Deputy Prime Minister Nick Clegg has urged Chancellor George Osborne to go ‘further and faster’ in raising the level at which people start to pay income tax.
The coalition government has promised to raise the tax threshold in increments to £10,000 by 2015, but Clegg said that families ‘cannot be made to wait’ until then.
In a speech delivered at the Institute for Government today, Clegg said the chancellor should use the March 21 Budget to raise the threshold higher than the planned £8,105.
Pressure on family finances is ‘reaching boiling point’, he said, and cutting income tax is ‘one of the most direct tools we have to ease the burden on low and middle earners’.
Increasing the tax free personal allowance was part of the Liberal Democrat manifesto at the 2010 election. Clegg said he was ‘extremely proud’ of the government’s commitment but it should happen quicker.
This would help people ‘whose incomes are too high to qualify for welfare benefits, but too low to provide any real financial security’, who are facing the biggest squeeze on household disposable income since records began.
Clegg said the tax threshold had not kept pace with earnings. In 2010, it was worth only 20% of average earnings, compared with almost 28% in the early 1970s,
Faster increases could be funded by ‘tackling industrial-scale tax avoidance’, he said. He also confirmed that the government was considering introducing a general anti-avoidance rule on tax. This would seek to stop what he called ‘the tax industry’ from ‘creating ever more contrived schemes, undermining the principles and intentions of the system’.
In the speech, Clegg also backed the government’s planned benefits reforms, which have suffered a number of defeats in the House of Lords, including one last night over plans to make single parents pay to use the Child Support Agency.
The ‘country can’t afford’ to have as many as 2.6 million people on incapacity benefits, he said. ‘Where children grow up in homes where no one works, they are twice as likely to experience long spells of unemployment themselves.’
Labour said that Clegg had ‘a cheek preaching about fairness and tax’, when he had campaigned against a rise in VAT and then introduced it when the Liberal Democrats got into government.
