Several thoughts. Is £12,500 all that generous, given no concrete date for its implementation has been announced? When I look at increases already applied under this government, I'd have to say no, whether I extrapolate the 2015-16 tax free allowance of £10,500 to 2019-20 by the lowest annual percentage, or the absolute amount.
For example, the lowest % increase, year-on-year, under this government has been 5%. The lowest absolute amount is £500. Applying this going forwards, we'd reach a tax free threshold of £12,763 under the first method and £12,500 under the second. So Cameron's 'promise' does not seem generous, unless he means for this level of tax-free allowance to come into play much earlier, which is unlikely given his comments on the deficit.
|Year||TFA||Annual % increase||TFA||Increase to TFA|
Now looking at the next bit of Cameron's 'promise', that with a tax-free allowance of £12,500 no one on minimum wage will pay any income tax. This is a blatant attempt to appear to be altruistic, when it's really to bribe the lower earner voters with a headline making announcement which in actual fact benefits the higher-earners more!
A rise in minimum wage from £6.31 to £6.50 came into force today. This implies an annual salary of £12,145. A tax-free allowance of £12,500 equates to an hourly rate of £6.69. So a minimum wage of £6.70 or over would breach the £12,500 tax-free allowance. So with his promise, Cameron is also committing to minimum wage being no higher than by 2020. That is, over the next five years, minimum wage will not go up by more than a total of 19p. So what is £6.50 on 1 October 2012 will be no higher than £6.69 come 5 April 2020.
I may have been impressed had Cameron said the higher tax-free allowance applies only to those whose total incomes are below a certain level, rather than all of us benefiting.
Finally, with his bold claims of cutting spending to eliminate the deficit, I echo the sentiments of others in wondering how these tax cuts will be funded; I wonder what areas will see cuts. Education, NHS, welfare, housing, or surely not, our spend on war and weapons which have nothing to do with defending our nation? Sadly what is not in doubt is that it is the lower earners who will bear the brunt of the cuts in spending whilst also benefiting the least from the tax cuts.