Clegg: Raise tax threshold further and faster

 

Nick Clegg: "UK tax system cannot go on like this"

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Nick Clegg has urged the government to go "further and faster" in raising the level at which people start paying income tax to £10,000 a year.

The deputy prime minister argued many families were facing a "state of emergency" in their finances and ministers must respond "more rapidly".

The coalition has promised to raise the income tax threshold to £10,000 by the next election, set for 2015.

But Labour said the coalition was to blame for the "squeeze" on families.

In a speech to the Resolution Foundation in London, Mr Clegg attempted to set out a distinctive Liberal Democrat fiscal position by highlighting differences with the party's Conservative coalition partners.

His remarks follow official figures showing the economy shrank by 0.2% in the final quarter of 2011 and ahead of the Budget on 21 March, increasing speculation that changes to tax thresholds could be announced.

'Unfair system'

Mr Clegg said the "biggest question" facing the country was how the tax burden on people was shared.

Start Quote

I don't think people are going to trust Nick Clegg or this government to help the squeezed middle”

End Quote Ed Miliband Labour leader

While the coalition had "called time on the unfair and out of whack tax system", he said Lib Dem priorities were different from those on the right in politics who placed "less of an emphasis on using the tax system to tackle inequality".

At the last election, the Lib Dems pledged to raise the income tax threshold to £10,000 a year and the coalition agreed to implement this policy over the course of this Parliament.

The income tax threshold was raised by £1,000 to £7,475 in the 2010 Budget, and the government plans to increase it further to £8,105 this year.

Mr Clegg said he was proud of these measures, as "cutting income tax is one of the most direct tools we have to ease the burden on low and middle earners".

'Boiling point'

And he added: "Today I want to make clear that I want the coalition to go further and faster in delivering the full £10,000 allowance, because bluntly the pressure on family finances is reaching boiling point.

"Compared to those at the top, these families have seen their earnings in relative decline for a decade. That has got worse since 2008, with lower real wages and fewer hours at work."

Mr Clegg said the pledge - which would cost an estimated £9bn - had to be fully funded, stressing "we need to find the money and that won't be easy of course".

Start Quote

It is perfectly clear he is doing this for political reasons and is trying to get a few brownie points”

End Quote David Ruffley Conservative MP

But he argued the UK could not afford not to address inequalities in the current system.

He also said he would "stick to his guns" in arguing the case for a "mansion" tax on property - aimed at homes worth more than £2m - as part of his plans to tackle "serious, unearned" wealth.

Mr Clegg discussed his tax objectives with Chancellor George Osborne on Wednesday and Prime Minister David Cameron on Tuesday.

But the BBC News Channel's Chief Political Correspondent Norman Smith said although Mr Clegg was pushing hard on the issue none of his demands had been "signed off" by No 10.

Ahead of the speech, Mr Clegg told BBC One's Breakfast: "I can't tell you exactly what's going to be in the Budget, because it hasn't been decided yet, but this is very much what I think should be in it."

'Playing politics'

But the plans were criticised by Conservative MP David Ruffley, a member of the Treasury select committee, who said there were "better ways" right now to boost economic confidence - such as cutting workers' national insurance contributions.

"In case Nick Clegg had not noticed, the deficit is not falling as quickly as we would like because growth is more sluggish than we would like," he told the BBC News Channel.

"It is perfectly clear he is doing this for political reasons and is trying to get a few brownie points. In good time, we will get to the £10,000 tax free slice. It is all good stuff but there are priorities here."

Mr Ruffley warned Mr Clegg against "pushing Conservative backbenchers around" on tax, particularly over issues like property taxes and tax relief on pension contributions.

"You should not play politics with the economy which is what I fear Nick Clegg is doing. I think he is trying to bounce the chancellor which is not a wise thing to do."

Ed Miliband says that the government has squeezed middle income Britain

Labour leader Ed Miliband said it was the coalition government which had put up VAT, cut tax credits and "allowed energy and train companies to rip people off on their bills".

"Finally Nick Clegg has woken up to the squeezing of people on middle incomes," he said. "But the problem is who squeezed the middle? It is this government.

"I don't think people are going to trust Nick Clegg or this government to help the squeezed middle."

 

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  • rate this
    +1

    Comment number 122.

    If raised direct to £10K this means £2.5K no longer taxed Income Tax @ 20%, or we get to keep anothe £500 over the year. It's likely that those earning less than £30K will win, while the higher bracket will be lowered to taper costs so that higher earners all lose out by a little.
    As there's no such thing as a free lunch, though, I wonder what Cameron has in reserve to claw this money back.

  • rate this
    +1

    Comment number 121.

    The poor have cash savings and are cheated by banks
    ---

    Poor people don't have savings in the UK

    They live hand to mouth, week to week.

  • rate this
    -1

    Comment number 120.

    100.soarerman0264 I don't know your circumstances so won't comment but, according to the benefit calculator, a childless couple earning 10k a year are entitled to just under £90 tax credit a week. Your original statement was incorrect. Agree about paying for people who won't work but what are people to do if they have kids who are in their early teens when they become unemployed? Send them back?

  • rate this
    0

    Comment number 119.

