The UK Independence party is not known for its influence over the Treasury, but it's just put out a press release welcoming the news that the government may be adopting one of its tax policies. "Raising the personal allowance to take the working poor out of the income tax net has been Ukip policy for some years. It's near insane that we both tax and subsidise the same people, those on low incomes where the income tax and benefit systems meet," said John Whittaker, its north-west MEP.
The press release was inspired by a story in the Daily Mirror today saying that the government may raise the income tax threshold from £6,450 to £10,000. The paper quotes John McFall, the Labour chair of the Commons Treasury committee, as saying that the proposal is "in the prime minister's mind". McFall says that a tax cut on this scale would kick-start the economy because it would put money in the pockets of people likely to spend it. He's not a member of the government, of course, but his relations with Gordon Brown are very cordial and the economic policies he was advocating before the pre-budget report last year weren't far off those what was eventually announced by Alistair Darling.
But could Brown really raise allowances to £10,000? According to the Treasury, it costs £530m to raise the tax allowance by £100, which means the Mirror proposal would cost around £18.5bn. Darling did spend £12.5bn slashing VAT, but officials point out that was a one-off cut that will be reversed at the end of the year. If the Treasury were to raise allowances, it would be politically unacceptable to bring them down again – which means the Exchequer would lose £18.5bn a year. Even by Brown and Darling's current standards, that seems a bit lavish.
But the Treasury says it will not announce its tax plans until the budget. Which means, if Ukip wants to find out whether it really is running UK fiscal policy, it will just have to wait.
