Tories Would Seal Election Victory With Tax Cuts For UK's Middle-Income Earners.....Eventually

Lisa Ugur, Tax-news.com, London

23 March 2001

As British Prime Minister Tony Blair remains resolute that a general election will be held at the beginning of May, the Conservatives are looking to win over voters by touting tax cuts for middle-income earners. If the Tories win the election, they have promised to raise the threshold for top rate taxpayers. But there's a catch - they will not do anything until the latter stages of their time in office.

Tory Central Office confirmed reports that shadow chancellor Michael Portillo intended to make a reduction in the number of people paying the top rate of tax. It would mean moving around 650,000 people who moved into the higher rate under the Labour government to the lower tax bracket. Currently the higher rate is payable on taxable earnings above £29,400 (gross income of £32,785). Mr Portillo did not say how high he intended to raise the threshold for the 40 per cent rate. What Portillo essentially wants is for so-called middle-income earners such as head teachers, top nurses and police inspectors, to fall outside of the high tax net.

In an article for the Spectator, Mr Portillo stated: 'Supertax was designed to hit the very rich - but these days the higher rate catches people who are on middle incomes. Anyone earning more than one and three quarters average earnings now pays top rate tax. Only 10 years ago, you had to earn more than double average earnings to be caught in the net.'

Predictably, Labour have lashed out at the Tory plans, in particular the fact Mr Portillo could not say how the tax cut would be financed (it is estimated that it would cost more than £1bn) or commit himself to a more definite time-scale. Treasury Chief Secretary, Andrew Smith, said: 'Michael Portillo's sums don't add up and there is a massive black hole at the heart of his economic policies. He has said that he will do this before, but is unable to provide the most basic details about his plans. He is refusing to say when, by how much and at what cost he would implement this and he hasn't got a clue where the money would come from to pay for it.'

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