I almost feel sorry for the Prime Minister and his puppet, - almost but not quite.