Danny Alexander MP writes… Liberal Democrat budget victory for “further faster” tax campaign

Over 20 million working people will be better off next year after Liberal Democrats in the Coalition Government delivered the biggest ever increase in the income tax personal allowance in the Budget.

The increase of £1,100 is worth £220 to 21 million working people – taking the total income tax cut for working people delivered over 3 years by the coalition to nearly £550 a year. Two million people will pay no income tax at all. By going ‘further and faster’ as Nick Clegg promised, we’re getting real help to millions of hard-pressed people at a time when they need it most.

The £14billion tax cut means that the government is within ‘touching distance’ of delivering the most important promise we Liberal Democrats made in the 2010 General Election manifesto – that no one should have to pay any income tax until they earn more than £10,000.

With the allowance rising to an historic high of £9,205 next April, our aim will be to deliver the final step at the next budget – so that people get the full benefit over a year before the 2015 general election.

This big tax cut for working people is paid for in part by a significant increase in the tax paid by the wealthiest. As part of the Coalition budget deal, we agreed to reduce the top rate of tax to 45p – but only after securing a series of new taxes on the wealthy that pay for it five times over.

Labour’s 50p rate turned out not to work effectively. By introducing taxes that do work, like a tycoon tax, raising stamp duty, blocking stamp duty avoidance, and getting non-resident companies to pay capital gains tax on their residential property, we have secured real progress on the taxation of wealth. This is a budget for the many, not the few.

All of this has been done while sticking to our tough but necessary plan to deal with this country’s financial problems. Britain can’t afford unfunded giveaways – unlike the last Labour government, we have made sure everything is paid for.

The Budget shows real progress on our commitments to infrastructure – on roads, railways, and renewable energy. Tougher green taxes on company cars will help cut emissions as well as raising money.

The Budget delivers other long fought-for Liberal Democrat ideas. The Government is now committed to delivering the ‘single tier pension’ – Steve Webb’s plan for a citizen’s pension that will mean a basic pension above the means test of around £140 per week.

Specific measures to support key industrial sectors like creative industries, technology investment, aerospace and university spin out, as well as further business tax simplification means that we have delivered a budget for growth as well as fairness.

The negotiations on this budget were friendly but hard fought. Liberal Democrats should be proud of what we have achieved – not for ourselves, but for the millions of people who voted for us because they saw a party willing to stand up for the squeezed middle. Those people can see the difference we are making in Government for them – and that gives us a very strong message for the elections in May and beyond.

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  • Sorry but the 50% issue has been handled really badly, and the “compromise” reached will benefit a number of those earning 150,000 or more are cost to the taxpayer. Many will be able to defer a bonus or pay rise (probably be given more as a result as it will aid corporate cash flow), and then take it next April with an effective 5% gift from the Government…

    Good news on the lower threshold and stamp duty though…

  • LondonLiberal 21st Mar '12 - 1:55pm

    last year you said it was nonsense to suggest that the 50p tax rate would go – not so bolshy now, are you, Danny?

  • @George Potter
    From those that have been removed from the system under the deeply flawed assessments no doubt…..

  • toryboysnevergrowup 21st Mar '12 - 2:02pm

    “HMRC find that an astonishing £16 billion of income was deliberately shifted into the previous tax year – at a cost to the taxpayer of £1 billion, something that the previous Government’s figures made no allowance for.”

    One should be asking why this avoidance/evasion of £1bn of taxes is possible , and then chasing those responsible for their dues. But what do you instead is to reward the perpetrators with a tax cut. Most of us cannot switch income from year to year in such manner. Given that there are some who seem to have such freedom – actually giving them notice that the tax rate will go down to 45% next year appears to be a singularly stupid action.

  • Well i’m in the squeezed middle and i can see the difference you’ve made for me… Redundancies for family members, frozen wages, increased pension contributions, increased age of retirement, tuition fees for my daughter … thanks from the bottom of my heart Danny. I did vote for you but idon’t see you standing up for me. And i definitely won’t be voting for you again.

  • Out of interest I ‘clicked’ to link Danny’s previous contributions to LDV; not for those of a weak disposition.

