Darling will have to undo the damage done by Brown to low-earners

From The Times April 7th

Gordon Brown is rapidly becoming a man haunted by himself. It is increasingly clear that his electoral success or failure as Prime Minister will be determined by his record and actions as Chancellor of the Exchequer. His claim to have left behind an economy of exceptional strength by international standards will be severely tested as the ?credit crunch? ceases to be something complicated happening over there in the American mortgage market and starts hitting would-be first-time buyers over here. In a similar vein, the decisions which he made on taxation and spending are now coming under the spotlight.

In his last Budget 13 months ago, Mr Brown introduced a significant change in the income tax system. He cut the standard rate from 22 pence in the pound to 20 pence, a shift which led him to declare proudly that it had fallen to its lowest level in 70 years. His apparent charity to the country was, though, only possible because he was abolishing a lower 10 pence band of income tax which he himself had created with considerable fanfare a decade earlier. Although the net effect was still a (modest) overall reduction in the income tax burden, Mr Brown had engaged in the classic exercise of robbing Peter in order to pay Paul.

Except in this instance Peter was notably poorer than Paul to start with. As this change starts to register in pay packets, Labour MPs sense an anger among these voters. It is utterly perverse for a Labour Government to have reduced the living standards of the hard-working poor in order to offer a little more comfort to those on higher incomes. Although Mr Brown and his successor, Alistair Darling, insist that there are other means, notably the tax credit process, by which those who have lost out could be compensated, this is not cutting the mustard with their colleagues. Many Labour MPs have the common sense to appreciate that PAYE - and any loss through it - is extremely simple to understand, whereas the tax credit structure which Mr Brown has devised is immensely complicated. In the real world, many taxpayers will not claim the money that they might be due.

The timing of this is awful. It will occur at a moment when the prices of many ordinary goods are accelerating and fears of an increase in unemployment are escalating too. It is exactly the wrong time for the Treasury to be raiding purses and wallets in this manner. But the blunt truth is that, in the short term at least, there is not a lot that Mr Darling can do to make the situation better.

Mr Darling's one chance to tweak income tax again in a way that would have directly assisted those about to be hurt was in his Budget last month, and for inexplicable reasons he did not choose to do so. He will not have another opportunity until the Pre-Budget Report in November or December. The best that Labour MPs can achieve now is vociferous lobbying for belated action at that date.

The broader lesson from this saga is this. If a policy proposal looks like it is too clever by half, then it probably is. If Mr Brown really wanted to cut income tax so that absolutely everyone benefited - which would indeed have been desirable - then he should have sought to balance the cost by new restraints on spending, not by offsetting it with a rise elsewhere. As it stands, having wanted to be seen as some kind of Robin Hood, he is about to be viewed as a new Sheriff of Nottingham.