David Laws predicts tax cuts for middle earners

Low and middle-earners should be in line for tax cuts by the time of the next general election, Chancellor George Osborne's former deputy said today.

David Laws, who was chief secretary to the Treasury for the first 16 days of the coalition Government, said there would be scope for tax reductions by 2015.

The Liberal Democrat MP was forced to resign over his expenses in late May but is widely expected to return to the Government. He was central to the post-election negotiations between his party and the Conservatives and won plaudits from colleagues for his work during his brief time at the Treasury.

In an article for the Daily Telegraph, Mr Laws said there would be a "strong case" for tax reductions after the structural deficit is cleared.

Low and middle-earners would face marginal tax rates — the total amount paid to the Exchequer on additional earnings — of close to 50 per cent, Mr Laws said.

He said this might be necessary while the Government was clearing the deficit over the next four years but would "hardly be acceptable" thereafter.

"Towards the end of this Parliament, as the deficit targets are met, securing social recovery will require more of the future proceeds of growth to be invested in education, health and welfare reform," he wrote.

"Just as in the private sector, these services cannot be delivered without adequate funding.

"But if we can continue the spending discipline in other areas of the public sector, we will also create the scope for tax reductions.

"Once the £10,000 personal allowance is delivered, there will be a strong case for looking at the burden on those in employment on low and middle incomes.

"After tax, National Insurance, graduate contributions and pension payments, some of these individuals will face marginal deduction rates of almost 50 per cent.

"That may be necessary in the tough times, but it will hardly be acceptable once the deficit is eliminated."