  • Richard Shaw 21st Mar '12 - 2:19pm

    @Simon Speaking as someone who recently studied under the previous loans system and who would have been £350 better off per year under the new arrangements (due to the repayment threshold rising from 15k to 21k) I don’t think your daughter should feel too hard done by. As for the other stuff… well I don’t think having different parties in power would have made a great deal of difference – the increased retirement is an inevitable result of people living more healthily for longer and the decreasing ratio of working people to the retired.

  • Keith Browning 21st Mar '12 - 2:27pm

    Tax avoidance. need to put Miss Marple on the case. Simple concepts are generally the best.

    Stop people being paid by false, private companies, a la Red Ken.

    Very simple – everyone must have a declared ‘main job’ which they are taxed on PAYE at standard rates, and anything else then is secondary income and taxed as extra.

    Footballer plays football, bank employee works for bank, mayors are mayors etc etc. Its not a difficult concept. If secondary income exceeds primary then taxes switched. Just like buying three items at Boots and getting cheapest one free. Present system gives the most expensive one free, and possibly most of second item as well.

    The Chancellor will be dining out well with his posh friends ad infinitum on todays budget.

  • @Richard Shaw
    “Speaking as someone who recently studied under the previous loans system and who would have been £350 better off per year under the new arrangements (due to the repayment threshold rising from 15k to 21k)”

    £350 better off per year perhaps, but with repayment taking many, many more years to complete.

  • @richard shaw

    Danny made the point that the government are standing upfor the squeezed middlewhovoted Lib Dem. i’m pointing outthat i did vote lib dem, i am part of the squeezed middle and i don’t feel much benefit of his apparent efforts.

    Redundancies, fees, squeezed wages. Its not acceptable to say it would be the same under other parties. I voted lib dem precisely because i was promised slower reduction of spending and no increase on tuition fees. What others would do is an irrelevance.

    As for my daughter feeling hard done by – the tuition fees debate has been done to death here so not worth going over again. We’ll have to agree to disagree.

  • MacK(Not a Lib Dem) 21st Mar '12 - 2:41pm

    Huge tax giveaways funded by old age pensioners. Company taxes slashed; Millionaires (including those in the cabinet and bankers) being awarded tens of thousands of pounds in huge tax cuts whereas pensioners will lose the risible amount of tax relief they get. You have dropped a huge political clanger on this one. The myth of “we’re all in it together” has been completely exposed. You must think the public are total mugs.

  • Richard Shaw 21st Mar '12 - 2:44pm


    IIRC the time before it is written off regardless of the amount repaid has only be extended by 5 years, and the repayment scale means that people, if they do have to pay, will pay much less per month and over the lifetime of the loan. The repayment period is irrelevant if you pay much less per month and overall if you’re on lower incomes. No matter how you spin it, the new arrangement is better and more progressive than before.

  • Another angry ex-LD 21st Mar '12 - 2:46pm

    I voted for you because you promised to reduce taxes on people on lower and middle incomes by increasing taxes on the wealthiest. And now you’ve done that.

    This is an OUTRAGE!

  • In the light of where we are and particularly the much slower growth than anticipated at the time of the election (eventhough spending cuts have barely started yet), I think the coalition has produced a considered and intelligent budget with a balanced approach to fiscal discipline and redistributive measures.

    No budget can wave a magic wand and solve all the country’s problems overnight, but we have taken some important further steps toward achieving our manifesto committment to a fairer tax system.

    The course seems pretty much set now for the remainder of this parliament. Based on our experiences in government we should soon be turning our mind, at the grassroots party level, to what can be effectively delivered in the next parliament. Folllwing what will have been a long period of austerity and public service cuts, we will need to be prepared with a radical but credible program of reform , that stands a good chance of being delivered in any political hue of coaltion that may take shape.

  • @Richard Shaw

    It’s written off when you’re 51 (or older, for more mature students). If you haven’t paid it off by then, chances are you’ve had a very dissapointing life. You won’t have ever had a high enough income to get onto the property ladder, for instance. I know that we’re moving towards people beginning their adult lives later – my parents bought their first home and started a family in their mid-20s, I did it in my mid-30s, and I expect today’s graduates will probably do it in their mid-40s, but I think being a first-time-buyer and first-time-parent in your mid-50s is going to be pushing it somewhat.

