Cameron non-committal on 40p rate

In comments ahead of next week's Budget, David Cameron gave little encouragement to Conservative backbenchers who hope George Osborne will announce changes to take thousands of middle-income earners out of the 40p higher rate of income tax.

David Cameron refuses to be drawn on whether George Osborne will announce changes to the higher rate of tax
David Cameron refuses to be drawn on whether George Osborne will announce changes to the higher rate of tax

As the Chancellor's March 19 statement approaches, there has been growing clamour for a significant rise in the level - currently around £42,000 - at which the 40p rate kicks in, with many Tories arguing that this should take priority over a further rise in the personal allowance from £10,000 to £10,500.

Asked whether he sympathises with the calls, the Prime Minister described himself as a "tax-cutting Conservative" who wants to reduce the burden on working people.

He declined to reveal Mr Osborne's plans for next Wednesday.

But he said nothing to suggest Mr Osborne will fulfil Tory backbenchers' demands, stressing instead the coalition Government's series of increases in the lower threshold for the 20p rate, which will rise again in April to take all earnings under £10,000 out of income tax altogether.

This measure is worth up to about £700 a year to all people earning under £100,000, he said.

The level at which the 40p rate takes effect has become increasingly contentious because of a series of below-inflation upgrades which have seen the number paying the higher rate swell to more than 5 million in a process known as "fiscal drag".

A number of Conservative MPs want Mr Osborne to reverse the process and make the higher rate once more the preserve of high-earners.

Asked how he responded to their calls, Mr Cameron said: "I am a tax-cutting Conservative. I want to see us relieve people's tax burden.

"We have chosen to do that through raising the personal allowance. That helps everyone earning under £100,000.

"In April this year, people will see something like £700 benefit from having £10,000 tax-free.

"We are a tax-reducing Government. The only way you can do that is by keeping control of public spending, which we are doing and other people won't.

"By raising the personal allowance, which we will have taken to £10,000 by April, that benefits everyone earning under £100,000.

"This is a tax cut which definitely helps low-paid people, because we've taken so many people out of tax, but it actually helps people all the way up the income scale."