Clegg tax speech paves way for bigger rise in personal allowance
Thursday, 26 January 2012 09:45
The Deputy Prime Minister, Nick Clegg is expected to call for the government to speed up the timetable by which no-one pays income tax on the first £10,000 they earn.
In a speech to the Resolution Foundation in London that has been cleared by the Treasury and agreed with the Chancellor, George Osborne, Mr Clegg will argue that UK household finances are under unprecedented pressure and lower and middle-income workers need more help through the tax system.
The plan to increase the tax threshold to £10,000 is one that was in the Liberal Democrat’s manifesto and agreed by coalition government that it would be implemented by the time of the next election in 2015.
However, Mr Clegg will argue that working people need the help earlier and will call on the government to speed up the process.
Mr Clegg’s call comes as the government faces increasing pressure that it is failing in the economy and that its policies are not encouraging growth. Yesterday, the Office for National Statistics (ONS) confirmed that the UK economy shrank by 0.2 per cent in the final quarter of 2011. This increases the likelihood that the UK will enter a double-dip recession during 2012.
George Osborne will present his budget on March 21st and Mr Clegg’s speech, the contents of which has been agreed with the Chancellor, increase the likelihood that there will be an announcement on increasing the tax threshold in the budget.
The income tax threshold was raised by £1,000 in the last budget to £7,475 for the 2011-12 tax year and it is planned to increase by a further £630 this year, to £8,105 for the 2012-13 tax year.
However, Mr Clegg is expected to argue that the pressure on family finances is reaching boiling point and that the increases in the tax-free allowance should happen “further and faster” as families have seen their real income decline since the financial crisis of 2008 due to low wage settlements, less overtime and high inflation.
Labour’s shadow Exchequer secretary, Owen Smith said: "This is the man who campaigned against a rise in VAT and then introduced it just after he got elected. And his government's Autumn Statement took three times more from families with children than from the banks.
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