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Cutting your tax

This April, one of two things will happen to you. If you earn less than £9,440, you will no longer pay any income tax. If you earn more than that, then you’ll be paying £600 less each year than you were in 2010. This is the biggest ever increase in your personal allowance (the amount you can earn before you start paying tax). It means we’re now within a whisker of achieving our manifesto pledge of allowing everyone to earn £10,000 a year tax free – a total tax cut of £700.

I know that you want to hear the inside track on what’s happening in government, not just read the latest press release. But this is one win I’m so proud of I have to shout about it. And I want you to shout about it as well.

We took this big step on income tax at this week’s Autumn Statement on the economy. It wasn’t the top line in the papers – of course not. The big, immediate news was that we are going to have to work even harder than we hoped when we started this coalition government to cut the deficit and get the economy back on track. The difficult truth coming out of the Autumn Statement is that we have to continue to make savings for another few years.

Some people say that’s a reason to give up on the coalition – in my view that’s absurd. It makes the coalition even more essential to provide the strong government Britain needs. Labour left us with a massive mess to clear up and – with the situation in Europe and ongoing problems with the banks – it is proving harder than anyone predicted. The coalition has to pull together strongly for another big push on cutting the deficit and kick starting growth.

So as we sat down at the negotiating table (in the Cabinet Room at Number 10) over the last few months, poring over spreadsheets and economic projections, I focused on one thing above all: if Britain has to be in this difficult situation for even longer, how do we make it bearable for everyone?

For me it’s a simple equation. First: get as much help to hard working families struggling to make ends meet as you can. Second: you cannot balance the books on the backs of the poor – you have to spread the burden across society more fairly. And third: make sure you look to the wealthiest people for an extra contribution so we can prove we really are “in this together”.

So in the negotiations Danny Alexander and I fought longest and hardest to get that tax break for working people. We worked to limit the impact of the next wave of cuts on low income families, ruling out the abolition of child benefit for families with two or more children, and saying we should keep housing benefit for under-25s who need a place to stay. The welfare savings are less than half of the £10 billion cuts first floated. They give people on benefits exactly the same rise as we are giving in pay to nurses, civil servants and everyone else in the public sector.

These were far from easy decisions – we are asking people to make great sacrifices to get our country back on track. We must always be fair in the language we use to describe people on benefits. Many of the people are in work and others are out of work through no fault of their own. When they are being asked to tighten their belts, they should not be demonised too.

Finally, we fought for our party policy of mansion tax. But the Conservatives have an irrational phobia against asking people who live in £2 million plus properties from chipping in a bit more when everyone else is making their contribution. So instead we agreed to ensure the richest pay their fair share by limiting pension tax relief for millionaires and increasing our efforts on tax avoidance.

The end result is this Autumn Statement has taken no more from benefit claimants than it has from the wealthy. I’m certain that wouldn’t have been the case if Danny and I hadn’t been in the room.

It adds up to a fair and balanced package to help us in government plot a course through the next two years. And, more importantly, it puts money back in the pockets of struggling families to help them plot a course through the next two years too.

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