A Lib Dem demand that the Tories should get behind
Peter Hoskin 9:18am
Remember those Lib Dem calls for a mansion tax at the weekend? I said at the time that, ‘the Lib Dems appear to be drawing more attention to which of their own policies they are fighting for
within government, whether those policies make it to the statute books or not.’ Well, now they're at it again.
Nick Clegg is giving a speech this morning in which he'll urge George Osborne to go ‘further and faster’ in raising the income tax threshold to £10,000 a year. It was the stand-out policy of the Lib Dem manifesto, so it's hardly controversial that Clegg should want to see it enacted ASAP. But it's still striking that he's making this appeal in public. A year ago, he'd have emphasised what the coalition was already doing to raise the threshhold. Now, it's more what they should be doing.
The Treasury is keeping its distance from Clegg's speech this morning, claiming that it's an expression of Lib Dem priorities and nothing more. But I doubt George Osborne will be entirely, or even partially, minded against the Deputy Prime Minister's demands. After all, raising the threshhold to £10,000 is already government policy; they were just doing it by step. Clegg simply wants to make the full leap from £7,475 to £10,000 around the forthcoming Budget, rather than to £8,105 as was planned. And rightly so, I'd say.
Besides, we read today that Osborne is considering tax cuts for low- and middle-income earners at the moment — so Clegg's plea may have come at just the right time. There would only be two questions were it to be accepted. First, where would the Chancellor make up the money? Clegg wants various tax loopholes to be closed around the rich, but would Osborne? And, second, what would the Lib Dems ask for then?
Raising the threshhold sooner would be a great and righteous achievement for Clegg and his party. But it would also mean that they'd have to identify new priorities for the three years ahead of the election. This could mean diverting their efforts towards the pupil premium, say. Or perhaps they'd call for the threshold to go beyond £10,000, to offset the effects of fiscal drag. Whatever the case, Osborne will certainly have more LibDemands to consider in future.
Previous
Nickle
January 26th, 2012 9:45am Report this commentWhilst raising the threshold so those in poverty do not pay tax is a good thing, you have to question the priorities.
The priority has to be investment.
Getting rid of taxes on new investment has to come first.
Nickle
January 26th, 2012 9:47am Report this commentNext.
Where is the money coming from?
Government spending has increased above inflation.
There are no cuts.
Perhaps the lib dims can get what they want, but conditionally on the deficit (total) getting to zero.
Matthew Blott
January 26th, 2012 9:48am Report this commentThis is something that should have been done years ago - I was arguing for it myself, check the comments here ...
http://www.progressonline.org.uk/consultations/challenge/comment.asp?c=2482
Indeed, I made the point then that it should be higher - poor people shouldn't be paying taxes at all. It makes no sense if they then have to have top ups from the government to make ends meet, its simply more efficient to take them out of the tax system altogether. And given the pathetic growth (or should that be no growth) strategy of this administration we need far more radical measures to increase demand and the jump to a £10,000 doesn't seem anywhere near enough.
Matthew Blott
January 26th, 2012 9:51am Report this commentI just noticed the link I posted is now broken. Anyway, I wrote this over three years ago and it seems relevant to the piece above ...
Raise the personal allowance threshold to at least £10,000 or, better still, £15,000. This would provide a huge boost to low paid workers and would dramatically increase the value of the minimum wage. The tax credit system is a joke - most people cannot understand the logic of paying poor people, then taxing them, then going through a complicated set of criteria to give them some money back. Most who are eligible don't claim and it's been proven to be expensive and error prone. Far simpler to remove those on lower incomes from the tax system altogether. Labour needs to get away from this Brown driven obsession that a bloated public sector is necessary to solve every problem. At the same time simplify the tax system by abolishing NI contributions and absorbing these into normal taxation. A possible outcome could be three bands of 17, 34 and 50 per cent with 17 per cent kicking in at somewhere between £10-15,000. This would be more transparent and would reduce some of the cynicism rightly felt by the public - it has been duplicitous the way Labour has raised taxes.
Jacob(ite)
January 26th, 2012 9:57am Report this commentHmmm ... so Clegg wants to raise the personal allowance by £2500, and apparently pay for it by lowering the higher rate threshold. Given that there are c4m higher rate taxpayers out of a total of c30m, Osborne would have to create an enormous number of new higher rate taxpayers to get this money back - because he'd have to drop the threshold way further than just £2500 to catch sufficient people. On the assumption that he doesn#'t want to go that far, and that tax avoidance 'savings' are largely mythical (because HMT doesn't count them as extra money to spend, but money off their forecasts - so any money recouped is just going to plug holes in the existing budget)a very interesting question would be where elase the Lib Dems are getting the money from.
