There have been rumours for a while about Nick Clegg being very keen to find a way to help those struggling with rising living costs. Today he announces that he’s pushing for the Coalition to raise the tax threshold to £10,500 in April 2015, exceeding the manifesto promise that Liberal Democrats made in 2010.
From Scotland on Sunday:
Sources close to Clegg said last night that the increase in the personal allowance – which has gone up from £6,475 in 2010 to £10,000 by 2014-15 – was the Lib Dems’ “signature tune” in the coalition pact. “It was always our intention to get to the £10,000 and a £700 tax cut, but we believe the economic recovery allows us to put even more money back in people’s pockets. Because the economy is recovering, we want to reward people with a workers’ bonus,” the source said.
The extra tax cut would have to be paid for from current spending limits, the source added. “We know that we are on to a vote winner here. The Tories once said this policy wasn’t affordable, but now they like to claim credit for it.”.
Clegg is expected to argue that the increase is a “reward” for people who have accepted below-average pay rises or flexible working hours to stay in work during the hard times.
Three quick thoughts from me:
This idea is both a good practical idea and serves to remind people whose idea the tax threshold rise was in the first place. The Tories have been falling over themselves to take credit for something that David Cameron dismissed so casually during the leaders’ debates in 2010. The “workers’ bonus” will provide much needed help with the rising cost of living and show clearly one of the key things that the Liberal Democrats have brought to the Government. And it certainly makes it very difficult for George Osborne to say no.
However, this will automatically diminish what we put in the manifesto. For the 2015-20 parliament, our policy so far is that we raise the tax threshold to the level of the National Minimum Wage. If we do 20% of that before the election, we surely need to replace it in the manifesto, which should also contain many more measures to help those on the lowest income.
Speaking of whom, this doesn’t reward any worker who earns less than £10,500. They aren’t going to get any extra cash and it’s quite possible that they need it most. Serious thought needs to go in to working out how to help those people, particularly where their income is the only one in the house.
Nick Clegg will be on Andrew Marr very soon, so we will let you know what he has to say.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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“Speaking of whom, this doesn’t reward any worker who earns less than £10,500. They aren’t going to get any extra cash and it’s quite possible that they need it most. Serious thought needs to go in to working out how to help those people, particularly where their income is the only one in the house.”
We need to look at cutting workers National Insurance (by some means that doesn’t affect benefit entitlements down the line) or consider the idea of a negative tax band at the very lowest level.
I’m surprised to see you up this early, Mr McGregor, after your party last night, let alone thinking about fiscal matters.
Agree with A C MacGeegor. Heretical as it sounds, I’m struggling to support raising personal allowance as per party policy. Why? The people struggling to get by week by week in my area are those working part time, with hours and income changing week by week. This will totally bypass them. If we had real courage we’d be talking about abolishing NI and increasing income tax to cover (think of the simpler tax calculations as well….) or looking for big increases in minimum wage instead. This will be good for
some people but won’t help many of the neediest. Not too late to turn.
As BBC money expert Paul Lewis points out on Twitter
”Clegg calls for £10,500 personal tax allowance from 2015 but it would rise with CPI anyway which would be around half that.”
So does Clegg really think an extra £50 in the pockets of those earning enough to benefit from his policy will make us all rush back to voting Lib Dem ?
Good luck with that.
And is this the ‘new & interesting’ announcement Caron Lindsay was trailing for Clegg yesterday ?
If so, the pot really is being scraped isn’t it ?
Reform of Employers National Insurance could be tried.
Currently there is an incentive for employers to employ staff on part time hours so that their earnings are below the threshold at which the employer has to start paying the employers National Insurance. If that were removed then there would be a trend towards more full time jobs, rather than people being stuck in a part time job that they cannot combine with a second job to up their earnings.
In the circumstances raising the tax threshold for the poorest is a practical help to some of the poorest workers but let’s be honest all it is really doing is using taxpayers money to subsidise those employers that won’t pay a decent wage to their employees.
