Political

Low earner Liberal Democrats: what’s the impact of the budget?

Having covered earlier in the week the importance of ‘low earner Liberal Democrats’ to the party’s prospects, how are things looking after the Budget?

One thing Alistair Darling most certainly did not do was to raise the income tax threshold to £10,000, the Liberal Democrat policy that would take millions out of income tax completely and also cut the tax bill for those low income households on higher incomes. Instead, he went in the opposite direction by freezing (i.e. cutting in real terms) the income tax threshold.

(Given the Fabians criticised the Lib Dem plans for raising the basic income tax threshold for, in their view, not being progressive, presumably the cut in it is being cheered on by them as a progressive move? Er, maybe not.)

What Darling also did was to continue the usually political emphasis on those who own or are immediately seeking their own home – hence the stamp duty changes and continuation of the mortgage interest scheme. Yet nothing was done to help those in rented accommodation. When it comes to property, renting is the big political no-no: not only does it not get mentioned, people don’t even usually get criticised for not mentioning it.

Two other Labour moves will also hit low income households hard: the planned increase in 2011 in National Insurance contributions (another increase in income tax in all but name) for those earning £20,000 or more and the 1% pay cap for public sector workers. 1% for someone on £15,000 is an awful lot less than 1% for someone on £50,000 – which is why Vince Cable’s sensible alternative is for a £400 cap., That would also save money to plug the deficit, but in a way that emphasises fairness with the least well off getting proportionately higher pay rises than the best paid public sector workers.

All in all, it was a Budget that leaves plenty of scope for Liberal Democrat campaigners to push a strong message about a fairer alternative to Labour’s priorities.

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