The House of Common's Treasury committee has published its report into the impact of the abolition of the 10 pence rate of income tax. It recommends compensation for the 1.1 million households who are still losing out from the removal of the 10% starting rate of income tax, together with the setting up of a Poverty commission to examine public policy challenges relating to poverty.

The committee also considered the effects of initial implementation and the changes to personal allowances announced on 13 May 2008 and has considered future policy options relating to the personal tax system and benefits system.

Concern was expressed that the consultative purpose of the pre-budget report has been lost in recent years, and the worry is that PBR 2008 will become short term political "fix". The committee says that "The Government must learn lessons relating to budgetary processes. We recommend that the Government publish a Household Impact Assessment alongside future Budgets and Pre-Budget Reports. This would analyse the impact on individual, family and household finances of Budget measures and other changes to the welfare system."

The Low Incomes Tax Reform Group (LITRG) says that it welcomes the Committee’s recommendations and endorses what the Committee says about the need to take Budget decisions not in isolation, but having regard to other policies in the tax and benefits systems, and to the Government’s objective to eliminate poverty. Proper consultation, as with all changes to the tax system, is the key.

Robin Williamson, LITRG’s Technical Director, says: “The debate over the withdrawal of the 10% starting rate has shown how important it is, when introducing new policies, to take account of all the knock-on effects on individuals’ and households’ finances. Introducing a measure, however well-intentioned, can undermine efforts elsewhere in the tax and welfare systems to combat poverty, unless the full implications for all other policy areas are carefully studied beforehand. For that reason the Government must take the Committee’s recommendations very seriously.’