  • It hits the richest hardest, but then hits the very poorest next hardest. It’s hardly that redistributive, slightly so at best.

  • Danny……………………………This big tax cut for working people is paid for in part by a significant increase in the tax paid by the wealthiest……………

    I, as a pensioner, am adversly affected by this budget. If, as you say, the 50% tax was not effective it was not the fault of the rate but because of the ‘avoidance’. It should not be ‘beyond the wit of man’ to closethe avoidance without giving a massive salary increase to the wealthiest in society (who, incidentally, have awarded themselves a an average of almost 50% salary increase since the coalition).
    Still, as they fund your coalition partners, rather than “All in this together”, “He who pays the piper” seems more appropriate.

  • “No matter how you spin it, the new arrangement is better and more progressive than before.”

    On the contrary, no matter how the advocates of the new system spin it, the whole point of the changes was to save the government £3 billion or so a year. Obviously that money will come from graduate repayments, which means that overall people will be paying a lot more.

  • Mike Barnes 21st Mar '12 - 3:35pm

    “Anyone who thinks we are going to shift our priority to reducing the tax burden for the wealthiest they have got another thing coming. The idea that we are going to shift our focus to the wealthiest in the country at a time when everyone is under pressure is just in cloud cuckoo land.” – Danny Alexander on the politics show last summer.

  • “As part of the Coalition budget deal, we agreed to reduce the top rate of tax to 45p – but only after securing a series of new taxes on the wealthy that pay for it five times over.”

    And yet only three days ago the Telegraph told us that “It will be replaced with a 45p rate from April 2013, which Treasury officials believe will raise more money because fewer people will avoid it.” So Danny Alexander thinks that lowering the rate will have to be paid for by new additional taxes, while his officials think that lowering the rate will actually result in more money being raised. Faced with such a glaring contradiction it’s very difficult to take these claims seriously.

  • @joe bourke

    Would that be the same economy that Nick Clegg and Vince Cable told us before the election would flat line if spending was cut too quickly?

  • Nick (not Clegg) 21st Mar '12 - 4:04pm

    Danny>>> What was the rationale for increasing the tax on pensioners? Is the Chancellor assuming that most of them vote Tory and are too set in their ways to spot that he is not “on their side” and switch their votes accordingly?

  • @Richard Shaw
    “The repayment period is irrelevant if you pay much less per month and overall if you’re on lower incomes. No matter how you spin it, the new arrangement is better and more progressive than before.”

    It’s hardly irrelevent – you’ve been taken in by the spin. Tuition fees are three times as high, so you will pay three times as much over your lifetime unless you’re no a low income. Most people in the middle of graduate incomes will pay substantially more over their lifetime than under the previous system. Those on higher incomes will pay less than those on middle incomes as the sytem is regressive. It’s even more regressive than it was when proposed, as the early repayment penalties have been quietly removed.

    As to the budget:

    Tax cuts as a reward for avoidance! Paid for by pensioners!

    The slight increase in the threhold may be welcome, but when combined with increased VAT and changes to tax credits it’s hardly likely to make a difference to those on low to middle incomes.

    As for SDLT – it is a dreadful tax and easily avoided (by choosing to not move house or buy two million pound houses rather than one two million pound house, etc). The revenue it will bring in is far less than the 50% marginal rate on income would have been brought in if the government had bent over backwards to please the avoiders by using the warped measures of its success (as discussed by others on here). SDLT is as far from LVT as one could care to imagine.

  • Simon,

    The planned spending cuts have not really kicked in yet. The deep public spending cuts only begin this year and escalate each year through 2016-17. Up to now most of the deficit cutting has come from tax increases- VAT and the like. Tax increases may have dampended growth prospects to some extent, but oil prices, food price inflation and trouble in the Eurozome look to have had more of an impact. The macroeconomic argument is that deficit reduction and keeping interest rates low is a higher priority right now than a more risky fiscal stimulus through unfunded tax cuts/benefit increases or increased infrastructure spending.

    The ‘takeaways’ and ‘giveaways’ in this Budget broadly balance out over the five years of the latest forecast, leaving the Government on course to meet its deficit and borrowing targets..

