Election 2015: Thousands more middle earners 'face paying higher tax under all main parties'

 
Rolling up his sleeves: David Cameron addresses workers at a radar company in Enfield today
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Experts today warned that up to 1.6 million people faced being dragged into higher rates of income tax over the next five years.

The Institute for Fiscal Studies warned more broadly that the main parties’ tax and benefit plans would see many families’ income fall.

The warning came as new data showed Britain’s economy slowed dramatically at the start of the year, growing at half the rate of the last quarter of 2014.

In its analysis of income tax rates, the IFS said up to 1.6 million people on salaries of £40,000 to £50,000 would be dragged into the higher 40p tax rate by 2020 under Labour or Liberal Democrat plans. Even under the Conservatives, hundreds of thousands more workers could be drawn into paying higher rates.

The respected think tank said that since 2010 the number of higher and additional rate taxpayers had risen from 3.2 million to 4.9 million, mostly because the higher-rate threshold was cut by the coalition.

The IFS said: “Fiscal drag means that failure to increase the threshold by more than inflation could see the number paying higher rates rise to nearly 6.5 million by 2020. Even if the threshold were to rise to £50,000, as the Conservatives promise, numbers of higher and additional rate taxpayers would probably grow by about another 300,000 to well over five million.”

The IFS attacked all three parties for failing to give enough detail about tax and benefit plans or for only admitting to trivial measures.

It said: “All these parties seem to have a desire to raise tax revenue in a vaguely defined, opaque and apparently painless ways. In many cases, the proposals would lead to unnecessary increases in complexity and inefficiency in the tax system.

“Where benefit cuts are proposed, they are largely unspecified (Conservatives), vague (Liberal Democrats) or trivially small, relative to the rhetoric being used (Labour).”

Worse-than-expected GDP data showing growth of just 0.3 per cent in the first quarter dealt a pre-election blow to coalition parties who have based their campaigns on economic management.

The sharp slowdown was mainly because the dominant services sector grew at its slowest pace in almost two years. The construction industry shrank for the second quarter in a row, the first time since 2012, and industrial production shrank slightly, squeezed by a decline in North Sea output amid lower oil and gas prices.

Visiting the marginal Enfield North constituency, David Cameron said today’s figures showed a boom could not be taken for granted: “All of this is at risk in nine days’ time.”

He arrived tieless at the headquarters of radar company Kelvin Hughes and after meeting executives, he pulled off his jacket to address the workforce.

Chancellor George Osborne wrote on Twitter that the growth, albeit slower, was still “good news”.

But he added: “This is a critical moment & reminder you can’t take recovery for granted.

Liberal Democrat Danny Alexander said: “Britain will continue to grow at a healthy rate if we stick to a sensible, balanced, timely plan to finish the job and do it fairly.”

But Labour’s shadow chancellor Ed Balls said: “While the Tories have spent months patting themselves on the back these figures show they have not fixed the economy for working families.”

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