Brown heads off tax rebellion

LONDON Wed Apr 23, 2008 6:29pm BST

1 of 3. Prime Minister Gordon Brown speaks at the STUC conference in Inverness, northern Scotland April 21, 2008.

Credit: Reuters/David Moir

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LONDON (Reuters) - Prime Minister Gordon Brown made concessions on tax reform on Wednesday to end a rebellion by members of his own party which had threatened to further erode his authority.

The government said it would look at ways of helping those worst affected by the abolition of the lowest income tax band and backdate any additional payments to the start of the tax year in April.

Frank Field, the leader of the Labour Party rebels, withdrew an amendment which had raised the prospect of a humiliating defeat for Brown in a parliamentary vote next week. "The government has listened," Field said.

The Conservatives, leading in opinion polls, tore into Brown over his "panic" concession after he had repeatedly said the abolition of a 10 percent tax rate band was fair and did not hurt the poor.

In heated exchanges in parliament, Conservative leader David Cameron accused Brown of a U-turn and said he was "a pathetic figure" suffering a massive "lack of authority".

Brown denied he had been "pushed about" by Labour rebels. "I've listened to people's concerns ... I believe it's right to respond where there are low-paid people in difficulty," he told the BBC.

Brown, who replaced Tony Blair as prime minister last June after 10 years as Chancellor, has seen his ratings slide as the effects of the credit crunch dent his reputation for sound economic management.

By bowing to pressure, Brown may embolden party rebels to hold out for concessions on other issues such as toughening terrorism laws or nuclear power, some analysts said.

AUTHORITY UNDERMINED

But Wyn Grant, politics professor at Warwick University, said the alternative would have been worse for Brown. "It's a question of balance and how his authority would have been undermined if he'd lost the vote."

He asked where Brown would find the money to pay for his concessions at a time when the global financial crisis has limited his room for manoeuvre on spending.

Brown's spokesman could not say how much the measures would cost, but said the Treasury would not have made the concessions unless it was confident it could fund them.

Getting rid of the 10 percent tax rate band raised some 7 to 8 billion pounds.

Nearly 50 Labour MPs had demanded concessions to help low earners hurt by the tax changes. The timing of the row could not have been worse -- local elections are due on May 1, Brown's first test at the ballot box since taking over from Blair.

Speculation has increased that a challenger for Brown's job could soon emerge if the party keeps trailing in the polls.

The abolition of the 10 percent tax rate was part of Brown's last budget as Chancellor in 2007 and was intended to fund a reduction in the main tax rate to 20 percent from 22 percent.

"We are determined to take action because we are the party of fairness," Brown told parliament to cheers from supporters.

Chancellor Alistair Darling said he would look at winter fuel payments for the elderly, tax credits and the minimum wage as ways to reduce pressure on people who will suffer from the change.

Labour, more than half way through its third consecutive term in office, lags the Conservatives in opinion polls and Brown's personal popularity ratings have plummeted. He does not have to call a parliamentary election until mid-2010.

(Editing by Janet Lawrence)

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