Clegg urges ‘further and faster’ tax cuts

The deputy prime minister is urging the Chancellor George Osborne to go “further and faster” in raising the income tax threshold to £10,000 a year.

The level at which earners start paying income tax was raised by £1,000 to £7,475 in the 2010 budget, and the government plans to increase it further to £8,105 this year.

The coalition has already committed to making the first £10,000 of earnings tax-free by 2015.

State of Emergency

But as Britain’s economy shrinks further, Clegg argues that the squeeze on middle-income Britain has reached “a state of emergency” and the coalition government should speed up those changes to ease the financial burden on families.

In a speech to the Resolution Foundation think tank, Mr Clegg will call for urgent reforms to the tax system so that it rewards ordinary taxpayers and helps drive growth.

These families cannot be made to wait. Household budgets are approaching a state of emergency, and the government needs a rapid response. – Nick Clegg, Deputy Prime Minister

“These families cannot be made to wait. Household budgets are approaching a state of emergency, and the government needs a rapid response,” he will say.

“These families have seen their earnings in relative decline for a decade, compared to those at the top. That has accelerated since 2008, with lower real wages and fewer hours at work.”

But figures from the Resolution Foundation, where Mr Clegg is making his speech, reveal that up and coming changes across tax credits “mean losses for many low to middle income households” despite the rise in tax thresholds.

The changes to working tax credits and child tax credits coming into force this April will save the government £2.5bn in 2012/2013 according to the think-tank.

It says that low to middle income households receive 56 per cent of all tax credits in cash terms so will be “disproportionally hit”.

Read more from Political Editor Gary Gibbon

‘Rebalance the system’

Mr Clegg will call on Britain’s richest to “pay their fair share” with extra taxes to fund the cuts for ordinary taxpayers.

“Every politician now has a simple choice: do you support a tax system that rewards the hard-working many? Or do you back taxes that favour the wealthy few?

“There is now an urgent need to give families more help, an urgent need to rebalance our tax system so it rewards work and encourages ordinary people to drive growth.”