Unions expose latest tax con from coalition

Deputy Prime Minister Nick Clegg has boasted that raising the personal allowance by £1,000 so that no-one pays tax on the first £9,440 of earnings puts "more money in the pockets of people who need it."

But the TUC said its research shows that "the biggest losers from the government's tax policies are the poorest households."

A TUC analysis of tax revealed that the VAT rise will cost families up to four times more than they will save from the increase in tax-free personal allowance that comes into effect from April.

Its research shows that a low-income family with an average weekly income of £195.92 - the lowest income band for working people - stands to gain £1.09 per-week from the rise in personal allowance by the end of this parliament in 2015.

But that same family will lose £4.26 every week or £164.84 every year because the government pushed up VAT from 17.5 per cent to 20 per cent shortly after they took office.

Britain's very poorest households can also expect to see their income plummet by more than 6 per cent while high earners, who are already taking home more than £530 a week or more can expect a further windfall of £350 every year.

TUC general secretary Frances O'Grady said: "If the Chancellor really wants to make a difference to family budgets he should look at reversing his VAT hike and cuts to vital tax credits and benefits."

Labour's shadow Treasury minister Catherine McKinnell MP added: "David Cameron and George Osborne give with one hand but take much more with the other."

Speaking ahead of tomorrow's Budget announcement, she said that the Chancellor should deliver a "substantial tax cut for people on low and middle incomes" by implementing a temporary VAT cut and bringing back a lower 10p starting rate of tax.