Lib Dems’ tax threshold policy robs Peter to pay Paul

New analysis by Gavin Kelly shows how individual tax and benefit changes will impact a normal family. They underline the meagreness of the Lib Dem's policy to raise the income tax threshold.

The Staggers have published a great picture today from this week’s New Statesman cover article by Gavin Kelly of the Resolution Foundation. The image – which shows how individual tax and benefit changes due this year will impact a normal family – underlines the meagreness of the Lib Dem’s flagship policy to raise the income tax threshold.

As well as misleading the British public on Britain’s debt position, Nick Clegg was at pains on the Today programme this morning to talk up the Lib Dems’ policy of raising the tax free threshold by £1,000 to £7,475 in the June Budget. Meanwhile, Simon Hughes used a column in this week’s New Statesman to make a similar point.

The problem for Clegg and Hughes, as Gavin Kelly points out, is that the policy is not even enough:

“to offset the rise in VAT, let alone the far larger tax credit cuts.”

Channel 4 News’ Economics Editor, Faisal Islam, concurs. In a tweet this morning he wrote:

“it seems a bit odd for Clegg to boast about the £200 income tax cut when it is paid for by raising VAT to 20%”

The total tax cut is worth up to £170 for basic rate taxpayers but the VAT rise will, according to the Lib Dems’ famous poster, cost the average family £389 per year – more than double. The policy is also – as Left Foot Forward has previously shown – an expensive and regressive way to target help at the lowest paid.

11 Responses to “Lib Dems’ tax threshold policy robs Peter to pay Paul”

  1. Vincenzo Rampulla

    RT @leftfootfwd: Lib Dems' tax threshold policy robs Peter to pay Paul writes @wdjstraw //bit.ly/dIOnQv

  2. Max

    RT @leftfootfwd: Lib Dems' tax threshold policy robs Peter to pay Paul writes @wdjstraw //bit.ly/dIOnQv

  3. tomm

    RT @leftfootfwd: Lib Dems' tax threshold policy robs Peter to pay Paul writes @wdjstraw //bit.ly/dIOnQv

  4. Ryan Devlin

    RT @leftfootfwd: Lib Dems' tax threshold policy robs Peter to pay Paul writes @wdjstraw //bit.ly/dIOnQv

  5. Duncan Stott

    1) The dashed line for the double gain of tax-free personal allowance for households with two earners appears to have been forgotten.

    2) The tax-free personal allowance will increase every year, so by 2015 the gain from this will be substantially higher. So the situation will improve in the long run.

    3) The child element of CTC will also increase again in 2012 (£60 above indexation). I don’t know why the loss in CTC in 2012 is included, but the gain is excluded.

    4) A “normal family” (presumably you mean average) doesn’t contain higher-rate taxpayers.

    5) EMA only affects families for two years per child (if they planned to stay on into FE in the first place) and is being replaced by a different system (the details of which remain unannounced but will no doubt be considerably less generous).

  6. Anon E Mouse

    Will – You know full well that VAT poster was nonsense.

    Anyway why hasn’t LFF covered Jack Straw’s comments on Pakistani criminals?

    I’m over at Liberal Conspiracy defending his freedom of speech and feel I’m out on my own on this matter.

    Someone from this fine blog backing me up would be nice – they can be very horrid in their comments over there ;-}

  7. Daniel Pitt

    RT @leftfootfwd: Lib Dems' tax threshold policy robs Peter to pay Paul writes @wdjstraw //bit.ly/dIOnQv

  8. Kevin Richards

    All smoke and mirrors – Lib Dems' tax threshold policy robs Peter to pay Paul //bit.ly/dMl1Lj

  9. Look Left – Miliband hails "first step in a long journey" as Labour hold Oldham | Left Foot Forward

    […] Straw described the policy as “an expensive and regressive way to target help at the lowest paid”, […]

  10. Could childcare cuts be the Coalition's 10p tax? | Left Foot Forward

    […] including fuel prices, falling real incomes, and the more publicised cuts to public services and tax credits. This little talked about cut could come back to bite them more than most. Share | Permalink | […]

  11. Is Clegg’s tax threshold plan the best way to reduce income inequality? | Left Foot Forward

    […] also: • Lib Dems’ tax threshold policy robs Peter to pay Paul – Will Straw, January 10th […]

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