NICK Clegg moved closer to securing a core Liberal Democrat aim on tax yesterday as George Osborne announced a shake-up of personal allowances that will affect up to 24m people.
Osborne outlined plans to raise the threshold for paying income tax to £9,205, higher than a planned increase to £8,105, affecting those who earn less than £100,000.
The change, from April next year, means working people will be £220 a year better off, or £170 after the impact of inflation, according to the Treasury. It means two million people will have been taken out of tax altogether since 2010, Osborne claimed.
“Every working person on low or middle incomes will benefit... This Budget supports working families and helps those looking for work.”
It also bring the coalition within “touching distance” of the goal of a personal threshold of £10,000, the chancellor added.
The reform represents a victory for Clegg, the deputy prime minister who has been lobbying the Conservatives in the Cabinet. He also included it on the first page of the Lib Dem manifesto in 2010 and publicly called for it this year.
Last night Clegg told activists: “This is a Budget every liberal can be proud of. We’re proud of the fact that we have delivered the largest increase in the personal allowance ever.”
Earlier in the day, however, Tory moderniser Nick Boles used Prime Minister’s Questions to try to claim party credit for the policy by highlighting the fact it has been advocated by Lord Tebbit and Lord Saatchi.
John Cridland, director general of employers’ organisation the CBI, said: “Family budgets have been under great pressure, and by putting more money in the pockets of ordinary people, the chancellor has provided a much-needed confidence boost.”
The move was not universally popular, however. The Citizens Advice Bureau (CAB) accused the coalition of “turning its back” on the poorest people, who they said would be just £33 a year better off because of simultaneous benefit cuts.
CAB chief executive Gillian Guy said: “Raising the personal tax allowance is an empty gesture to struggling families on low wages who get housing and council tax benefits. For these families, the weekly gain is less than the price of a loaf of bread; a measly 63p per week.”
The free market Adam Smith Institute called for ministers to go further, however, saying: “The government should raise its [personal allowance] target from £10,000 to £12,400, which would lift minimum wage earners out of tax altogether.”