Labour: Ready for tax cuts
Labour has made further hints of tax cuts in next Monday’s Pre-Budget Report with Gordon Brown saying Britain was “ready” for a fiscal stimulus.
“Britain, like many other countries in Europe, is ready to make its contribution for a temporary and affordable fiscal stimulus,” the prime minister said at a joint press conference with EU Commission president Manuel Barroso.
“It is now clear that the need for an urgent fiscal stimulus, within a medium-term framework of fiscal sustainability, is overwhelmingly accepted across the world.”
The ‘fiscal stimulus package’ expected to be unveiled next Monday will probably be targeted at the low paid – those more likely to spend a tax cut rather than save it.
It could come in the form of increased tax credits or large winter fuel payments.
Mr Darling told the BBC at the weekend it was right “to do everything you can to help people get through a difficult period”, although he revealed no concrete plans.
The Liberal Democrats are now calling for a 2p cut to the basic rate.
“The only serious proposal to boost the economy is a 2p tax cut,” said Liberal Democrat leader Nick Clegg.
“As we slide into recession, people need to know that government is on their side. We have bailed out the banks, surely it is right that we help those families who are struggling to pay the bills this winter.”
The Lib Dems estimate a £15 to £20 billion tax cut is necessary to revamp the economy.
Analysis by KPMG show a 1p reduction in the basic rate would cost the Treasury £4 billion- with the maximum benefit of £348 for those with earnings over around £41,100.
An increase in the basic personal allowance from £6,035 to £7,035, with similar increases for age related allowances, would cost around £ 7 billion – with benefits for taxpayers from £200 to £400.
This weekend Gordon Brown at the G20 meeting pushed for global tax cuts to boost economies.
Although no solid measures were announced, a communiqué did call on governments to use tax cuts where appropriate.
Julian Jessop, chief international economist at Capital Economics, said: “The lack of specific commitments on additional policy stimulus will disappoint some.
“However, individual governments do not need a green light from the G20 to stimulate their own economies with activist fiscal policies and aggressive cuts in interest rates.
“Indeed, many countries are already well along this path and others will follow.”
