Nobody was really expecting another rise in the Income Tax threshold in yesterday’s Autumn Statement. A significant rise, to over £9,000 had already been announced. When Chancellor George Osborne revealed that there would be a further rise to £9440, he didn’t add on the rest of the story – that this would mean that the Liberal Democrats’ key pledge of raising the threshold to £10,000 by 2015, looked certain to be met.
The tax threshold pledge was right there on the front page of our manifesto. Nick Clegg had talked for years about making the tax system fairer, citing the example of the millionaire banker who paid a lower marginal rate of tax on his income than his minimum wage cleaner paid on hers. That was a scandalous situation and one which the Liberal Democrats have done much to remedy. The rate of Capital Gains Tax has gone up by 10%. The same banker who under Labour would have had tax relief to put up to quarter of a million quid a year into a pension fund can now only put away £40,000.
But going back to the point of this post, the reason we can be pretty certain that the £10,000 target will be met is down to two Labour MPs in the 1970s. Audrey Wise was a bit of a leftie, while Jeff Rooker must have mellowed given that he served in the Blair Government. They put a rebel amendment to the 1977 Budget to ensure that tax thresholds would rise at the same rate as inflation.The Conservatives and, I assume the Liberals, voted for it and statutory indexation of tax thresholds was born. The consequences today mean that the statutory increases alone should give us a £10,000 threshold by 2015.
I doubt that a couple of Labour awkward squad would have anticipated that their amendment would help a Liberal election pledge to come to fruition 35 years later. Thanks, by the way, to Adam Corlett on Twitter who pointed me to the exact piece of legislation.
£600 off the tax bill of every basic rate taxpayer, with millions taken out of paying tax completely is quite something.