Vince Proposes £15,570 Personal Allowance Plan with £30bn Banking Twist

Millions of workers could see their tax bills slashed by £3,000 if plans to raise the personal allowance are implemented. The proposal, reportedly being examined by Andy Burnham and Chancellor John Healey, would increase the allowance from its current £12,570 level to £15,570.

Dale Vince, a Labour donor, has suggested funding the increase by changing how interest is paid on commercial bank reserves held at the Bank of England. The payments amount to around £30 billion per year, and Vince claims that ending them would more than cover the estimated cost of restoring the personal allowance.

Vince stated that 'we pay interest to the banks every year totalling about £30 billion... take that back, pay for the income tax allowance, and have £10 billion in change.' He also proposed bringing capital gains tax rates into line with income tax rates in a submission to the Treasury ahead of the Budget.

However, not everyone is convinced that the proposal would be effective. Former Conservative Treasury minister Sir David Gauke questioned whether reducing or ending interest payments on some bank reserves could raise the claimed sums without wider economic consequences.