U.K. Deputy Premier Clegg Urges More Taxes on Rich to Fund Cuts for Poor
Deputy Prime Minister Nick Clegg struck an independent course within Britain’s coalition government by calling for higher taxes on the rich in order to accelerate a planned tax cut for low- and middle-income workers.
Clegg, who’s seeking to create a distinct identity for his Liberal Democrats after nearly two years in government with David Cameron’s Conservative Party, today called on Tory Chancellor of the Exchequer George Osborne to bring forward the date when people can earn 10,000 pounds ($15,600) a year before paying tax. The government is currently committed to doing that by 2015.
Osborne said last year the starting point for tax, which was 6,475 pounds in 2010, will rise to 8,105 pounds from April this year. Clegg’s comments mark a break from the usual rule for government ministers of not publicly advocating changes to tax policy, which Osborne will set out in his March 21 budget.
“I want the coalition to go further and faster in delivering the full 10,000-pound allowance,” Clegg said in a speech in London. “This rebalancing will necessitate reform across the tax system so that those who are better off, or who act in ways that damage our environment, pay their fair share.”
Clegg said he was speaking on behalf of “the people whose incomes are too high to qualify for welfare benefits but too low to provide any real financial security.” For these workers “the pressure on family finances is reaching boiling point,” with “lower real wages and fewer hours at work,” he said.
Cameron, Osborne Talks
Clegg said he had discussed his proposal with Osborne yesterday and with Cameron the day before. He didn’t say how they responded. The Conservatives need the Liberal Democrats to keep them in government.
Questioned by reporters, the deputy prime minister conceded it would be politically difficult to continue the government’s original plan of ensuring higher earners don’t benefit from the cut by reducing the income threshold at which people pay 40 percent tax.
Osborne’s 2010 announcement that parents paying the 40 percent rate will lose their child-benefit welfare payments from 2013 would otherwise hit more and more people. “It’s a tax cut for pretty well everyone up to 100,000 pounds,” Clegg said.
Clegg’s decision to speak out may reflect his party’s poor poll ratings since entering a coalition with the Conservatives. A YouGov Plc poll on Jan. 24 gave them 9 percent of the vote, less than half what they received at the May 2010 general election.
Competence and Compassion
“People look to the Liberal Democrats to keep this coalition anchored in the center ground,” Clegg said. “They want economic competence, but they want compassion too. It is our job to make sure this government delivers both.”
The Treasury estimated in 2010 that its plan to raise the tax threshold by 1,000 pounds in 2011 would cost it around 3.5 billion pounds in lost revenue. Asked about one estimate that his proposal would cost 9 billion pounds, Clegg said it was “a very big figure, but over a long period of time and done in a fair way that kind of shift in the tax system is manageable.”
To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.
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