Clegg To Press Osborne To Speed Up Tax Relief For Low Earners
Nick Clegg has urged George Osborne to introduce the £10,000 personal allowance on income tax more quickly than planned to relieve the growing pressure on household budgets.
The Liberal Democrat Deputy Prime Minister will say that the coalition agreement to raise the threshold gradually over the course of the parliament is no longer enough when family finances are facing a "state of emergency".
"The Coalition is calling time on our unfair and out-of-whack tax system," he told the BBC on Thursday morning.
He and Chief Secretary to the Treasury Danny Alexander will be lobbying the Chancellor ahead of his March Budget to increase taxes on the wealthy to fund faster tax cuts for squeezed low and middle earners.
In a speech to the Resolution Foundation think tank, Clegg insisted the tax system needs urgent reform so that it "rewards work and encourages ordinary people to drive growth".
In a challenge to his Conservative coalition partners, Clegg said: "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?
"I know which side of the line I stand on - the UK's tax system cannot go on like this, with those at the top claiming the reliefs, enjoying the allowances, paying other people to find the loopholes, while everyone else pays through the nose.
"This is about fairness in the middle. More money in the pockets of the people who need it."
Sources said Clegg wanted to revisit the "basic principles" of the tax system and felt the case for tax cuts for hard working families as soon as possible was "irresistible".
Raising the income tax personal allowance to £10,000 was a Lib Dem manifesto commitment and endorsed in the Coalition Agreement after the 2010 general election.
The first increase in the allowance, from £6,475 to £7,475, was announced in the 2010 Budget. It is set to rise again, to £8,105, in April.
In his speech, Clegg said he wants the coalition to "go further and faster" in delivering the full £10,000 allowance because "the pressure on family finances is reaching boiling point".
"These families cannot be made to wait. Household budgets are approaching a state of emergency, and the Government needs a rapid response," he said.
Osborne is aware of the contents of the Deputy Prime Minister's speech, but Treasury sources said it represented Clegg's "personal view" rather than a change of plan.
"It's an interesting Budget submission," one said.
Clegg will not advocate an increase in borrowing to pay for the cut but call for extra taxes on the richest in society and environmentally-damaging behaviour.
"We need to find the money. That will not be easy, of course, but to those who say we cannot afford to do this, I say we cannot afford not to do this.
"And it is because of the pressure our economy is under that 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.
"And I can tell you today that 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."
He added: "People look to the Liberal Democrats to keep this Coalition anchored in the centre ground.
"They want economic competence, but they want compassion too. It is our job to make sure this Government delivers both."
A source close to Clegg said he wanted to "debate the basic principles of taxation in this country".
"Between now and the Budget, Nick and Danny will be arguing for faster tax cuts for hard-working families, paid for by increasing the amount paid by the richest," he said.
"Times are tough for a lot of people and Nick wants to put money back in their pocket. The case for doing this as soon as possible is, in his view, irresistible.
"The planned steady increase aimed at delivering the £10,000 personal allowance by 2015 just won't cut it anymore."