    @115.LeftieAgitator
    "are you a devotee of Objectivism?"
    Getting involved in pigeon-holing into different 'ism's is distracting. I don't conform to any and just mesh basic libertarian principles with pragmatism. I've been following Ron Paul from the Uk with great interest. It's a shame libertarianism isn't even on the table in the UK.

  • rate this
    -2

    Comment number 118.

    Clegg is sounding ever more desperate.

    He should have thought a bit more before boarding the Tory bandwagon.

  • rate this
    0

    Comment number 117.

    @104 mofro
    Of course there are hard workers in every tax bracket. However you need talent as well. This combination generally correlates with an increasing salary. Which the state takes a larger and larger chunk out of to prop up the less skillful or lazier (or both).
    For the record I define hard work by looking at the benchmark set in India and China. We have cushion lives in the UK.

  • rate this
    0

    Comment number 116.

    @ 76

    The squeezed middle refers to the middle class, not middle income. The two are not the same. To be able to afford to be middle class now you need an income in the higher tax bracket or equivalent within a family.

  • rate this
    -1

    Comment number 115.

    103.farkyss
    'a believer in liberty', so am I. I would class myself as a Left Libertarian,
    are you a devotee of Objectivism?
    Anarcho-Capitalism has the potential to be as oppressive of the Human Spirit as Soviet-Communism.

  • rate this
    +1

    Comment number 114.

    It would be great for the ecenomy...people would have more money in there pocket,perhaps spend more,new business would open etc so everyone would win.

  • rate this
    +1

    Comment number 113.

    @7.farkyss
    Yes as a % the lowest paid pay more tax (when taking in council tax etc) but the higher earners (£35k and above) pay a massive amount of tax in terms of numbers.
    Someone who earns £1m actually only takes home £498k after tax


    Oh bless them!!
    Not quite on the breadline then

  • rate this
    -3

    Comment number 112.

    Sorry but raising the tax free bit so high mainly helps the rich who earn that much or more.

    Help more people by getting interest rates up. The poor have cash savings and are cheated by banks, the rich sit pretty with assets or can rate tart.

  • rate this
    -1

    Comment number 111.

    @108.Ady
    "The benefits system wins"
    How? Those on benefits will still claim them.

    "The individual wins"
    Provided they earn more than the old threshold & the government doesn't continue to screw the country up so badly that any gain is wiped out by other tax/cost rises

    "The government wins (lower costs)"
    I think you've had a maths fail, raising the threshold means less tax revenue.

  • rate this
    -1

    Comment number 110.

    Obviously poor old Nick has just realised he is being shafted by Cameron on everything else so is going on the offensive over this. I thought the coalition was supposed to be good for the UK, more and more it seems it is just government with a built in opposition. Unfortunately for Nick he is trying to woo the working class whilst Cameron takes his orders from big business. All in this together?

  • rate this
    +3

    Comment number 109.

    Of course the income tax threshold should be raised, preferably the 10p tax band also re-introduced.
    Don’t be fooled into thinking that the ‘Mansion Tax’ will be benign; a ‘Rich Person’s Tax’ only. Once in place it will expand and deepen in time to cover almost every private home. No politician will be able to resist the temptation.

  • rate this
    +1

    Comment number 108.

    Love 'em or hate 'em, this is the LibDems best policy (only policy!)

    The higher the threshold, the fewer the number of people who will spend their lives languishing on benefits.

    The benefits system wins
    The individual wins
    The government wins (lower costs)
    Society wins

    Simples!

  • rate this
    +1

    Comment number 107.

    60.Vampire - "Of course there aren't as many jobs in the 40% bracket. .......I think we have different definitions of hard work."

    Ergo if everyone worked really hard then by your own definition there wouldn't be enough jobs to go round that pay enough to be on higher rate......the mere fact someone earns that much they are LUCKY as well as hard working......

  • rate this
    0

    Comment number 106.

    So, we seem to have a choice
    1 Choose old labour to redistribute income from the middle classes through the benefits system;
    2 Choose new labour to redistribute income from the middle classes via the national debt through the benefits system ; or
    3 Choose the Coalition to redistribute income from the middle classes through the tax system.

    Anyone spot a gap in the political market?

  • rate this
    0

    Comment number 105.

    This appears to be not only about trying to help the hard pressed so called "middle" tax payers, but also about trying to stimulate the economy by putting more money into consumers pockets. If this is the case then it is definitely "plan B" territory. Unfortunately this isn`t going to be enough to kick start growth and needs to be part of a much wider and clearly thought through approach

  • rate this
    +7

    Comment number 104.

    To: 45.Vampire

    How do you define hard workers? My definition is anyone who works hard whatever tax bracket they come under, whether it be the lowest or the highest. Those of you who pay 40% do not have a monopoly on working hard. The £10k tax threshold should be brought in asap, not have to wait until 2015.

  • rate this
    0

    Comment number 103.

    @96.LeftieAgitator
    "European countries where tax rates are significantly higher"
    DIRECT taxation is significantly higher. I wouldn't mind income tax rates being higher if it weren't for INDIRECT taxation that cripples us.

    Just because they have tax regimes you 'agree' with doesn't make them better. Sweden, Switzerland, and Finland are all horrid places to live if you believe in liberty.

 

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