Osborne ‘plans tax giveaway for lower-paid workers’

Is George Osborne planning to give lower-paid workers a headline-grabbing pre-election tax break in his Budget on 18 March? That’s what Labour fear, according to reports in The Times and the Daily Mail.

Whether they know it for sure – or are guessing at the Chancellor’s tactics – “senior Labour figures” believe he will raise the threshold at which National Insurance is paid. This is equivalent to an income tax cut for most people, and would benefit the lowest-paid most – a direct dig at Labour’s mantra that poorer households are failing to feel the benefits of the economic recovery.

The Daily Mail says the main beneficiaries would be the 1.2 million low-paid workers who escape income tax but who still pay National Insurance contributions, which kick in at a lower threshold of £7,956 a year.

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It gets worse (from Labour’s perspective): Osborne could “double the political pain" for Ed Miliband if he funds his giveaway by reducing pension tax relief currently enjoyed by top earners.

Miliband was planning to do just that in his bid to reduce student’s tuition fees – against the wishes of Labour colleagues who think tuition fees are not a problem and that money raised by hitting pensioners could be better used elsewhere.

The Times’s Labour sources fear Osborne “is preparing to punish what they regard as a mistake” by the Labour leader.

So, why would “senior Labour figures” feed these “fears” to the press?

Two reasons: one, they want to spoil the Chancellor’s “rabbit-out-of-a-hat” moment on 18 March; two, they want to remind Ed Miliband that they said all along it was a mistake to push for a the tuition fees cut which would only benefit wealthy graduates.