Prime Minister David Cameron, facing pressure from his Conservative lawmakers to lessen the cost burdens on British voters, said cutting taxes is “the right thing to do.”
“It’s wrong for government to take a single penny more of your money than we absolutely need,” he said in a speech today in Coventry, central England. “It’s more important than ever when families are feeling the squeeze.”
Some Conservative lawmakers are urging Chancellor of the Exchequer George Osborne to deliver tax cuts in his March 19 budget to offset rising energy costs and the prospect of an interest-rate increase before the May 2015 general election. The opposition Labour Party says the rising cost of living means only the richest are benefiting from the economic recovery.
Cameron also announced he will accept a recommendation by the Low Pay Commission to raise the minimum wage by 3 percent to 6.50 pounds ($10.85) an hour, the first above-inflation increase since 2008.
“It’s something that’s only affordable because of the difficult decisions we have taken with our long-term economic plan,” he said. “It means that as we recover from the great recession, hard-working people on the minimum wage -- who have suffered during the tough times -- can know they will share in the recovery.”
The Institute for Fiscal Studies said on Jan. 31 that Britons’ standard of living may take five years to return to pre-crisis levels. The Daily Telegraph reported yesterday that rank-and-file Tory lawmakers had asked Osborne to raise the 40 percent tax threshold to help middle-income families.
Both Osborne and Cameron have said that any tax cuts would be targeted at low and middle-income households. They are being urged by their Liberal Democrat coalition partners to increase the amount people can earn before they start paying income tax to 10,500 pounds. Labour announced in January it would reintroduce the 50 percent top tax rate, which was cut by the coalition government to 45 percent.
The prospect of a pre-election interest-rate rise has been raised by Bank of England policy makers Spencer Dale and Martin Weale who said last month that one could come next spring. The central bank has warned that highly indebted households might be vulnerable to an increase in the benchmark rate, which has been at a record-low 0.5 percent for five years.
Cameron also reiterated the need to stick to deficit-cutting plans.
“Cutting the deficit matters for our economy,” he said. “Higher deficits mean more debt and higher mortgage rates with more people living in fear of losing their homes.”
The European Union forecast last week that Britain’s economy will grow 2.5 percent this year. That compared with projections of 1.8 percent for Germany and 1 percent for France.