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Coffee House

David Cameron hints at tax cuts for Middle England

30 July 2014

11:47 AM

30 July 2014

11:47 AM

The Telegraph’s Christopher Hope tweets the news that David Cameron is open to raising the threshold for the 40p rate:

NEWS! PM: “I would love to raise the 40p tax threshold, I understand the problem, but would have to look at the books before doing it”

— Christopher Hope (@christopherhope) July 30, 2014

 

The Telegraph has been pushing for this change for some time. Cameron has, in political terms, flashed a bit of thigh at Middle England.

[Alt-Text]


One of the strange features of this parliament is how little credit the government gets for keeping taxes low. This sense was reinforced recently by one of Lord Ashcroft’s polls, which found that voters thought that they would pay less tax under Labour. This is errant nonsense, as this morning’s revelations suggest. But, nonetheless, the perception remains.

Tory MPs have a number of explanations for this. MPs who remember the Lawson and Clarke years talk about ‘the politics of the penny off’. Their view is that, politically, it makes no sense to take people out of the tax system by raising the basic threshold as the government has done. The answer, they say, is to cut the rate of income tax: keep people contributing, but make them contribute less. That way they think about public services and public money.

Other MPs refer to the 40p threshold. As one backbencher put it to me some time ago: ‘These hardworking people we keep talking about. We’re making them work even harder.’

Maybe the government will look at the books and conclude that the threshold should remain in place, but that the 40p rate should become the 39p rate.

Or maybe they won’t do anything. Could this announcement have anything to do with distracting attention from Ed Balls, who’s giving a speech and doing some banker bashing today?

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