One million workers in UK to be taken out of tax net
Published 22/06/2010 | 05:00
Almost one million of the lowest-paid British workers will no longer have to pay income tax, under plans to be set out in George Osborne's first budget tomorrow.
The Chancellor of the Exchequer will claim that the coalition is being "fair and progressive" and its budget will not hit the poor disproportionately.
The package of measures is expected to be the most draconian in 30 years. Mr Osborne will say that "tough action" -- raising taxes and cutting spending -- is "unavoidable" if the £155bn (€185bn) deficit is to be brought under control.
Some experts fear that the austerity measures could push Britain back into recession and choke off the recovery.
Mr Osborne will tell MPs that the personal tax allowance will be raised by £1,000 (€1,200) from £6,475 (€7,750).
The policy, which was central to Liberal Democrat demands in the coalition talks with David Cameron, will mean 880,000 of the lowest paid will no longer have to pay tax.
Basic-rate taxpayers will also be £200 (€220) a year better off. Those earning more than £40,000 (€48,000) will not benefit because they will be hit by a rise in National Insurance (NI) contributions, a Labour policy that Mr Osborne has decided to introduce.
He will announce that changes in NI will mean that employers will no longer have to make contributions for around 650,000 employees.
Mr Osborne will present this announcement as part of his promise to halt the "job tax" that Labour had proposed through increases in NI. Several Tory tax policies have been ditched to accommodate the policy and other tax rises are expected to be announced to help pay for it, including a rise in capital gains tax. But government sources admit that "the richest will pay the most".
Mr Osborne is expected to raise VAT from 17.5pc and could settle on a figure of 20pc Alistair Darling, the former chancellor, said he would be "amazed" if VAT did not go up.
Millions in the public sector, including teachers, police officers, council workers and civil servants, face having to increase their pension contributions.
Mr Osborne will also target the welfare budget for further savings of £4bn (€4.8bn). (© Daily Telegraph, London)