Cameron promises tax cuts for low and middle-income earners

Income-tax cuts for low and middle-income earners will headline the 2015 Conservative election manifesto, British prime minister David Cameron said yesterday.

The decision was greeted with relief by thousands of party delegates on the final day of the party’s conference in Birmingham. However, a widening of the threshold at which workers pay the higher 40p rate of income tax could be four years away, as it will not happen until the government’s accounts are in the black, which will not be until 2018.

EU targets

On EU membership Mr Cameron has set high, and perhaps unrealisable, targets for negotiations with fellow European leaders on membership terms ahead of a promised referendum in 2017. The prime minister, acknowledging demands for lower immigration, said numbers had increased “faster than we in this country wanted, at a level that was too much for our communities”.

“All of this has to change,” he added. “I will not take no for an answer, and when it comes to free movement, I will get what Britain needs.”

The Strasbourg-based European Court of Human Rights (ECHR) – which is not part of the EU, but which is deeply resented by most Conservatives – “needs to be sorted out”, he said. The country that gave the world the “Magna Carta does “not require instruction on this from judges in Strasbourg”, he added, to loud cheers.

Despite the toughness of his language, it appears that Mr Cameron is not readying to quit the ECHR, as many in his party would wish. Instead, Labour’s Human Rights Act would be repealed and replaced by new legislation, leaving final judgments to the UK Supreme Court, influenced by the ECHR.

Coming on the back of Monday's speech by chancellor of the exchequer George Osborne, who emphasised the pain needed to balance the books, Mr Cameron instead focused on the prize.

The tax cuts are a message to doubtful Conservative voters, an attempt to woo back some of those who now support Ukip and an appeal to the “soft” Labour vote.

Most importantly, the speech – the best that Mr Cameron has given to a party conference – saw him deliver a polished address that many felt compared favourably to Labour leader Ed Miliband’s much-criticised effort last week.

On tax, Mr Cameron is promising that anyone earning less than £12,500 will pay no tax, while middle-income earners will not pay the 40p rate until they earn £50,000. The increase in the basic-rate threshold is the most expensive element of the plan, costing £5.6 billion a year, while the 40p pledge would cost £1.6 billion.

Spending cuts

The income tax cuts will be matched by spending cuts, not tax increases elsewhere, the party says, and these will be in addition to the £25 billion that Mr Osborne has vowed to cut.

Casting some doubt on the promises, the Institute of Fiscal Studies said some government departments are already facing a cut of one-third in their budgets by 2020. If these cuts are implemented, Mr Cameron will have achieved a greater reduction in the government’s size than anything ever contemplated by Margaret Thatcher.

However, the Conservatives are vulnerable to charges that the tax cuts will benefit the higher paid, as someone on £100,000 will keep an extra £2,000 a year, while those on £50,000 will get only an extra £500. People earning below £10,000 will not gain anything, while some lower middle-income families will be worse off because of family-credit and other benefit cuts.