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British workers deserve income tax cut: deputy PM

Deputy Prime Minister of the United Kingdom Nick Clegg addresses the 68th United Nations General Assembly at U.N. headquarters in New York,
Deputy Prime Minister of the United Kingdom Nick Clegg addresses the 68th United Nations General Assembly at U.N. headquarters in New York,

LONDON (Reuters) - British Deputy Prime Minister Nick Clegg will say on Sunday that workers deserve an immediate income tax cut and call for the tax-free allowance to be raised further in a bid to spread the proceeds of growth after three years of austerity.

The government of centre-right Conservatives and centrist Liberal Democrats promised when it took power to honor a LibDem pledge to raise the threshold after which people pay income tax from 6,475 pounds in 2010 to 10,000 pounds by 2014-15. The allowance now stands at 9,440 pounds.

But in a letter to be sent to party members on Sunday, Clegg will urge the government to raise the level to 10,500 pounds by May 2015, when the next election is due.

"Think of it as a workers' bonus," Clegg will say, in a letter seen by Reuters on Saturday.

"The British people have lived with austerity for three years. Your sacrifices are making it possible for us to fix the economy. This is your recovery and you deserve to feel the benefits - without delay."

The increase would leave 24 million basic-rate taxpayers better off by 100 pounds a year as political parties focus on voters' concerns that they are not reaping the benefits of an incipient economic upturn.

Despite unemployment falling to 7.6 percent, according to figures released on Wednesday, and Bank of England forecasts that GDP will grow by 1.6 percent in 2013 and 2.8 percent in 2014, many in Britain continue to feel the squeeze.

Soaring energy bills, stagnating wages and rising prices look likely to make the cost of living the dominant theme of the 2015 parliamentary election campaign.

Both governing parties have begun to differentiate themselves with an eye on the election, and with the opposition Labour Party nine points ahead of the Conservatives in the latest poll for the Observer newspaper.

Osborne is due to signal possible future policy when he updates parliament on the public finances in three weeks.

The 'Autumn Statement' on December 4 includes fiscal forecasts produced by the independent Office of Budget Responsibility ahead of the annual budget, usually in March.

A Treasury spokesman declined to comment on Clegg's remarks.

The Conservative Party said in a statement it was open to changes and could consider options next year.

"We always want to help people with lower taxes where we can - and we can consider future tax changes like this at next year's Budget."

(Reporting By Costas Pitas; Editing by Kevin Liffey)

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