According to reports, George Osborne is likely to raise the threshold at which people start to pay income by £1000 to £7,475. This is apparently to be paid for by clawing it back from top-rate taxpayers. I am am not clear on exactly how this second part will work but if this is correct then I think it is excellent news.
Tuesday, 22 June 2010
Firstly it is the beginning of an implementation of the Lib Dem policy to take everyone earning less than £10,000 per year out of income tax. It gets us over a quarter of the way to realising this aim. It is also something I think we can genuinely point at at say that it is unlikely to have happened had we not been in the government.
Secondly it will offset the likely rise in VAT to 20% for the poorest earning families. If a 2.5% hike in VAT is going to cost the average family £389 ((c) 2010 Lib Dem election campaign) then surely it will cost the average lower earning families proportionally less. I do not have the exact figures but I would expect it will be a net gain to those earning the lowest amounts.
Don't get me wrong, I still don't think raising VAT is the right move but at least its effect will be mitigated for some of the most vulnerable.
Of course we hit the problem of what happens to those who do not earn anything at all but I await to see what is in the budget overall before passing comment on that.