Government performs U-turn on income tax changes

The government has conceded to pressure from rebel Labour MPs, performing a U-turn on income tax changes.

Chancellor Alistair Darling wrote a letter to Treasury committee chairman John McFall detailing the government's intention to offset losses incurred by low-income households because of the removal of the 10p band of income tax.

The move appears to have placated the rebels, led by backbencher Frank Field.

Mr Darling added that work had also been done to compensate pensioners aged between 60 and 64 for people losing out through the winter fuel allowance. Any changes will be backdated to the beginning of this financial year.

Mr Field welcomed the "terrific news", saying: "The government has listened, and more importantly acted upon what many Labour MPs have been saying."

He congratulated Mr Darling for "actively seeking ways of compensating workers made worse off by the loss of the 10p starting rate of tax".

The changes to income tax, which also include a cut in the basic rate from 22p to 20p, were initially outlined in the 2007 Budget.