    Growth this year is forecast at 0.8% and 2.0 per cent in 2013 , picking up to 2.7 per cent in 2014 and 3.0 per cent in the final two years of the five year forecast. There is of course. no certainty that these growth estimates wil be achieved in the face of contracting public sector spending and continuing difficulties in International markets. A cautious fiscal approach seems prudent at this time, until we can get to a more stable domestic position.

  • Chris Nicholson 21st Mar '12 - 5:23pm

    Nick (not Clegg) asks what the rationale was for increasing the tax on penioners. I think the more relevant question is what was the rationale for having an increased personal tax allowance for pensioners in the first place? My CentreForum colleague Tim Leunig’s analysis http://centreforumblog.wordpress.com/2012/03/05/budget-2012-the-case-for-tax-equality-tim-leunig/ has shown how the tax system has substantially favoured the better off pensioners. As David Willetts has argued convincingly in “the Pinch” the baby boomer geneartion has done relatively well compared to the young. It is time to start redressing this. The triple lock system for pension increases has benefitted pensioners as will the citizen pension plans of Steve Webb. Winter fuel allowances, free bus travel etc have also benefited them and have not been withdrawn. Nobody likes to pay more tax but I think these proposals do start to address this anomaly.

  • Nick (not Clegg) 21st Mar '12 - 5:25pm

    “Liberal Democrat Budget victory … ”

    Was it after Solferino that one of the French generals remarked : “a few more victories like that and we’ll bleed to death” , or words to that effect?

  • Nick (not Clegg) 21st Mar '12 - 5:32pm

    @ Chris Nicholson

    Would you like to put that in the next LibDem leaflet to be delivered to my neighbours, or shall I?

  • You’ve got to admire the bare faced cheek of it all…..

  • Mark Valladares

    Perhaps, perhaps not but the 50p tax take reasoning was pathetic and the bottom 20% are the hardest hit from all this.

    In fact, if Osborne is wrong about the 50p tax (which could be the case as none seems to know the true figure) the top 20% will come out of this very well.

    Unfortunately, the message for today is the ‘Granny Tax’ and this will do harm – not fair perhaps but then the press’s treatment of Gordon Brown was not always fair was it. Blair got hammered for a 75p pension increase, imagine how they will react to this.

    Also, Osborne was not particularly honest about this change for pensioners – who was it that used to bleat about stealth taxes?

    With friends like this who needs enemies!

  • @joe burke
    Thank you but i already understand the rationale for policy but I just don’t agree. Economics, as I’m sure you know , is not an exact science so its possible to differ. Two points though
    1. Prior to the election Nick Clegg consistently warned against drastic cuts to public spending for fear of jeopardising recovery. I happened to agree with that and still do. The party leadership turned 180 degrees from what it promised. It seems that his own prophecy is being fulfilled.
    2. We were told drastic cuts would reduce the deficit by the nect election. Thats already been revised once withon 18 months so forgive me if i’m less that confident that the strategy is working.

  • toryboysnevergrowup 21st Mar '12 - 7:08pm

    I seem to remember many Condems here arguing that previous budgets were redistributive because of the impact of the higher tax rates on the top decile. Given that it now appears that the top decile have avoided £1bn of taxes by pushing back an “astonishing” £16bn of income into the year before the 50 p rate came into force (just as I now expect them to push an equally astonishing amount from the current year and next year into 2013/14 to take advantage of the 45p rate) perhaps those concerned will now have the grace to accept that previous Condem budgets were actually regressive.

    Given that the idea was to raise an additional c£3bn from the top 1% earning over £150k – don’t expect anyone to be impressed by now looking to raise only c£500m and those idiotic 5 signs from the front bench.

  • Richard Dean 21st Mar '12 - 7:40pm

    People too poor to pay tax lose out, and on Channel 4 just now there is a family who cannot find enough hours of work and will lose 60 pounds a week. This is absolutely ridiculous, and must be addressed as a matter of urgency.

  • Simon,

    the point I was trying to draw out earlier was not that the argument over ‘too far, too fast’ is in anyway invalid, but that it is yet to be seriously tested. The aneamic recovery of the past two years can’t really be laid at the door of drastic spending cuts, when the bulk of those cuts are yet to come.

