Doubts cast over British PM's £7.2bn tax cut promise

2nd October 2014, Comments 0 comments

Financial experts cast doubts on Thursday about a promise by British Prime Minister David Cameron to make massive tax cuts, saying the proposals would take time and might not help taxpayers so much.

Cameron closed the final conference of his Conservative party before the May general election with a promise on Wednesday to raise the income threshold for people paying the 40 percent rate of income tax and for those on the lowest band.

Aides said the measures could benefit 30 million people, and the independent Institute for Fiscal Studies (IFS) said they would cost £7.2 billion (9.2 billion euro, $11.6 billion) -- raising questions of how they would be financed.

Cameron heads a Conservative-led coalition which came to power in 2010 when public finances were in a dire state and has since built a reputation for budget rigour.

"Cameron trades votes for economic credibility", the Financial Times wrote in an editorial, which spoke of the proposals as "electoral gimmickry" and of "questionable coherence".

"While this may help to lure back those dallying with UKIP (the UK Independence Party), it raises a fundamental question about the economic credibility of the Conservative case," the business daily said.

The tabloid Daily Mirror said it would "hand the rich a £7.2 billion tax break -- funded by yet more spending cuts that will clobber the poor".

The Daily Telegraph instead insisted that the measures would help the "squeezed middle class", adding: "This was more than just a goody-bag oration intended to bribe voters".

In his speech, Cameron promised to raise the amount people can earn before paying any income tax to £12,500 ($20,200, 16,000 euros) by 2020 and raise the threshold for those on the 40-percent rate -- the second highest -- to £50,000.

Aides said the changes meant that basic-rate taxpayers would pay £500 less in 2020 than they do today.

But the IFS said that once inflation-linked rises were taken into account, the pledge would be worth about £160 a year for basic-rate taxpayers and £430 a year for those paying the higher rate.

The Resolution Foundation, another think tank, pointed out that the Conservatives have already pledged to clear the budget deficit by 2018, which meant that tax cuts would likely have to come after that.


© 2014 AFP

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