Lib Dems call on Osborne to soak the rich
SENIOR Liberal Democrats are lobbying George Osborne to fund tax cuts for low earners by clobbering the rich in his Budget next month.
David Laws, the influential former chief secretary to the Treasury, is expected to use an interview on BBC Newsnight tonight to call on the chancellor to raise the threshold at which people start paying income tax to £10,000 as soon as possible.
He will argue the move – which would cost the Treasury some £9bn – could be funded by removing tax relief on pensions for people earning over £43,875.
But the government is sure to face an outcry if it removes pension relief for higher-rate taxpayers, especially as the move would contradict its calls for people to save more for their retirement. Experts say those paying the higher rate of tax could opt to stop contributing to a pension altogether and to invest in other assets instead.
Raj Mody, head pensions at PwC, said: “Should pensions tax relief be reduced to basic rate relief, higher and top rate tax payers may be better off if they were simply paid cash and taxed on it as income tax at the time.”
Laws is also expected to signal his support for a mansion tax on houses worth more than £2m, in a sign that the Liberal Democrats are pressuring Osborne to soak the wealthy.
Tory MP David Davis dismissed the Liberal Democrat plans as “populist” and said they “won’t give us the growth we need”. Instead he called on the chancellor to cut “popular” taxes such as the 50p rate and corporation tax.
David Laws will call for new taxes on the wealthy