Raising the personal tax allowance to £12,500 per year would be the price of Liberal Democrat support for either Labour or the Conservatives if next year’s general election ends in another hung parliament.
Danny Alexander, the Lib Dem Chief Treasury Secretary, will announce today that the pledge will be included in the party’s election manifesto. It will promise a £500 increase in the tax threshold in the first Budget or economic statement after the election.
Mr Alexander will tell the Lib Dems’ spring conference in York: “A top priority in any negotiation will be our aspiration to raise the personal allowance dramatically again in the next parliament. To raise it to £12,500.”
The £10,000 a year allowance, which will take effect next month, was a flagship Lib Dem policy at the last election, when the threshold stood at £6,475. Nick Clegg is pressing for it to be raised to £10,500 in April next year.
The £12,500 goal, to be implemented by 2020, would mean a tax cut of £500 on top of the £700 for 25 million workers which will be delivered by next month, meaning that 2.5 million people have been lifted out of the tax net.
Accusing the Tories of belatedly trying to claim credit for the move, Mr Alexander will say: “This tax break was invented by the Lib Dems but resisted by the Conservatives. Fought for by the Lib Dems, delivered by the Liberal Democrats.”
He will tell Lib Dem activists: “Repairing the economy on its own isn't enough. We have to do this fairly. That’s why we forced through the decisions to cut income tax for working people… note that word ‘forced’. We have had to fight for this at every Budget and at every autumn statement since 2010.”
Claiming that the economic recovery would not have happened without the Lib Dems, the Treasury minister will say: “Every job that’s been created, every apprenticeship opened up, every pension boosted has our Lib Dem DNA running through it.”
Downing Street hit back at Vince Cable, the Lib Dem Business Secretary, after he told The Independent that David Cameron’s promise of a Europe referendum in 2017 was “seriously irresponsible”. Mr Cameron’s spokesman said: “The question mark is already there and ignoring it is not going to make it go away. The PM's approach is to confront the issue, shape it lead the debate and get a better settlement for the UK in the EU."