David Cameron fired off much of his pre-election armoury on Wednesday, promising £7bn of tax cuts by 2020 aimed primarily at those on above average incomes and not backed by any new sources of funding.
With his party still behind Labour in the polls and struggling to escape the shadow of Ukip, the prime minister closed a defiantly upbeat party conference in Birmingham by saying the next election will be fought on the issue of credibility and urging voters to trust his promises.
In a speech designed to show the era of austerity will close, and suffused with Cameron’s brand of patriotism, he said: “With the Conservatives if you work hard and do the right thing we say you should keep more of your own money to spend as you choose”.
He said under his plan the personal tax allowance will rise from £10,500 next year to £12,500 in 2020, while the higher rate tax threshold would increase from £42,265 next year to £50,000 at the same date.
The Conservatives did not spell out in what stages the reforms would be achieved, but said that by 2020 the extra cost of the higher personal allowance would be £5.6bn and the new higher rate threshold £1.6bn.
Cameron’s aides acknowledged that the tax cuts are not yet funded by cost savings, but insisted the Tories had the track record to make his dramatic pledge covering a total of 30 million taxpayers.
The prime minister also tried to parry the Ukip threat by promising to introduce a UK bill of rights instead of the human rights act that incorporates the European Convention in UK law, and place EU rules on the free movement of labour at the heart of his renegotiation strategy. He told his audience: “Britain, I know you want this sorted so I will go to Brussels. I will not take no for an answer and when it comes to free movement I will get what Britain needs.”
Cameron urged voters to realise that by 2015 election Ukip will be irrelevant. “This is a straight fight. It does not matter whether parliament is hung, drawn or quartered, there is only one choice – the Conservatives or Labour. This is the big question for this election: on the things that matter in your life, who do you really trust?”
With a byelection in Clacton due next week, that the Conservatives are expected to lose to Ukip, Cameron took the rare step of referring directly to the anti-EU party and its leader with a joke. He warned voters about next year’s general election: “If you vote Ukip – that’s really a vote for Labour. Here’s a thought. On 7 May you could go to bed with Nigel Farage and wake up with Ed Miliband.”
The prime minister made no mention of chancellor George Osborne’s pledge on Monday to freeze working age benefits for two years, but said the plan to eradicate the deficit by 2017-18 through a further £25bn of public spending cuts was doable, adding it represents only 3% of government annual spend. He confirmed the government will defend NHS spending in real terms, but made no similar pledge for the schools budget or the overseas aid programme. All three have had their spending protected during the current parliament.
Cameron’s political punch focused instead on tax cuts by saying the £2,000 a year increase in the personal tax allowance would lift a further one million people out of tax and ensure no one working 30 hours on a minimum wage of £8 would pay income tax at all. Raising the higher rate threshold would lift 800,000 people out of the 40 % higher rate tax.
His aides even hinted that incremental tax cuts could start in the second half of the next parliament, ending by 2020 with basic rate taxpayers paying £500 tax less a year.
The tax cut package is a variations of ideas already proposed by Ukip and the Liberal Democrats, but left Labour gasping at “the audacity of David Cameron offering himself as custodian of public finances, and the provider of such unfounded tax cuts”.
Ed Balls, the shadow chancellor, said: “Nobody will be fooled by pie in the sky promises of tax cuts in six years time when David Cameron cannot tell us where the money is coming from”. Labour pointed out Cameron himself had said in 2008 “You cannot talk about tax reduction unless you can show how it is paid for, the public are not stupid”.
The Resolution Foundation thinktank also declared “the distributional impact of these tax cuts is skewed towards the top half of the overall income distribution”. Anyone earning between £50,000 and £100,000 will pay £1,313 less in tax than they do today.
Conservative sources were defiant when challenged about the distributional impact of the plans saying they “are very happy to have the argument about whether people earning less than £50,000 should pay 40% tax”.
However, as much as 60% of the value of proposed tax cuts will be eroded by inflation over the next five years, and if the coalition government had retained the previous measure of inflation abolished in 2010 the entire tax cut would have been swallowed up by inflation.
Cameron was also given a remarkable standing ovation as he criticised what he said were “complete and utter lies” from Labour on the NHS. Adopting an uncharacteristically passionate tone, Cameron pledged to protect the NHS budget.
“For me, this is personal,” he said. With both he and his watching wife Samantha looking close to tears, he said that his family knows “more than most” the importance of relying on the health service, referring indirectly to the death of his son Ivan. With a venomous tone he added: “How dare they suggest I would ever put that at risk for other people’s children? How dare they frighten those who are relying on the NHS right now?”
The prime minister also made a rhetorical land grab onto Labour terrain, saying “we in this party are a trade union. The party is the union of hard working parents the father who reads his children stories at night because he wants them to learn. The mother who works all hours God sends to give her children the best start. This party is the trade union for children from the poorest estates and most chaotic homes”.
He ended his speech by saying he was not a complicated person, and was not a perfect leader. “But I am your public servant standing here wanting to make our country so much better. I love this country and I will do my duty by it’.
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