The Government must do more to help low-income individuals losing out as a result of the abolition of the 10p tax rate, the Commons Treasury Committee has claimed.

A new report released by the cross-party Committee has warned that the compensatory measures, announced by the Chancellor earlier this year, do not go far enough.

On 13 May Alistair Darling raised the personal income tax allowance by £600, meaning that those earning up to £40,835 will receive an additional £120 this year.

However, the Committee’s report asserts that Alistair Darling’s decision to raise the income tax threshold was ‘probably the least bad option’ to mitigate the impact of the scrapping of the 10p tax rate.

According to the report, 1.1 million households are still financially worse off, with young adults without children and women aged between 60 and 64 thought to be the hardest hit.

Committee chairman John McFall said: ‘The Government's short-term priority must be to make every effort to compensate these people in full.

‘The Government must not let this issue slide into the background and will need to produce fresh proposals to fully compensate these 1.1m households by the time of the 2008 Pre-Budget Report.’

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