It's widely though that the government's efforts to compensate the low paid for the abolition of the 10p tax rate would be either complicated or expensive. But it needn't be so. There's one possible solution that's simple, revenue neutral, a benefit to the median voter, which would lift thousands out of the tax system, unite Labour MPs behind Gordon Brown, and probably cause Polly Toynbee to die of ecstasy.
Step one would be to raise the personal income tax allowance by £1200. This would save all 20p tax-payers £240 a year (20% of £1200) - the amount lost by the biggest losers from the abolition of the 10p rate. This would cost £6.6bn, according to the Treasury's own estimates (pdf).
This £6.6bn could be recouped by a 7p rise in the top tax rate.
On top of its aforementioned benefits, this would cause the Tory party a problem. Brown could ask: "Are you serious about standing up for the poor or are you what you've always been - the party of the rich?" And he could justify the rise in top taxes more easily now than ever before. Something like this'll please Labour backbenchers:
This government is supporting the financial sector to an unprecedented degree, with a £50bn bail-out. It's only right that those who work in that sector should pay in some way for this state aid. What's more, the financial crisis that triggered this hand-out has shown that - in many cases - the justification for big salaries was only ever self-serving hogwash. Big earners in the City were not skillful judges of risk, helping to improve economic efficiency by cutting the cost of capital, but just ignorant punters who whine like five-year-olds who have pissed their pants the moment things go slightly against them. Higher taxes on these won't much damage the wider economy.
Of course, it's possible that a 7p rise in top taxes wouldn't raise as much as the Treasury thinks, if some top earners migrate (though not to New York) or downshift. But Brown could mitigate this danger by raising the top rate by less and raising the capital gains tax rate*.
Whatever, the fact is that Brown has every chance to get out of his own mess in a way that'd delight Labour backbenchers and benefit most voters.
So, what's stopping him? Is it the fear that top tax-payers are so footloose that they would migrate en masse? Or is he just more scared of the right-wing press than of his own MPs?
* Corrected from earlier version in light of comment one.