Osborne: Budget is for 'working people' (but 50p tax is set to go)

Chancellor reveals he will crack down on tax dodgers as 'Quad' meets for final time to thrash out details

Wednesday's Budget will be aimed at "working people", George Osborne claimed yesterday, despite the expected scrapping of the 50p rate for top earners.

The Chancellor is expected to announce moves this week to lift hundreds of thousands more people out of income tax and to target wealthy property-tax dodgers.

The package will be finalised at a meeting today of the coalition "quad" – Mr Osborne and David Cameron for the Conservatives and Nick Clegg and Treasury Chief Secretary Danny Alexander for the Liberal Democrats.

Following the extraordinarily public negotiations over Wednesday's Budget, the outline of its contents was becoming clearer last night.

The Chancellor looks certain to announce a larger-than-expected move towards the Coalition's ambition of raising the income-tax threshold to £10,000, as well as modifications to the plan to scrap child benefit to higher-rate taxpayers. The 50p top rate of tax is expected to be reduced for people earning more than £150,000 a year – a politically tricky step which will be balanced with fresh moves to crack down on tax avoidance by the rich.

Mr Osborne said yesterday he would close the "completely unacceptable" loophole that enables the wealthy – often foreign investors – to buy expensive property but register it in a company name, thus avoiding paying stamp duty.

"We are going to come down on that practice like a ton of bricks. We are coming after that tax avoidance. We are going to be extremely aggressive in dealing with it," he told BBC1's Andrew Marr Show. He will also announce new moves against tax dodgers with legislation to tackle "artificial and abusive tax-avoidance schemes".

Separate steps to prevent the wealthy from using the array of allowances available to them to minimise their tax bills will be set out on Wednesday. The moves will be seized on by the Liberal Democrats as a version of the "tycoon tax" for which they have been pressing in recent weeks.

However, Mr Osborne is anxious not to allow the Liberal Democrats all the credit for moves to curb the excesses of the wealthy and to help the less well-off. He said yesterday: "My priority is to help low and middle earners. That is where the bulk of the effort in the Budget is going to be."

He promised that there would be "real and substantial progress on lifting low-income people out of tax". The Government has already announced plans to increase the tax threshold to £8,105 in 2012-13 and £10,000 by 2015, but his words were a clear signal that he is preparing to accelerate the increases.

He also signalled changes to controversial plans to remove child benefit from households where anyone is earning enough to pay higher-rate tax. Tory critics have angrily protested that the scheme will create a "cliff-edge" leaving millions worse off. Mr Osborne said: "How we implement the policy is something we will discover on Wednesday."

Mr Clegg faced Liberal Democrat anger yesterday over indications that the 50p top rate of tax was about to be scrapped.

The senior backbencher Stephen Williams said: "I certainly don't think now would be the right time to announce the abolition or the reduction of the 50p rate of tax; 2012 is going to be quite a difficult year for many families."

The Liberal Democrat London mayoral candidate, Brian Paddick, said it would be a "tragedy" if the Chancellor failed to increase the total burden on the better-off when some people faced a choice "between heating and eating".

The shadow Chancellor, Ed Balls, said: "For families on middle and low incomes seeing their petrol prices up, their fuel bills up, the living standards squeezed, youth unemployment rising, the idea that George Osborne is saying the number-one priority is to cut taxes on salaries of £150,000, they can't be serious."

THE BIG IDEAS: WHAT'S LIKELY TO BE IN THE BUDGET – AND WHO'S BEHIND IT

Cut top tax rate Could be reduced from 50p to 45p from next year. Advocates of a cut say the current rate deters business growth. Likelihood (4 out of 5)

Child benefit To be removed from higher-rate taxpayers. Cameron admits the plan needs modification, and some adjustments are almost certain. 4/5

Delaying petrol price rises Lots of pressure from Tory backbenchers, but would be costly for the Treasury. 3/5

Youth unemployment Package of measures including more apprenticeships. Could be worth around £500m. 5/5

Tax avoidance Tougher action to prevent the wealthiest side-stepping tax, such as registering a property in an offshore company. 5/5

Sunday opening Eight weekends' unrestricted opening in the summer to stimulate struggling high streets. 5/5

Corporation tax Osborne has already announced some cuts, but further reductions could be on the way because of the grim business climate. 3/5

Tax breaks for married couples Enthusiastically endorsed by Cameron, but Osborne is lukewarm and the Lib Dems openly hostile. 1/5

Tycoon tax Clegg has called for the rich to be obliged to pay a minimum of 20 per cent tax, but will try to use the phrase for any new tax on the wealthiest. 3/5

Mansion tax Levy on properties worth more than £2m. Has run into Tory resistance.

Raise income tax threshold Due to rise to £10,000 by 2015, but Lib Dems pressing to hit the target earlier. Look to have won the battle. 4/5

Higher council tax for biggest houses Tories worried it would mean entire council-tax re-evaluation. 2/5

Scrap high-rate pension relief Would raise big sums, but hit natural Conservative supporters. 3/5

Comments