Paul Danon
January 26th, 2012 10:16am Report this commentThe money would be saved by cutting public spending and borrowing. HS2 and Boris Island would be canned, along with overseas aid and the jubilee. We'd sell art from our galleries and museums, Scottish islands and the Falklands to Argentina.
Mac
January 26th, 2012 10:21am Report this commentCutting public expenditure doesn't work. Cutting taxes won't work. So what will work to stimulate a flat lining economy? There is no point in asking the Rainbow Axis of Blue, Yellow or Red Tories at Westminster - they simply don't have a clue.
Bob Dixon
January 26th, 2012 10:44am Report this commentThe personal allowance should be £11,856.This is £6.08*37.5 hours per week*52 weeks per year.
Currently the minimum wage is £6.08.Why should this be subject to tax?
DavidDP
January 26th, 2012 10:44am Report this commentEven if it doesn't come to fruition, a good move from Clegg.
You have ask what on earth the Tory party is doing - the only tax they have been going on about is reducing the tax on top earners, allowing Clegg to come out on the side of the hard working middle classes.
A PR goal that was there for the Tories' taking.
David L
January 26th, 2012 11:03am Report this commentThis is very expedient, politically. And it is desirable, all things being equal. But the greatest need is for measures to encourage real economic growth - reduced corporate taxes, regulations, and access to capital. Any of whihc would have to be funded by making further inroads into public spending - preferably via a comprehensive review of role and purposes of public expenditure.
If we are going to survive and prosper we need to declutter government, and be able to engage and compete with the world's growing economies.
Wily Trout
January 26th, 2012 11:08am Report this commentMac - go on, then, enlighten us. What will work?
Kitty
January 26th, 2012 11:09am Report this commentThe Goverment can play around with the Tax Sysyem as much as they like but until they seriously rebalance the economy by significantly cutting back the public sector and reducing goverment spending we will remain at square one!
May i ask is it fair that a person can get 10 k tax free when a unemployed person can claim 100k and pay no tax!
Times have changed and the cost of living has increased since Nick Clegg first floated this idea it will only work if you increase it to around 20/ 25 k
Then prehaps Low earners will not need Housing benefit, Family credit ( But a fair Child benefit should stay)- Unless this is just a little thing to make the Lib Dems feel good about themselves!
Mathias Broucek
January 26th, 2012 11:15am Report this commentShould have been done years ago IMHO
Russell
January 26th, 2012 11:27am Report this commentA clear winner for Clegg and the coalition. Financial gain for low paid workers and encouragement for non workers to get a job, and the bulk of workers earning less than £40,000 per year.
As for finding the £9 billion to pay for this, lowering the threshold for higher paid workers satisfies part of this.
It is not hard to imagine that a huge amount of the 'missing' £9 billion income tax would be recovered in vat from additional spending and the gain in revenue from higher spending by the millions of low and medium paid workers who would spend this 'extra' cash.
Slim Jim
January 26th, 2012 12:02pm Report this commentIt's interesting to see the proposals for 'where the money is going to come from', isn't it? It usually comes in the form of milking more money from elsewhere, usually from wealth creators. I am all in favour of spending LESS on things like overseas aid, Trident, and the bloated welfare state (including health tourism and benefit fraud). However, you can guess what the Left will propose - MORE taxation and borrowing. Will that promote economic growth? Perhaps Fatbloke will enlighten us...
Axstane
January 26th, 2012 12:22pm Report this commentBob Dixon, said
January 26th, 2012 10:44am
The personal allowance should be £11,856.This is £6.08 x37.5 hours per week x52 weeks per year.
Currently the minimum wage is £6.08.Why should this be subject to tax?
Everyone please read and understand what Bob has written. If £6.08 is the minimum wage that anyone can survive on how can such workers survive if they pay tax?
How we can pay for this is another issue. Let's first establish the equity of the whole discussion. £600 a year back in a low-paid worker's pocket may help to defray the rapidly increasing transport costs of getting to work.
In any case it is not all a Treasury sacrifice. The money will recirculate and much will come back in VAT and other taxes collected.
tom jones
January 26th, 2012 12:53pm Report this commentI like the idea, but it's a shame that Clegg is making the running on this policy. If Osborne does do it then the LibDems will get all the praise/credit and we'll have zero money left to dish out. I can just see the headlines now, "Clegg wins tax cut for millions." Also, bit worried about how we will fund it. I'm all for cutting avoidance at the top, but the left seriously overestimate how much will be raised from it imo. So.... great idea and I think it'd boost the economy & be hugely popular, but not sure if it can be funded. We're not Labour - WE actually have to pay for our promises/policies.
