Oh, Danny, Danny: what has ConservativeHome ever done to you, for you to misrepresent us in this way? The Chief Secretary to the Treasury claimed yesterday on our so-called rival, LibDem Voice, that: “When Nick Clegg said in early 2012 that the Coalition should go “further and faster” in reaching our goal of increasing the personal allowance to £10,000, ConservativeHome wrote “George Osborne seems content to let the Lib Dems make the running on higher personal allowances.”
Actually, the editorial voice of this site – in the form of my great predecessor, Tim Montgomerie – said nothing of the kind. The piece in question was penned by Jill Kirby, who was a columnist at the time. And she was making precisely the opposite point that the one that Alexander made yesterday. Raising allowances for the poorest income tax payers, she said, was an idea that “has long been advocated by Conservative politicians and advisers”.
She cited as evidence George Osborne’s Tax Reform Commission, set up in 2005 – ah, how long ago it seems now! – under the chairmanship of Lord Forsyth to produce proposals for simpler, lower and flatter taxes. Her message to the Chief Secretary was: “We got there first! Sucks to you! Now go back to handing out bribes to voters in Liberal Democrat seats, sorry, reduced fuel duties for people in remote rural areas, or whatever you’re doing to save you seat, and let us hear no more of you.”
There is a moral in Alexander’s sleight of hand: namely, that this Coalition quarrels when it doesn’t agree, as over green taxes, and quarrels, too, when it does – as over the ownership of raising those thresholds. But let’s look on the sunny side. Putting them up, and taking people out of tax altogether, is a thoroughly good idea. Who cares which party claims credit for it, as long as it happens? From that point of view, the Chief Secretary’s tergiversations scarcely matter.
On balance, I agree with Andrew Lilico that it is better to raise thresholds than re-introduce the 10p rate (for which the excellent Robert Halfon make the case again this morning). It’s possible to imagine a point at which the move would place too great a burden on remaining income tax payers. This was precisely Nigel Lawson’s fear when he was Chancellor. He wanted a lot of people paying a little tax, rather than a few people paying a lot.
My view is that we should cross that bridge when we come to it. In the meantime, thresholds should be raised much further – to minimum wage or even Living Wage level. (Halfon references both approvingly this morning.) And the tax and benefits system should be radically simplified at the same time. Poorer income tax payers should pay less tax or none at all – not see tax taken off them, have a slice removed by bureaucrats, and see the remnant returned in the form of tax credits.