Cut taxes for low earners now, Mr Clegg
Jan 2011 13

Nick Clegg today reaffirmed his party’s manifesto commitment to substantially increase the personal allowance (the amount of money everyone can earn before having to pay tax) and Left Foot Forward has pointed out the Treasury wouldn’t confirm the policy. This tax reform was perhaps the single most attractive proposal the Liberal Democrats made before the election.

Increasing the personal allowance to £10,000 would remove many low earners from the income tax system altogether and significantly ease the tax burden on those whose incomes are not much greater. As well as the obvious attraction of not taking money out of the pockets of those who don’t have much in the first place, it will also shift the balance of incentives to make work pay for more people.

As Mr Clegg said in the Sun:

“Now more than ever, politicians have to be clear who they are standing up for. Be in no doubt, I am clear about who that is. That is why the Liberal Democrats made a promise to voters on the front of our manifesto.

That no basic rate taxpayer will pay any tax on the first £10,000 they earn.”

Great news. But ‘when?’ is a vital question when talking about money. £10,000 was worth a lot more 20 years ago than it is now. And it will be worth a lot less “by the end of this Parliament”, when Clegg told the Today programme that the policy would be implemented, than it is worth in 2011/12, which is when he promised it would be delivered in his manifesto:

“To put in place the necessary tax changes in order to raise the personal allowance to £10,000 for the start of the financial year 2011–12.”

By 2015/16, the last fiscal year of this Parliament, average earnings will have increased by 21% since 2011/12 according to Treasury forecasts in the 2010 budget. Adjusting the promise to keep in line with this would equate to a personal allowance of £12,100 in 2015/16 – substantially more than £10,000. But we can’t wait that long to get people off welfare, to make work pay and to stop taxing the lowest earners. Partially implementing the rise in 4 years is not good enough. Nick Clegg should ensure the coalition government adopts that Lib Dem manifesto commitment in full, now.

Call to action: send Nick Clegg an email [email protected] and let him know you want him to implement his policy in full, now.

Rory is the Research Director of the TaxPayers’ Alliance. Rory’s work is focused on tax policy and economics, with a particular emphasis on tax simplification.

  • Anonymous

    When I was school over 50 years ago. I was taught the basics of ecomonics that direct ax (PAYE) was fair tax and indirect tax (VAT) was an unfair tax. I believe this is still true today.

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  • AdrianS

    And lets face it the Lib Dems, Labour and even the Consv would get the money back anyway where all three parties are guilty of taxing the sh*t out of the motorist. Many low earners use thier cars simply to get to work but still pay heavy motoring taxes. Our fuel is some of the most expensive in the world and low earners generally cant afford to buy the latest Toyota Prius or electric car. If you rally want to make things fair how about taxing Aviation like the motorist— cuase this would give some oft he luvvies at the BBC and thier ilk a cardiac– they could no longer go on their long haul holidays to paradise whilst preaching restraint to ordinary working people

    • Anonymous

      The latest Toyota Prius would not help the average worker in rural Wales with a 30 mile commute, it would likely use more fuel than a small/medium turbodeisel

    • Hampshirehog

      Agreed that vehicle fuel is grossly expensive in view of it affecting all facets of modern day living but flying is taxed heavily via the Air Passenger Duty which hits every passenger regardless of nationality. But to tax aviation fuel would be rather silly as it would encourage airlines to move their hubs to Belgium or France and refuel there – as is now with European large goods vehicles coming here with massive tanks filled with much cheaper diesel.

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