Nick Clegg is making a speech today where he will call for the £10,000 personal tax allowance to be accelerated faster than its 2015 target – indicating that the wealthy will be squeezed in the Budget to pay for this.
This threshold policy is clearly branded as a Lib Dem policy; the 2011 Budget saw a significant lift of the figure by some £630 or so. Party strategists believe that it is an easy concept for the public to understand and casts them in a positive light.
Clegg is determined to remove from Ed Miliband the mantle of “champion of the squeezed middle“, although he uses slightly different rhetoric like “alarm clock Britain”. It’s an easier marketing sell in opposition than in the cabinet, however.
And how will he pay for the increased personal allowance? For now that is the big question. It’s easy to talk about tax avoidance – and measures are being taken to crack down on this – but less obvious that it will reap the desired windfalls. Meanwhile the economic slowdown does not point to higher tax receipts in the coming months. Inflation automatically lifts the allowance by a certain amount, but not as far as Clegg would like.
It’s easy to forget but back in November Clegg said some similar things about how the rich would be the ones mainly paying for measures in the growth review such as a £1bn fund for getting people back to work:
Over the last year and a half we’ve increased capital gains tax, we’ve slapped on a big bank levy, we’ve made sure that the loopholes that the wealthy enjoy are closed and we will have more of this kind of thing to make sure that the people with the broadest shoulders pay their fair share.
Perhaps unsurprisingly this was seen as a signal that the growth review would be progressive in terms of who had to pay the most. The end result, however, was that changes to tax credits (which support those in the “squeezed middle”) cost around £1bn while a small change to the bank tax is set to raise only a few hundred million pounds.
Jim Pickard
Kiran Stacey