Balls ‘may drag millions into 40p tax’

LABOUR and the Liberal Democrats last night hinted they could drag millions more people into paying 40p tax to fund their plans for higher public spending.

Shadow Chancellor Ed Balls and Lib Dem leader Nick Clegg both refused to rule out freezing the starting threshold for paying higher rate tax, which the Coalition has just raised to £42,385.

The Conservatives have pledged to increase it to £50,000 by 2020, following years in which it has been cut or held below inflation.

Both Labour and the Lib Dems have refused to match the pledge, saying it is unclear how it could be paid for. And Mr Balls yesterday refused to rule out a further freeze in the threshold in order to raise tax by stealth.

Asked if he was ‘leaving the door open’ to a future rise, he told ITV Westcountry: ‘What I would like to do is find ways in which I could have fewer people in the 40 per cent tax bracket. Of course I would.

‘But I have to be honest with people. The deficit is going to be £90billion. I have got to find a way to get the deficit down in a careful, and staged and balanced way.’ A spokesman for Mr Balls last night said Labour would honour Coalition plans for modest rises in the 40p threshold in each of the next two years. But he refused to make commitments for future years.

Chancellor George Osborne said Mr Balls had ‘ let the cat out of the bag’ on Labour’s tax plans, and accused it of planning a ‘ tax assault’ on the middle classes.

Mr Clegg also refused to rule out lowering or freezing the 40p-in-the-pound tax threshold three times yesterday. He said: ‘What we will always do is rule in giving people on low and middle incomes more tax cuts. That’s what we have done during this five-year government. On some budgets we have frozen the threshold, in others we have increased it.’