Darling under fire over 10p tax

And the Chancellor must ensure that the £2.7 billion package he announced last month to mitigate the impact of the 10p decision is not simply a one-off gesture, added the House of Commons Treasury Committee in a report.

Changes to the tax system should be announced by the autumn to ensure that there are no losses in years to come for any of the 5.3 million households affected by the initial decision to scrap the rate.

The cross-party committee called for the creation of a Poverty Commission to examine the effect of public policy on the poor, as well as the inclusion of a Household Impact Assessment in future Budgets and Pre-Budget Reports to analyse the impact of their measures on individual and family finances.

The report said Mr Darling's May 13 decision to raise the income tax threshold by £600 was "probably the least bad option" to offset the impact of the abolition of the 10p rate, announced in Prime Minister Gordon Brown's final Budget as Chancellor last year.

But the package did not go far enough and was "not well-targeted", as £2 billion of the extra money went to middle-income workers who did not lose out from the 10p decision, while 1.1 million of those worst affected continue to be out of pocket.

And the MPs noted that the Government has yet to make clear if the help - funded by extra state borrowing - will be repeated in years to come. Experts at the Institute for Fiscal Studies have warned the Chancellor could bust his own sustainable investment rule if it is.

The report found that the 5.3 million losers from the initial abolition of the rate were people on small taxable incomes for whom the loss of up to £232 a year dealt a "significant" blow to household finances at a time of sharply rising prices for essential goods and services.

The report found that Mr Darling was right to ditch his initial proposals to use changes to the minimum wage, winter fuel payment and tax credits to offset the 10p decision. Any future change to help the 10p losers should be made through the tax system, it suggested.

The May 13 measures had the benefits of "simplicity, transparency and greater incentives to work", said the report. Future reforms should aim to keep low-paid people out of income tax while avoiding further complication of the system.