"Cut Income Tax in Budget" - Lib Dems urge Chancellor

11.12.16pm GMT Tue 20th Mar 2007

Chancellor Gordon Brown should cut national income tax, funded by rises in green taxes, when he delivers his Budget on March 21st, say Northampton Liberal Democrats.

Liberal Democrat Parliamentary Candidate for Northampton North constituency Andrew Simpson said:

"Gordon Brown should use tomorrow's Budget, which will probably be his last as Chancellor, to make the tax system fairer and deliver tax cuts for hard working local people.

"He should cut tax on the things we want more of, like hard work, and pay for it by putting tax up on polluting activities.

"This is what the Liberal Democrats are calling for. Without raising the overall amount of tax raised, the 'green tax switch' we propose would deliver lower tax bills for most households in Northampton, as well as tackling inequality and environmental damage."

Proposals put forward by the Liberal Democrats would -

• Save a typical pensioner couple around £1,600 a year through proposals including scrapping council tax1

• Save a typical double-earning couple around £1,500 a year through measures including a 2p cut in the basic rate of income tax2

• Lift more than two million people on low income out of income tax completely across Britain by reducing the 10p tax rate to zero

• Take 1.3 million people out of the top rate of income tax by raising the threshold to £50,000 p.a.

Andrew Simpson added:

"The current system of taxation is not fair. The poorest 20% of households pay a bigger share of their income in tax than the richest 20%. Wealth inequality has actually risen since Labour came to power.

"These Liberal Democrat proposals will make the tax system fairer for those on low and middle incomes. This will particularly benefit pensioners, key public sector workers and young professionals.

"These tax cuts for the majority will be paid for by the wealthy and those with environmentally damaging lifestyles.

"It's time for Brown to go green, and by doing so he can cut income tax bills for hard-working people here in Northampton."

ENDS

Notes

1 Figure based on a pensioner couple with a combined income of £15,000.

2 Figure based on a double-earning couple earning the national median household income of £25,000.

Tables

These tables were produced for the launch of our tax proposals in August 2006. You probably do not need to include these tables in your news release. But they are public documents and can be supplied on demand.

Table One: Overall Costings For Specific Policy Commitments

The figures in these tables are given for illustrative purposes based on 2006/07 values. While we propose to implement all of these measures within the lifetime of a Parliament, and some of them early in the Parliament, we recognise that depending on circumstances we would need to phase some of them across more than one budget.

Gross (m)

Reduce 10p tax rate to zero (standard rate threshold raised to £7,185) £4,100

Raise employee NICs earnings threshold to £7,185 £5,100

Cut basic rate of income tax by 2% £6,700

Raise upper rate income tax threshold to £50,000 £5,400

Raise upper earnings limit of employee NICs to £50,000 -£4,200

Cut corporation tax by 1% £1,600

TOTAL COST OF PACKAGE £18,700

Gross (m)

Capital gains tax - scrap taper relief £4,500

Reduce CGT allowance to £1,000 £1,700

Single rate of pension contribution relief £4,300

Additional environmental taxes £8,100

Remove some corporation tax reliefs £1,400

TOTAL REVENUE OF PACKAGE £20,000

CONTINGENCY £1,300

Table Two: Estimated Impacts On Household Types From Income Tax, NI, Council Tax, CGT And Environmental Tax Changes

Impact of changes on households Council tax band Council tax bill Income tax & NI changes LIT charge Gain/loss Gain/loss with average environmental taxes

Pensioner couple, income £15,000 G £2,023 -£82 -£33 £1,908 £1,578

Teacher, £25,000 (single person household) F £1,315 £807 -£804 £1,318 £987

Median household income (double earner), £25,000 D £1,214 £1,114 -£483 £1,845 £1,514

Nurse, £20,000, and police officer, £25,000 E £1,484 £1,514 -£1,383 £1,615 £1,284

Cabinet Minister, £130,000 H £2,428 £1,761 -£5,529 -£1,340 -£1,671

City banker, £250,000 (single earner household), includes CGT* H £2,428 £1,761 -£10,929 -£9,271 -£9,602

Young professionals (double income - £38,000 and £25,000) E £1,484 £1,428 -£2,193 £719 £388

Young professionals (double income - £50,000 each), includes CGT* G £2,023 £3,521 -£3,858 -£844 -£1,175

Four nurses earning £20,000 each F £1,754 £2,827 -£2,316 £2,265 £1,934

• Assume CGT reliefs currently benefit richest 10% of households, £2,531 per household. Assume environmental taxes affect all households - average is £331 per annum. Changes to pension contribution relief not included.