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| Cameron tax cuts to cost £7.2bn, says Treasury | Cameron tax cuts to cost £7.2bn, says Treasury |
| (35 minutes later) | |
| The tax cuts being proposed by David Cameron would cost around £7.2bn, the Treasury has admitted. | The tax cuts being proposed by David Cameron would cost around £7.2bn, the Treasury has admitted. |
| Speaking at the Conservative Party conference, the Prime Minister promised to cut taxes, if re-elected in 2015. | Speaking at the Conservative Party conference, the Prime Minister promised to cut taxes, if re-elected in 2015. |
| "I want to take action that's long overdue and bring back some fairness to tax," he said. | "I want to take action that's long overdue and bring back some fairness to tax," he said. |
| The announcement comes in spite of the Chancellor's statement on Monday, in which he said a further £25bn needed to be cut from public spending. | |
| Paul Johnson, of the Institute for Fiscal Studies (IFS), said the £7.2bn figure was double the amount that George Osborne announced the government would be saving by freezing benefit payments. | Paul Johnson, of the Institute for Fiscal Studies (IFS), said the £7.2bn figure was double the amount that George Osborne announced the government would be saving by freezing benefit payments. |
| Referring to the announcement of tax cuts, he said: "It will be really important to understand how this will be paid for." | Referring to the announcement of tax cuts, he said: "It will be really important to understand how this will be paid for." |
| Thresholds | Thresholds |
| The Prime Minister said the personal allowance - the amount people can earn before paying tax - would be increased from £10,000 to £12,500 by April 2020. | |
| Doing so would take a million people out of income tax altogether, but would cost £5.6bn a year by 2020, according to the Treasury. | Doing so would take a million people out of income tax altogether, but would cost £5.6bn a year by 2020, according to the Treasury. |
| Mr Cameron also announced that a future Conservative government would raise the threshold for higher-rate tax. | |
| At the moment anyone who earns more than £41,900 is taxed at 40%. | At the moment anyone who earns more than £41,900 is taxed at 40%. |
| Over the last few years many middle-earners, including teachers and policemen, have been pulled into this tax bracket, as the threshold has not increased in line with the basic personal allowance. | Over the last few years many middle-earners, including teachers and policemen, have been pulled into this tax bracket, as the threshold has not increased in line with the basic personal allowance. |
| But Mr Cameron said the government would increase the threshold to £50,000, again by April 2020. | |
| That would take 800,000 people out of the higher tax bracket, and cost £1.6bn. | That would take 800,000 people out of the higher tax bracket, and cost £1.6bn. |
| Pasty tax | |
| If the changes are implemented, a basic-rate tax-payer would pay £500 less in tax in 2020 than they do at the moment, according to the Treasury. | |
| Someone earning between £50,000 and £100,000 a year would pay £1,313 less - a figure which may leave the Conservatives open to the accusation of cutting taxes for the rich. | |
| Anyone who already earns less that the tax-free personal allowance won't be affected. | |
| The IFS said less well-off workers could be helped more effectively by cutting National Insurance contributions instead, or increasing benefits. | |
| And it warned that the government might have to introduce new taxes to pay for the proposed give-away after 2015. | |
| "Remember the pasty tax?" said Paul Johnson. | |
| "We didn't have it in the end of course, but it was the Chancellor looking for money to pay for tax cuts," he told the BBC. |