Mark Thompson
January 26th, 2012 1:04pm Report this commentThree things:
1) personal allowence must be raised to £15,000 a year, and the welfare cap must also be slashed further to £15,000 a year to pay for it, along with child benefit being paid for the first three children only.
2) The personal allowence must be for British people only. How mad would it be to allow Eastern Europeans in to pay bugger all tax but still have the right to access our public services?
3) Forget the big house tax and tax multiple homes. For every extra property requires double the tax. The money saved from this can be used to lower corporation tax for manufacturing firms.
Mac
January 26th, 2012 1:36pm Report this commentThe only things that will generate an economic stimulus is INNOVATON, INNOVATION, INNOVATION and INNOVATION; be it technical, political, economic, social, constitutional, etc.
At the moment we have economic policy based on political myths; smaller government, printing money, lower taxation, public service reforms, etc, etc.
The mistakes of the past are being practised by people who you would think should know better. There is nothing innovative about that.
I S
January 26th, 2012 1:41pm Report this commentExcellent suggestion from Bob Dixon. Take the lowest paid out of the tax system completely.
Also, can the coalition give some thought as to how to help small businesses grow? 'Bonfires' anyone?
William Blakes Ghost
January 26th, 2012 2:12pm Report this commentNo more taxes until they have cut the obese and insufferable public sector waste. Demands for more taxes is the pathetic squealing of incompetent failing politicians.
More disgusting politics of envy nonsense. Talking of which have the Libdems paid back that 2 million pound donation by crook Michael Brown?
Andy H
January 26th, 2012 2:13pm Report this commentIf it has been deemed sensible that people can get 26K in benefits without contributing, then for a fair and equal society I suggest that the personal allowance be set at 26K as well.
There should not be a tax benefit for those claiming free money from the government, when people who get out and earn their own money have to contribute.
Everyone should be asked to contribute at the same level. That is fair, not the corrupted bastardised notion that the socialists with chips on their shoulders have.
niav
January 26th, 2012 2:16pm Report this commentA lot of people are in favour of this, while we still don't know how such a move would be fiscally balanced.
If balanced by a corresponding cut in state spending, it's a good idea.
If balanced by lowering the 40% tax threshold, it's a very bad idea.
Mac
January 26th, 2012 2:19pm Report this commentJust in case some are hard of hearing.
"CUTTING TAXES DOES NOT STIMULATE THE ECONOMY!"
TrevorsDen
January 26th, 2012 2:55pm Report this commentHS2 would only start building in 2018. Boris Island would be way in the future as well.
Juts how thick are people? Osborne has already announced a lot of smaller schemes.
Asking where the money comes from to pay for the rise in allowances exposes the real problem. We have been spending too much and the only people around in the numbers to pay are the great mass of ordinary tax payers. The 'rich' are too few in number.
If Clegg wants the poor to pay fewer taxes he has to shout out the need to spend less.
Keith
January 26th, 2012 4:36pm Report this commentThere's a simple answer to this. Tell Clegg that he can have his tax threshold, and that it will be paid for by reductions in public spending. Then let him make his mind up.
Keith
January 26th, 2012 4:55pm Report this commentMac @ 2:19:
"CUTTING TAXES DOES NOT STIMULATE THE ECONOMY!"
What a bizarre statement. Do you believe that increasing taxes stimulates the economy? Or that the performance of the economy has nothing to do with how it is taxed?
Those are the only two alternatives. Which of them do you say is correct and why?
David Lindsay
January 26th, 2012 10:39pm Report this commentThe raising of the income tax threshold is a gimmick if it is to be done apart from a wholesale restructuring which, among many other things, guaranteed everyone a tax-free income of at least half national median earnings at the given time.
Dimoto
January 27th, 2012 1:28am Report this commentClegg seems to be saying that the tax reduction would be paid for by yet more "green taxes" !!
The man is a chump, and so is Fraser Nelson.
There is no cunning, easy solution.
The deficit is too big.
Hard pounding is the only option.
Better pray for rain, 'cos there is zero indication that the Euro-imbeciles have got the message yet.
Alex
January 27th, 2012 9:51am Report this commentIt seems a laudable ambition, but of course it will be paid for by reducing the 40% threshold, bringing many more people into that tax band. And, this would also mean many more people not qualifying for child benefit as of 2013. This will be a double whammy especially if it is a single wage house-hold. The Tories will need to be careful with this - its unlikely to win them votes from the low paid, and is very likely to lose the votes of middle income families, especially the female vote.
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