Closing the Lib Dem tax gap

November 27, 2013 5:25 PM
By Mark Pack

tax cut poster The Liberal Democrats have invested huge political capital, not to mention rather a lot of public money, on raising the income tax threshold to £10,000 during this Parliament. As a result of the success in speeding up progress, the party is facing a 'tax gap' next year.

The £10,000 limit comes into force in April 2014 and the party is already setting out its stall for having a general election manifesto policy of further increasing the limit up to the equivalent of what a full time worker on the minimum wage would earn. There is an obvious appealing logic and simplicity to saying that anyone on the minimum wage shouldn't pay income tax, and it is also a rather more direct and quicker way of introducing in effect the Living Wage - as income tax cuts add to people's income just as wage increases do.

However, there is a political and economic gap between achieving something in April 2014 and then wanting to do something further after May 2015. What will the party be pushing for in the quartet of Budgets and Annual Spending reviews still to come before the next general election? It is hard to see a mansion tax being conceded by the Conservatives, although extra Council Tax bands for the most expensive houses is still something Lib Dem negotiators think is worth pushing for.

Last week Nick Clegg staked out another tax policy to fill the tax gap - going for a further increase in the income tax allowance beyond £10,000 in this Parliament:

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