NICK Clegg’s call to raise the tax threshold to £10,000 in the next Budget is as much about the politics as the economics. This is already a coalition objective for the lifetime of this Parliament, and the Liberal Democrat leader desperately wants to take credit for this policy after his party paid a heavy electoral price for its volte face on student tuition fees.
Yet, while the Deputy Prime Minister’s call is a tacit admission that household budgets have reached breaking point, the question of finance remains unanswered. The Sheffield Hallam MP argues that the wealthy should foot the bill while many of his Conservative coalition partners contend that lowering the 50p tax rate for high-earners is the best way of creating jobs and prosperity.
Mr Clegg may also come to regret the timing of his speech. For, if Chancellor George Osborne concludes in the Budget that tax cuts are out of the equation, and the fate of the eurozone still remains the great unknown, the Lib Dem leader will be portrayed as a man with little influence. His challenge now is to convince the Treasury that tax cuts are in the economic interest, more so than the political.