    We do not seem to have any real choice as to the necessity of eliminating the structural deficit – it is more a question of the length of time over which it is addressed . This has already been extended beyond the tem of the current parliament. The deficit that is currently being run represents one of the largest levels of support/stimulus program in UK peacetime history. Whether running a larger deficit could stimulate sufficient growth to recoup the additional costs in the current global climate ,is a difficult question to answer – precisely for the reason you point out “(that) economics … is not an exact science.” In such circumstances, erring on the side of caution with respect to debt levels and maintenance of low interest costs seems the more prudent approach.

  • ………………………Given that the idea was to raise an additional c£3bn from the top 1% earning over £150k – don’t expect anyone to be impressed by now looking to raise only c£500m and those idiotic 5 signs from the front bench…………

    George is not good with figures, “When military action in Libya began in March, George Osborne told MPs that the cost would be “in the order of tens of millions of pounds, not hundreds of millions”. In June Danny Alexander, the chief secretary to the Treasury, admitted that the price tag of the campaign would actually run in to the hundreds of millions.

  • Andrew Thomas 21st Mar '12 - 8:51pm

    I am so disgusted and appalled by the cut in the 50p tax rate that words almost fail me. It is a reward for those who have dodged tax. We should have been clamping down whatever. I really thought this 50p tax issue was the one we would stand up for. It is morally wrong that while low paid people who earn between 16 and 23 hours a week will lose their tax credits, while the wealthy, including the very people who got us in to this mess, are being given a tax cut. Along with the tuition fees, education academies bill, and the sell out on the Health and Social Care Bill, I am finally wondering whether fighting for the soul of our party is worth it any more. Our MPs should oppose this measure when the vote on the budget comes or quite frankly I’ve had it.

  • The special age-related tax allowances are surely an anachronism from the days when life from 60/65 onwards was nasty, brutish and short. In an age when many in their 60s and 70s are healthy, active and wealthy they are hard to justify.

    Plus it simplifies the income tax regime.

    And surely removing ageism is a good Liberal principle?

  • Foregone Conclusion 21st Mar '12 - 11:45pm


    The £3bn projection was from the 2009 Labour budget. You can hardly blame the Coalition for that, especially since Osborne launched the investigation into how much it actually brought in.

    I think this is a good budget. I would have kept the 50p rate as a good way of taxing the quite rich, but its replacements should bring in much more money from the super-rich – I don’t have much time in politics for symbolism. I regret the mistaken, ‘race to the bottom’ thinking behind cutting Corporation Tax further, an obsession of Osborne’s, and also the further rise in duties on alcohol which will put more pressure on our pubs. But the focus on improving infrastructure shows a positive vision and the willingness to hold the line on withdrawing child benefit from the well-off is reassuring. Most of all, I’m happy to see the bulk of the Afghanistan windfall going into tax cuts for people on low and medium incomes. I’m also happy with the plans to freeze the pensioners’ tax changes, by the way. I don’t see why they should be treated differently by the tax system.

  • heard Danny Alexander on BBC 1 at lunchtime boldly state there were no plans for a further 10 billion pounds of welfare cuts BUT he hoped for a ‘public debate’ on the subject .Since the public debate on welfare has thus far involved The Daily Mail The Sun and Daily Express branding anyone who relies on benefits as workshy scroungers exactly how does Danny feel this ‘debate’ will turn out?

    While it is appalling to see the Lib Dems attack the poor, vulnerable and disabled at least be honest about that is what you are doing. The government has driven the scrounger mania as part of their strategy to cut the welfare bill, much of it based on misinformation and selective use of statistics.

  • Get rid of the “Big Boys’ Toys” – TRIDENT!

    Immediate result = freeing up £120 billion.

    No need to hit your Grannies, then, boys!

    Hasn’t anyone noticed that it has been all men on the front bench during the reading of the Budget and all men who have crafted this disgraceful “smoke and mirrors” exercise? !!!

  • Nick (not Clegg) 22nd Mar '12 - 7:54am

    @ crewegyn

    According to economist Ros Altmann, director-general of the Saga Group, the main losers will not be “wealthy” pensioners but those with incomes between £10,500 and £24,000.

