BILLIONS NECESSARY TO FUND NICK CLEGG'S PROPOSAL

First published by: The Guardian

LIB DEMS EXAMINE OPTIONS TO FAST-TRACK £10,000 TAX THRESHOLD PLANS

Clegg has called on the government to go faster to lift allowances, claiming lower income groups were in a state of emergency due to a squeeze on living standards. The Liberal Democrats have started examining ways to raise billions in higher taxes on the rich to fund Nick Clegg's call for the government to go faster in lifting the personal income tax threshold to £10,000. 

Clegg's officials admitted that the rate at which the threshold could be increased would depend on what schemes can be developed before the budget to fund the proposal. Tax avoidance, aviation taxes and wealth taxes will all be examined by the Treasury. In a speech on Thursday Clegg called on the government to go faster in lifting allowances, saying lower income groups were in a state of emergency owing to a squeeze on living standards. Alex Henderson, tax partner at PricewaterhouseCoopers, suggested each £100 increase in the personal allowance cost the government at least £500m, and raising the threshold from £8,105 to £10,000 would cost £11bn. 

No 10 reacted calmly to Clegg's call, pointing out that the goal of a £10,000 personal allowance threshold is existing coalition policy. But Tory MPs were divided, with some warning the chancellor, George Osborne, not to let the Liberal Democrats grab credit for the policy and others warning the idea was expensive and unlikely to boost business confidence.

David Ruffley, a Conservative Treasury select committee member, warned: "There are no free lunches here and I think many of us believe the best way now to boost business confidence is not pushing it up to £10,000 to put some more money in the household pockets, but to actually go for payroll taxes." On the left, many analysts argue lifting the threshold is not as progressive as it seems since it is not aimed at household income.

Clegg will be delighted that he has highlighted what is a relatively simple tax policy, saying in his speech: "Cutting income tax is one of the most direct tools we have to ease the burden on low and middle earners." The income tax threshold was raised by £1,000 to £7,475 in the 2010 budget, and the government plans to increase it further to £8,105 this year.

In his speech Clegg continued to insist he was interested in a mansion tax, even if some of his officials doubt that such a radical policy can be pushed through the Treasury by the time of the spring budget.

Lord Oakeshott, the Liberal Democrat peer, urged Clegg to stick to his guns on the mansion tax, saying: "If we really want to tax the wealth of the super-rich, mansion tax is the game changer – the only tax the nondoms and City sharks cannot dodge."

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