At the last election, we promised to raise the income Tax threshold to £10,000. Both Gordon Brown and David Cameron said it could not be afforded. But in Government the Lib Dems have delivered this pledge.
That has taken 14,000 Manchester workers out of paying income tax at all, and given a £700 tax cut to 133,800 Manchester workers.
A couple of weeks ago, Ed Balls promised to reintroduce the 50p income tax rate for top rate tax earners. Do not get me wrong, I have not forgotten that Labour’s top rate of tax for 12 years 11 months was 40p. Or that the 50p rate was a cynical last-ditch attempt by Gordon Brown and Ed Balls to appeal to Labour’s so-called “core vote”.
I have not forgotten the 10p tax rate that hit the poorest workers hardest or that the gap between richest and poorest got wider under Labour.
The Tories wanted to reduce the top rate of tax to 40p, and had no interest in raising the personal allowance until they realised its popularity. The reduction in the 50p rate was a compromise to deliver our priority to raise tax thresholds.
The problem is that slashing income tax for people earning over £150k was seen as unfair with millions of average and lower paid people who hear “we’re all in it together”, but then see their wages frozen for 3 years. It does not matter that all the other tax changes mean that the 10% richest are now worse off.
The best way to distance ourselves from this top rate tax cut is to commit to reintroducing it at the next election. Most people I speak to believe it is the right thing to do. Opponents of the 50p rate argue that it does not raise any money, or at best, very little. Rather than take the view that people will simply avoid paying it, HMRC should do their job properly and levy the tax that is due. Another line being peddled that the rich are not paying their fair share is just not true. Thanks to the Liberal Democrats in Government, changes in the tax system now mean the richest are paying more tax not less.
Just this week, the Tories have been strongly pushing the re-introduction of the 40p rate again. Danny Alexander MP has said that will never happen whilst Lib Dems are in the coalition.
What the reintroduction of the 50p rate would do is show a symbolic commitment to fairness on tax and it is something the Liberal Democrats should be advocating.