Clegg’s call for income tax cuts for the low paid is welcome, but will the Tories back him?

It’s no secret that Nick Clegg is personally very committed to the Lib Dem – and now coalition – policy of raising the threshold at which people begin to pay income tax. It was one of the first big policies he argued for at conference after becoming leader, and was a key message during the 2010 election campaign. Clegg returned to the theme this morning, though, to call for the implementation of the policy to be speeded up.

Personally I think this intervention is very welcome, not only because the policy is a good and liberal thing in itself, but because its implementation couldn’t have come at a better time: it both helps those on low incomes struggling with the effects of high inflation and stimulates an economy suffering a severe demand crisis.

Here’s what I wrote back in October for the Guardian, including a quote on the issue from Clegg himself:

When it comes to inflation, while George Osborne’s options to tackle the problem itself may be limited, he can certainly take action to negate its effects on the people on whom it impacts most severely. One of the most effective things he could do is to let those on low and middle incomes keep more of the money they earn. The coalition agreement already commits the government to raising the threshold at which people begin to pay income tax to £10,000 over the course of the parliament. Given the way in which the economic outlook has deteriorated since last May, wouldn’t it make sense to do so more quickly?

When I put that very question to Nick Clegg last month, his response was this: “My simple answer is if we can do it tomorrow, I think we should do it tomorrow.” However, he also expressed practical concerns about the affordability of implementing the policy early: “It is an extraordinarily big shift in the tax system, and it costs billions – that’s basically the problem.”

It seems that a combination of the deputy prime minister seeking to be more vocal on Liberal Democrat priorities combined with the worsening economic picture means the reservations he expressed on the feasibility of such a move are now outweighed by the necessity for bold and urgent action to increase demand in the economy and help those on low incomes.

The big question that remains, though, is whether the Tories – and particularly George Osborne – will back Clegg. Certainly many in the Conservative party like the Lib Dem income tax policy and would probably agree with Clegg, but it remains to be seen whether a deficit-focussed Treasury can be convinced of the merits of this radical change.

Clegg’s speech, though, also signifies a very important and welcome change to the Lib Dem approach to the coalition, with Clegg putting public pressure on his colleagues in government either to reach a compromise on the policy or say why they don’t think it’s the right thing to do at this time. It’s far from clear whether Clegg’s call will materialise in the upcoming budget, but it should hearten Liberal Democrats that the deputy prime minister is pushing this policy and doing so in such an open way.

* Nick Thornsby is a day editor at Lib Dem Voice.

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7 Comments

  • Clegg called for the £10k faster in the context of being able to pay for it. There would be no effect on govt finances.

  • Excellent move by Nick Clegg.

  • Andrew Suffield 26th Jan '12 - 11:19pm

    is Clegg’s call for a stimulus in our economy in the shape of tax cuts for the poorest a tacit acceptance that austerity was wrong all along?

    No. His position that we should be running a reasonably well balanced budget is in no way inconsistent with his position that rich people should be paying for a larger share of it.

  • “I support the change whole-heartedly. If combined with a cut in the level top rate tax comes in it would be a tax cut for the bottom 85% of the population. I.e. everyone but the rich.”

    No. Obviously it wouldn’t help the poor who don’t pay tax – the ones who have already been hardest hit by cuts in spending on benefits and public services.

  • andrew purches 27th Jan '12 - 1:13pm

    The Lib Dem / Coalition policy to cut Income Tax for the financial lower orders is of course to be persevered with, and over Tory backwood’s mens dead bodies if need be, but more to the point is the pressure on household incomes, and the biggest help here would be,as I have proposed on many occasions, the revaluation of property for Council Tax purposes, and a subsequent rebanding that should extend to,say £ 750.000, reflecting current market values. The current “D” band, which is taken as the average for tax purposes should be extended to a valuation of ,say, £ 350000, with a tax payable base figure for that band of £ 1000. Anything below would show graduated savings and anything above a graduated increase. This would spread the load more equitably for all households and would give much more help to those in poorer homes who pay a disproportionate level of council tax with the current system. I know Mr. Pickles would fight this but he is not really the right person to have the final say.

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