Nick Clegg has challenged Conservative coalition partners to deliver a £140 income tax cut to 20 million workers by scrapping Tory plans for tax breaks for married couples and employee shareholders.
The Deputy Prime Minister is pressing Chancellor George Osborne to use his Budget on March 19 to increase the main income tax allowance to £10,500 in what he calls a "workers' bonus" which would slash around £100 from the bills of basic-rate taxpayers and take some low-paid workers out of income tax altogether.
Now he has said the threshold below which earnings are not liable to income tax could be raised further to £10,700 - increasing the potential saving to £140 - if the Conservatives agreed to ditch "pet tax projects" like the married couples' tax allowance.
Raising the threshold to £10,000 was a key plank of the Liberal Democrats' election manifesto in 2010 and was identified as the Government's tax priority in the coalition agreement . The personal allowance has been raised in steps from £6,475 and will reach £10,000 in April next year, in a gradual process which Mr Clegg said was worth a total of £700 a year to around 20 million workers.
But the Lib Dem leader has opposed plans outlined in last month's autumn statement for a £700 million transferable tax allowance for some married couples and civil partners, worth £200 a year to an estimated four million households from 2015.
Speaking at a Westminster press conference, Mr Clegg said: "My priority in the Budget, in a few weeks' time, will be to deliver a 'workers' bonus', to go further than the £10,000 income tax allowance that we will be delivering in April - a policy which I notice has suddenly become a subject of great enthusiasm for the Conservatives, an enthusiasm which they kept well hidden until now.
"It was a policy that was on the front page of the Liberal Democrat manifesto and was only in the coalition agreement because of the Liberal Democrats and millions of people are benefiting to the tune of around £700 each because of that Liberal Democrat commitment.
"I want to go further. I've said that if we can responsibly find means to deliver an even higher allowance of £10,500 - a workers' bonus - we should do so. That would be worth an extra £100 off the tax bills of over 20 million basic rate taxpayers.
"But now that my coalition partners have professed such enthusiasm for this policy, maybe we can go further still. If the Conservatives were prepared to give up spending huge amounts of money on their own tax pet projects - whether it's the marriage tax break, or what I call the unmarried couple tax penalty, which consumes hundreds of millions of pounds, or the tax incentives encouraging people to give up their employment rights to take up shares - if we just moved off both of those we could deliver a £10,700 tax allowance at the next Budget.
"That would be worth £140 back in the pockets of over £20 million basic rate taxpayers, taking more and more people on very low incomes out of paying income tax altogether."
Video: Nick Clegg says Tory cuts for the sake of it "monumental mistake"