& does Clegg think calling it a ‘workers bonus’ [who thought that one up , it’s on a par with Clegg’s Alarm Clock Britain] will win back a few left leaning ex Lib Dem voters ?
Let’s buy some votes? After all, how else could we get them?
I’m glad most of the comments here reflect my thoughts. This really is uninspiring stuff.
Well £100 will not go that far, with rising energy costs and the knock effect of things like the “bedroom tax” which most of your party love to inflict.
If anyone from your Party comes canvassing to my door, they can see the damp and the mould that I live with.
The lack of interest in children and the All Party Group on Child Abduction. Not even one MP has the time, personal involvement got me into this one. Very recently I was at a council meeting on Childrens Services, your Party even wants a rethink on the CAB. That was overturned.
I am not going to go over the top on this one, but we can make a choice on the next time we vote.
I’m not clear from the coverage I’ve seen how this £1 billion “vote winner” is going to be paid for. More cuts? Raising other taxes?
B class policy.
I agree with A C McGregor; it’s time that the NI threshold was the same as the tax threshold to further help those who are low income earners
I like the policy as it reminds people the tax threshold increase is a Lib Dem policy. The name is terrible – ‘bonus’ implies its a one off and not permanent.
Am I correct that this will cost £1 billion?
Am also correct that £1 billion is twice the ‘saving’ claimed by those in favour of the bedroom tax?
So instead of this tax change, Clegg could have said we would get rid of the bedroom tax ?
Would that have better better politics and better for the poor?
“So instead of this tax change, Clegg could have said we would get rid of the bedroom tax ?
Would that have better better politics and better for the poor?”
I think the party’s electoral strategy is clearly aimed at middle-class voters in Tory/LD marginals, and not the kind of people who are affected by the bedroom tax.
But this isn’t going to help that strategy much if the Tories themselves adopt the policy of raising the allowance further.
@Helen Duddon says ‘I am not going to go over the top on this one, but we can make a choice on the next time we vote.’ A little honesty is called for. As a Labour Party member you have decided already.
The problem of tax cuts not helping people who work but earn too little to pay income tax – this issue (which I raised in a piece here some time ago) is now becoming a major issue. The obvious quick and easy way to help is to raise tax credits but they too are a subsidy to mean employers. A substantial increase int he minimum wage is becoming ever more pressing.
Tony
Apologies for mistyping A C McGregor earlier…not at my best on a Sunday morning either.
Pleasantly surprised by the consensus on this one as I thought I’d be swimming against the tide. Hopefully the great and the good are reading in.
@LeekLiberal, it took me 21 years to change, but I did only recently.
If the Lib Dems do not listen on the “bedroom tax” you go somewhere where they do.
Very upset, that the MP I voted for, and worked with others to get him replacing the Tory in Bath.
I think that the way Clegg is phrasing this, is very patronising.Two pounds a week is neither here nor there, though if it is true that Clegg thought that state retirement pensions were only thirty odd pounds,which I heard, earlier in the life of the coalition,he may think that it is a small fortune.
We are not a one-policy party, The increase in the personal allowance is a good one, and once achieved we need to look at other areas.
We need to directly challenge the Tories on their cuts to social security, which have badly affected those on low incomes – this is core lib-dem principles where we should be differentiating ourselves:
Oppose the bedroom tax and cuts which leave people homeless,
No to forced labour for meagre benefits,
No to benefits sanctions that leave people destitute, and
Restore adequate benefits levels for working age people, as we have so successfully done with pensions – giving working age people the security of a decent safety net. This will restore the dignity of work, and prevent the wage erosion of recent years.
This move would cost significantly more than a billion pounds, though I am hamstrung slightly in not being confident that the figures I have are in the public domain.
The way to help the poor now in this country is not another £100 of Income Tax , but to raise the level at which National Insurance kicks in it would provide more jobs and would mean those on the lowest incomes would be better off as wel,l because if you are working less then 30 hours a week you would get nothing with this idea of Nicks.
The only people this will help is well heeled pensioners.
It would mean raising the threshold by £44 and any slack could be found by raising the lowering the upper threshold.