    So top headlines in this budget are a tax cut for the very rich and an increase for pensioners who have saved (from earned income) to pay for modest pensions. Good luck explaining that on the door-steps in next month’s elections.

  • Nick (not Clegg) 22nd Mar '12 - 7:57am

    I should, of course, have said,”from earned and taxed income”.

  • crewegwynMar 21 – 10:28 pm…………The special age-related tax allowances are surely an anachronism from the days when life from 60/65 onwards was nasty, brutish and short. In an age when many in their 60s and 70s are healthy, active and wealthy they are hard to justify. ?

    The Life Expectancy Gap Between Rich And Poorhas widened to 13.5 Years, according to’Medical News Today’. So I’m not sure your approval will be welcomed by those who didn’t get a massive tax hand-out.
    BTW, for any LibDems who still have a shred of compassion for the poorest, George Osborne’s comments on child poverty (BBC4 Today) this morning should be the last straw….

  • @ Nick The destination for everyone including pensioners is a personal tax allowance of over £10,000, irrespective of age. Meanwhile pensioners are enjoying the largest increases in state pension ever. Whilst it’s true that the transitional arrangements Osborne has come up with a bit fiddly, no-one’s losing a personal allowance they currently enjoy and the end product is a levelling-up of allowances for everyone (except those earning over £100k, some of whom are left paying a 60% marginal rate) – surely good news?

  • Jayne Mansfield 22nd Mar '12 - 11:14am

    @ Toryboysnevergrowup – giving advance notice that the tax rate is to be reduced to 45% is not a stupid action, it is a nudge and a wink.

    And are we to believe that those who are unwilling to pay 50% tax will now be falling over themselves to pay 45%?

  • @nick and @jason

    None of your comments justify additional age-related allowances.

  • jason Mar 21 – 2:13 pm
    “Out of interest I ‘clicked’ to link Danny’s previous contributions to LDV; not for those of a weak disposition”.

    I’ve always thought I had a strong(ish) disposition so I took that as a dare and took up the challenge.
    However after reading this……..
    “Saddling students with huge debts as they leave universities, particularly at a time when many are failing to find jobs through no fault of their own, is clearly wrong. And the prospect of such debts putting talented young people off going to university is equally wrong”

    And this
    “The Tory Chairman says liberal democracy is “part of the Conservative family”, but I’m certain I’m no part of his family. His flawed view of history is matched only by his arrogance”

    I gave up!

  • Stuart Mitchell 22nd Mar '12 - 8:06pm

    Richard Dean: “People too poor to pay tax lose out, and on Channel 4 just now there is a family who cannot find enough hours of work and will lose 60 pounds a week. This is absolutely ridiculous, and must be addressed as a matter of urgency.”

    Richard, for once I couldn’t agree more with you.

    212,000 familes, with 470,000 children between them, will lose out as a result of the change in the WTC hours threshold. 82,000 of those families will lose their entire £3,870 tax credit overnight next month.

    So why no sense of urgency about this particular “cliff edge”? These are some of the lowest paid families in Britian, and I hear nobody in the Lib Dem party standing up for them. Meanwhile, when the poor old higher rate income tax payers faced a much less precipitous cliff edge in the form of losing their child benefit, Lib Dems and Tories were united in declaring that Something Must Be Done.

    The government’s own impact analysis in the new budget report shows that those in the second lowest income decile are the biggest losers from this budget, while those in the sixth, seventh and eighth are the biggest gainers. At one time, I wuold have expected the average Lib Dem to be bothered by this. Not any more I’m afraid.

  • Nige Mar 22 – 5:31 pm.

    I did warn you!

  • Is the gain of the increase in the personal tax allowance worth the sacrifice of the top rate of tax , ‘reforms’ in the Health & Social Care Bill, Tuition Fees, enabling a radical Conservative privatisation / outsourcing agenda under the cloak of higher deficit reduction and austerity worth this single gain?

    Is this the major achievement that the Liberal Democrats in Coalition government ? Is it worth it all those policy sacrifices ? It seems that the Liberal Democrat leadership have not given that much for the activists on the doorsteps in May 12 to work with.

    Unless there is some great other thing that I have missed.

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