Lessons from the 10p Tax Debacle.

After days of threats from Labour MPs to back Frank Field's amendment to the Government's Finance Bill, the Prime Minister's crisis appears to have receded, at least for the time being.

Frank's amendment sought to compensate those people on low incomes who have suffered from Gordon Brown's abolition of the 10p tax rate in his last budget as Chancellor. Today Alistair Darling has offered a range of concessions and Frank has withdrawn his amendment.

I wrote to him both thanking him for the work he has put in to achieve a shift by the Government but also to explain that I would have preferred to have held out longer to ensure that we saw the detail of Darling's offer. It looks to me that there will still be people on low incomes who will lose out and we still do not have clarity on the amounts to be restored or when.

If it works out that the offer from Alistair Darling does not properly compensate the losers from the 10p abolition it will be seen as a significant act of bad faith on the part of Gordon Brown.

The question now being asked is how did we get into this mess.

My view is that the sequence of events went something like this. Last year Gordon Brown wanted to make a splash with his last budget to demonstrate that he can wrong foot the Tories and to project himself even further as the natural successor to Blair. So he seized on the political stunt of cutting the base rate of tax and bringing down corporation taxes at the same time. To pay for this he decided to raise £7 billion by cutting the 10p rate of tax.

Normally Treasury ministers would have been given the task of working out detailed examples of the implications of cutting the 10p rate and funds would have been set aside to smooth out any problems of potential losers.

I believe that this essential planning collapsed when just before the budget a heavy lobby was undertaken by MPs and charities campaigning for more resources to get the Government back on target of cutting child poverty. Gordon Brown scrambled round to put together resources for a child poverty package and either the resources were no longer readily available to compensate 10 p tax rate losers or the issue was just not thought significant enough.

Worryingly to pay for publicity seeking tax cuts Gordon Brown instinctively resorted to cutting financial support to the least well off rather than taking on the rich, the non doms or big business. In addition this whole exercise has demonstrated an almost amateurish approach to policy planning by creating an unnecessary crisis literally days before critically important local elections.

See my article on the Guardian's Comment is Free website for further comment on this issue.