Clegg wants faster increase in tax threshold

Lib Dem leader Nick Clegg’s speech at the Resolution Foundation yesterday spoke of his ambition to see the coalition move harder and faster in raising the tax threshold.

The coalition agreement includes a dedication to raise the basic rate tax threshold to £10,000 per year by 2015. The current threshold stands at £7,475 and is set to rise by £700 in April.

Clegg spoke of the desire to see more money in the pocket for ordinary working people. The rise due in April should take an additional one million people out of paying income tax.

"The pressure on family finances is reaching boiling point," he said.

"Compared to those at the top, these families have seen their earning in decline for a decade and that’s got worse since 2008, with lower real wages and fewer hours at work.

"These families cannot be made to wait."

Addressing the issue of funding this tax cut, expected to cost £9 billion, Mr Clegg suggested a number of initiatives.

The Chancellor has reputedly been consulted about the closure of a tax loophole which allows evasion of stamp duty by absorbing property into company assets.

Mr Clegg also spoke about the need to ‘green’ the tax system, targeting polluters, evaders, and a Mansion tax to target those with ‘serious, unearned wealth’.

"The eye wateringly lucrative assets so often hoarded at the top," he said. "We still live in a society where, for so many people, how much you earn can never compete with how much others own. Our tax system entrenches that divide. And we need to be bold enough to shift the burden right up to the top.

"I know the Mansion Tax is controversial, but who honestly believes it is right that an oligarch pays just double the Council Tax of an average homeowner even if their house is worth one hundred times as much?"

Assuming that the level of additional tax free income continues to rise by £700 each year from 2012 through to 2014/2015; if just half of this was saved in a 3 year fixed-term ISA each year (best performing: Natwest at 3.7%), the savings would amount to £1,130 by 2015.

Saving the whole increment would return £2,259. The Lib Dem dedication to raising this threshold further and faster would offer much greater amounts for longer.

The forceful nature of these Lib Dem ambitions, then, provokes strong ramifications for both success and failure.

Mark Hornby