A couple of weeks ago, Nick Clegg signalled his determination to cut the taxes of the lowest-paid — now Lib Dem chief secretary to the treasury Danny Alexander is pressing for the tax-rise that would enable the Coalition to get on with it.
Danny Alexander, a Liberal Democrat Cabinet minister, says the better-off are receiving overly-generous tax relief when they invest money for their retirement. Mr Alexander’s proposals would see tax relief halve from 40 per cent to 20 per cent. He also wants workers on the minimum wage, who earn up to £12,500 a year, to pay no income tax at all. Mr Alexander claims that removing the higher-rate tax relief would save the Exchequer more than £7 billion and make the system fairer. Even restricted to those earning more than £100,000 the Treasury could save £3.6 billion.
“If you look at the amount of money that we spend on pensions tax relief, which is very significant, the majority of that money goes to paying tax relief at the higher rate,” Mr Alexander told The Daily Telegraph. His remarks may open up a new dispute between the Tories and Lib Dems over tax. They are already at odds over Lib Dem calls to keep the 50p top rate of tax and introduce a “mansion tax” on high-value homes. George Osborne, the Chancellor, is expected to strongly resist any calls to scrap higher-rate tax relief. …
Nick Clegg, the Deputy Prime Minister, wants to move “further and faster” with tax cuts for lower-paid workers — a move that would be funded by higher taxes on the better-off, but which had not been accepted by Conservatives.
At the Liberal Democrat spring conference next month, the party’s members are expected to pass a motion calling for cuts in tax relief for higher-rate savers, with the Chief Secretary likely to back it. “I’m willing to study that motion but I dare say I will [support it],” he says. “I wrote an election manifesto at the last election which proposed going considerably further for precisely the reasons of fairness that I’ve set out. As a Coalition government, we’ve made some decisions in this area already, which go in the right direction. When it comes to people on low and middle income, I am a tax-cutter by instinct.”