UK Politics

Nick Clegg pledges 'tax cut for 29 million people' in 2016

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Media captionNick Clegg: The policy is a "fair way of funding tax breaks"

The Liberal Democrats would cut the taxes of 29 million working people in 2016 if they remain in government.

Nick Clegg said no-one would pay tax on the first £11,000 of income from April 2016, a £1,000 rise on current limits.

The Lib Dem leader accused David Cameron of "plagiarising" his party's longstanding objective of raising the personal allowance to £12,500 by 2020.

However, Business Secretary Vince Cable said the party would seek to rebalance tax rises and spending cuts.

Mr Clegg's announcement comes on the eve of the deputy prime minister's closing speech to his party conference in Glasgow, the last before next year's general election.

He insisted next year's increase would be paid for by tax rises on the wealthy and not "hitting" low earners.

On Tuesday, Mr Clegg suffered a setback as party members rejected the leadership's calls to relax opposition to airport expansion in the south east of England.

A proposal to not rule out future extra capacity at Gatwick and Stansted in its 2015 manifesto, if environmental and other criteria were met, was rejected by activists.

'First step'

On tax, the Conservatives and Lib Dems have already agreed to lift the personal tax allowance to £10,500 next April but both have said they want to go much further in the next Parliament.

In his conference speech last week, the prime minister said a future Conservative government would aim to take all those earning up to £12,500 out of income tax by the end of the next Parliament.

He said this would only happen when the economic circumstances allowed but not before the budget deficit was eliminated - currently forecast to happen in 2018.

Image caption Nick Clegg told the BBC's Nick Robinson the Conservatives and Labour represented a "dismal choice"

Critics have questioned how the measure, combined with a separate pledge to raise the level at which middle earners start paying income tax at 40%, would be paid for.

Mr Clegg has now responded by promising an immediate post-election tax cut for millions of taxpayers in the event of the Lib Dems remaining in government.

'Magic objective'

He said he would insist on the personal tax allowance being raised by £500 to £11,000 in the first year of the next Parliament as a first step towards achieving the £12,500 "magic objective".

"That is worth about £100 in less tax paid to almost 30 million people," he told the BBC's political editor Nick Robinson.

The Lib Dem leader said the measure would be paid for by increasing capital gains tax paid by the wealthiest and further measures to clamp down on corporate tax avoidance.

Under his plans, tax paid on the profits of share sales and second home transactions would be aligned "more closely" with income tax, he said, raising "hundreds of millions of pounds".

The basic level of capital gains tax was raised from 18% to 28% in July 2010, although the amount paid depends on an individual's taxable income.

Mr Clegg contrasted his party's approach to funding tax cuts with what he said was the Conservatives' plan to freeze working-age benefits for two years from 2016.

"That is a fair way of funding tax breaks. George Osborne's approach is an unfair way because it is the working age poor who are going to be penalised.

Mr Cable told the BBC's Newsnight programme the party would seek a "better mixture of taxes as opposed to spending reductions, because we are in a difficult place at the moment".

"There are areas like the armed services, the police, local government, which have really been squeezed very hard and it's difficult to see how you could repeat the cuts exercise we already had again," he said.

'Singled out'

While accepting there would have to be tax rises after the 2015 election to cut the deficit, Mr Clegg said his party believed that "you should start at the top and work down, not start at the bottom and work up".

"What I don't think I would ever put up with - and I don't think the country would put up with - is the idea that it is the working-age poor only who pick up the tab, who pay the price and make the sacrifices for the mistakes of the bankers in the past.

"Why should the working poor be singled out for extra pain by George Osborne... when they are shielding very wealthy people from any additional contribution to fill the black hole in our finances.

"It is wrong, wrong, wrong and something my party would never endorse."

Although he could not rule out any further cuts to benefits, he said the Lib Dems would "borrow less" than Labour and "cut less" than the Conservatives.

"We think our recipe for the future, which is getting the balance right between the head and the heart, doing the tough stuff to get the economy sorted... but also spreading opportunity across the country, is something that neither of the other two parties can offer," he said.

A Labour spokesman said: "You can't trust a word Nick Clegg and the Lib Dems say. They say they want fairer taxes for working people but in government they have given millionaires a tax break while everyone else pays more."