Nick Clegg refuses to rule out cutting 40p tax threshold

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The Liberal Democrat leader, Nick Clegg, has refused to rule out lowering the threshold for the 40p tax rate, the day after the shadow chancellor, Ed Balls, came under pressure to do the same.

The Conservatives and Labour have been forced in recent weeks to rule out raising VAT and national insurance, leaving them with fewer revenue-raising options if they get into government.

The Liberal Democrats have ruled out increasing the three main taxes of VAT, national insurance and income tax, which typically raise 60% of revenues.

On Wednesday Clegg declined three times to rule out lowering the threshold for the 40p tax, saying that his party’s priority was raising the amount you have to earn before you start paying income tax.

“Because that means that even people who are 40p taxpayers, they are certainly no worse off and in some cases they are better off because the raising of the point at which they start paying income tax far outweighs what tax they might pay in the 40p bracket,” he said.

“That is the reason why we will continue with our emphasis of using every spare penny we have to give tax cuts to millions of people on middle and low incomes.”

Over the past decade, 1.6 million people have been pulled into the higher-rate tax bracket, which kicks in for earnings over £41,865.

The prime minister, David Cameron, has pledged to raise the 40p threshold by 2020 if the Conservatives win May’s general election. Speaking to the BBC in March, the chancellor, George Osborne, indicated that he would aim to cut the threshold in the first budget after the election, saying it was something the Lib Dems had stopped the coalition government from including in last month’s budget.

“We’d like to raise the higher-rate threshold to £50,000, the point at which people pay the 40p income tax, so you don’t have people on middle incomes sucked into that higher rate,” Osborne said.

“That’s the kind of thing that, actually, the Liberal Democrats didn’t support and I guess it’s the kind of thing I might have done differently in this budget.”

On Tuesday, Balls repeatedly refused to say whether a future Labour government would change the threshold when he was asked by ITV West Country.

“What I would like to do is find ways in which I could have fewer people in the 40% tax bracket. Of course I would. But I have to be honest with people. The deficit is going to be £90bn,” said Balls. “I have got to find a way to get the deficit down in a careful, and staged and balanced way.”

On Wednesday 103 business leaders signed an open letter, published in the Telegraph, which claimed that any change in course after the general election would threaten jobs and put the UK’s economic recovery at risk.

Clegg said the letter had been a judgment on the coalition’s record of the economy and not just that of the Conservatives. He said: “I think the signatories to the letter are completely right in saying that about the last thing that this country needs, now that we’re emerging from this long shadow of the economic crash in 2008, is a great lurch in one direction or another.

“However, I think they are very wrong in thinking that the Conservative party are somehow the guarantors of that stability,” he added.

Clegg was speaking as polling released by Lord Ashcroft had him two points down against Labour in his constituency of Sheffield Hallam, something the Lib Dem leader dismissed. “I am going to win,” he said firmly.

The polling came the day before Clegg is due to take part in a seven-way televised leaders’ debate on ITV.

“I hope it’s going to be watchable,” said Clegg. “There are going to be seven of us on stage. I hope two hours of seven politicians talking against each other will be a watchable spectacle.”

The Lib Dem leader insisted that he was not going to have a sleepless night ahead of the debate. “I have been in politics long enough now to know that you shouldn’t over-think these things or over-rehearse them.”

“I will try and answer the questions as best as I can and make sure that the Liberal Democrat voice is heard loud and clear in the cacophony of other political voices that will be represented on that stage.”

Powered by article was written by Frances Perraudin, for on Wednesday 1st April 2015 18.48 Europe/ © Guardian News and Media Limited 2010