By Jonathan Davies
Taxpayers will find themselves worse off whatever the outcome of the general election, according to the Institute of Fiscal Studies (IFS).
In its analysis of the parties' plans for spending and tax cuts, IFS director Paul Johnson, said: “There’s nothing in any of the parties’ proposals that we think will help the good functioning of the economy”.
“With significant deficit reduction still to come, households can expect the tax and benefit changes implemented over the next parliament to reduce their incomes, on average."
The IFS warned that Labour's plans to introduce a 10p rate of tax, paid for by scrapping the Tories' married-couples tax allowance would replace “one small complication in the tax system with another”. The organisation even warned that the tax could be worth just 50p per week. And Labour's plans to re-introduce the 50p rate of tax on high earners would generate just £100 million.
Meanwhile, the Conservatives' pledge to raise the personal tax allowance - the amount you can earn before paying tax - regarded by the party as its own policy for low-paid families, would actually fail to benefit them at all. The IFS said 44% of taxpayers don't earn enough to see a benefit from it.
The IFS also warned that higher earners could be dragged into the 40p tax rate by 2020 as the threshold rises faster than inflation. As many as 6.5 million taxpayers could pay the 40p rate by that time. And even if the Conservatives raise the threshold to £50,000, five million would still fall in the category.
Clamping down on tax avoidance has been a policy accepted by most parties in the election campaign. And although the Conservatives claim they can raise £4.6bn from tax avoidance, Labour £6.7bn, and the Liberal Democrats £9.7bn, the IFS describe those claims "at best, aspirational".