GEORGE’S TAX CUT FOR THE MIDDLE CLASS

Tory Budget will raise 40p threshold – but there’s a sting in the tail on child tax credits

GEORGE Osborne will today unveil a major tax cut for Middle Britain.

The Chancellor will announce a significant increase in the starting point for paying 40p tax – rewarding employees squeezed in the last Parliament.

And he will let millions of poorer workers keep more of what they earn by raising the threshold for paying basic rate tax.

But the sting in the tail is a crackdown on child tax credits, which are set to be limited to the first two children in any family.

Around 30million workers will benefit from the tax cuts in today’s Budget.

In a boost for the middle class, Mr Osborne will accelerate progress towards the Tory pledge of raising the 40p threshold to £50,000 by 2020. Repeated freezes and cuts to the threshold caused the number paying 40p tax to rise from two to five million in the last Parliament.

The Chancellor announced a modest ‘down payment’ on the pledge in March, when he increased the threshold to £42,385. Today he will unveil a further inflationbusting increase.

He is also expected to slow the pace of £12billion in welfare cuts, arguing that better than expected tax revenues allow more

STUDENT grants will be axed and replaced with loans, it is expected to be announced in today’s Budget.

Sajid Javid, the Business Secretary, has been working on plans for the grants – worth up to £3,387 per year this September – to be paid back after a student graduates.

Maintenance grants, which are meanstested, cover a students’ rent and living costs at university and are intended to help those from poorer backgrounds.

But they already cost £1.6billion a year of the Business Department’s £13billion budget. Officials are concerned that the grant budget could double over the course of the Parliament.

The proposal will go down badly with student groups, who say that with fees having tripled to £9,000 a year, the prospect of getting into further debt will put off students from low-income families.

Grants are available for students with a family income of up to £42,620 a year. One option is keep them only for students with a family income of under £25,000 who are eligible for the maximum grant.

Whitehall officials proposed converting grants to loans two years ago, but the plans were abandoned due to opposition from the Liberal Democrats, who were concerned about further damage to their reputation with students after Nick Clegg’s U-turn on tuition fees.

But as unprotected departments are faced with making budget cuts of around 15 per cent over the next three years to meet the Conservatives’ targets to cut the deficit, the move will help Mr Javid reach his goal of cutting £2.2billion.

Ministers are expected to stress that universities must do more to improve access to higher education for poorer students.

Students from families claiming income support or with other special circumstances will remain eligible for other funding, it is understood.

ahead of today’s Budget, figures released yesterday showed Britain’s economy roared back to life after a slowdown at the start of the year, .

Gross domestic product – total output in the UK – rose by 0.7 per cent between april and

Worth up to £3,387 a year

June, according to the National Institute of Economic and Social research.

That is nearly twice as strong as the 0.4 per cent growth seen in the first quarter of the year, in a sign that the recovery has picked up pace once again.

The Chancellor looks set to hail Britain as the fastest growing major economy in the developed world as he outlines plans to balance the books.

But George Osborne will also warn that the crisis in Greece poses a threat to the rest of Europe including the UK.

NIESR said it now expects the Bank of England to raise interest rates early next year, having held them at an all-time low of 0.5 per cent since March 2009. But the think-tank added that the ‘ongoing euro area saga’ could knock the recovery off track and force the central bank to delay any rate hikes.

Mr Osborne has pledged ‘ to do whatever is necessary’ to protect Britain from the financial catastrophe unfolding in Greece.

But he is also under pressure to address weak productivity in Britain, as output per hour and per worker is lower here than in many other major economies .

There is also a worrying slowdown in manufacturing, which is 4.6 per cent below its pre-recession peak, new figures show.