The Queen’s speech: Tax break for low earners and the five-year “tax lock”

Legislation will be brought forward to ensure people working 30 hours a week on the national minimum wage do not pay income tax. Discussing the speech during the BBC’s coverage, employment minister Priti Patel said her party’s main concern was “supporting people” and “getting people back into work – that’s the bread and butter”.

Patel said the Conservatives recognised that these were “the issues that matter to the public, and that’s where our focus will be”.

Labour’s Emma Reynolds – who recently announced her backing of Liz Kendall’s leadership bid – said the key question still remaining was whether the government could make progress on economic recovery reaching “the kitchen table and the pockets of people on lower incomes”. She added that Britain needed an “economic recovery that delivers for all.”

Key announcements for British businesses from Queen's speech

As well as serving to help low earners, the measure also serves as an anti-fiscal drag law as The Guardian pointed out, which could benefit high earners too.

The Conservatives’ briefing on the subject said this law will be applied from the first budget following the general election. “The change…will mean that the personal allowance will automatically be uprated each year in line with the minimum wage, rather than just inflation, meaning the personal allowance will increase more quickly,” it outlined.

The Financial Times reported economists’ criticism of David Cameron’s commitment to preventing tax rises in income tax, VAT and national insurance, which also formed part of the Queen’s speech. Michael Saunders of Citi said the pledges undermined Britain’s “fiscal credibility” as “you want the ability to raise taxes if your most important objective is to eliminate the deficit”.

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By refusing to raise taxes, the Conservative government could risk limiting itself to a policy that could run counter to the interests of the UK.

Reynolds added that, “it’s not clear to me how Conservatives square this circle”. She pointed to them “locking themselves in” saying there won’t be tax rises, and also pledging to make £12bn welfare cuts without clarifying where this will come from.

Paul Raynes, policy director at EEF said that “deficit reduction remains vital and the job is only half done.” He added: “Businesses will question the wisdom of ring-fencing huge public sector spending budgets and then tying the chancellor’s hands on taxes too – especially if that means the only taxes left to raise in future are the ones that bear down on investment and wealth creation”.

“We face a severe productivity challenge,” Reynolds said, and it remains to be seen whether the Conservatives would be able to deliver on raising productivity.

Patel, though, said the British public had voted for the Conservatives and the manifesto was now “a mandate”, which they would seek to deliver – with the economy at the heart of it.

By Rebecca Smith

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