By . James Chapman . PUBLISHED: . 20:33 EST, 14 March 2014 . | . UPDATED: . 04:53 EST, 15 March 2014 . A former Tory Cabinet minister who advised George Osborne to introduce a dramatic increase in the threshold for the basic rate of tax has condemned him for ‘robbing Peter to pay Paul’ by dragging hundreds of thousands more families into the 40p rate. Critical: Lord Forsyth, who said hardworking people are being squeezed by the rate . Lord Forsyth, who headed a tax reform commission for the Chancellor before the election, said ‘ordinary, hardworking people’ who were far from well off were now paying the higher rate of tax. He insisted there should be no further increases in the £10,000 starting threshold for income tax if it meant more people being pulled into the 40p rate. The intervention of the former Scottish Secretary is particularly significant as it was his report in 2006 that recommended lifting the basic rate threshold to take 2.5million people out of tax altogether. Some 4.4million people now pay the 40p rate, up from just 3.02million when the Coalition came to power and only 1.35million in 1988. Mr Osborne is expected to increase the basic rate threshold to around £10,500 in next week’s Budget. Some senior Conservatives believe he will then call a halt to personal allowance increases to concentrate tax-cutting measures on National Insurance and the 40p threshold. But he is still expected to cut the £41,450 starting rate for 40p tax in real terms next week, increasing it by only 1 per cent – less than inflation. This will push more workers into the higher rate. Two former Conservative Chancellors – Lord Lawson and Lord Lamont – have suggested that too many ordinary middle class professionals are being made to pay 40p tax. Lord Lawson, who introduced the 40p rate in 1988, said yesterday that ‘far too many people’ were now in the band. About 4.4million people now pay the 40p rate, up from just 3.02million when the Coalition came to power and only 1.35million in 1988 (library image) And Lord Forsyth said a big hike in the threshold for the basic rate of tax was the 'first recommendation' of the Tax Reform Commission report he wrote for the Chancellor in 2006. But he added: ‘What I regret is that the Chancellor is funding it by robbing Peter to pay Paul, and making people who are earning more pay more. ‘He should acknowledge that he has been funding this by squeezing the middle classes.’ David Cameron has vowed to hand sweeping new tax-raising powers to Scotland if they vote ‘no’ in this year’s independence referendum. On a visit north of the border yesterday, the Prime Minister gave his first clear statement that he will back more devolution if the union is preserved on September 18. He did not reveal which specific powers would be given up by Westminster, but said the shake-up would allow Tories in Scotland to campaign for lower taxes. Currently, Scotland only raises about 15 per cent of its budget. However Mr Cameron told the Scottish Conservative conference in Edinburgh that the party was ‘committed to making devolution work better still’. He went on to say that: ‘A vote for no is not a vote for  “no change”.’ He added: ‘We have to reduce the burden of tax and not just shift it from one group to another. It doesn’t resolve the fundamental problem of the state taking too much, and has become the cuckoo in the nest which is destroying fledgling businesses and making people’s living standards fall.’ Lord Forsyth said a basic rate threshold of £10,000 was ‘absolutely’ high enough. ‘We have to recognise that we have exhausted the possibility for squeezing revenue out of the higher rate,’ he insisted. ‘It’s having a very damaging impact on ordinary hardworking people – the people that actually make Britain work. ‘If Osborne hasn’t got money to raise the basic rate threshold without dragging more people on relatively modest incomes into the upper rate of tax then he shouldn’t do it.’ Increasing pressure on the Chancellor, Ukip will fight the election on a policy of raising the 40 per cent income tax threshold to £45,000, although they have so far given no indication of how the move would be funded. But David Cameron told the Mail: ‘Anyone earning up to £100,000 has benefited, so it has been a tax cut for all those people and it’s important to bear that in mind.’
'Hardworking people' paying higher rate of tax - Lord Forsyth .
No further increase in the £10,000 starting threshold for tax, he added .
4.4million pay the 40p rate - up from 3million when Coalition came to power .
By . James Chapman . PUBLISHED: . 20:33 EST, 14 March 2014 . | . UPDATED: . 04:53 EST, 15 March 2014 . A former Tory Cabinet minister who advised George Osborne to introduce a dramatic increase in the threshold for the basic rate of tax has condemned him for ‘robbing Peter to pay Paul’ by dragging hundreds of thousands more families into the 40p rate. Critical: Lord Forsyth, who said hardworking people are being squeezed by the rate . Lord Forsyth, who headed a tax reform commission for the Chancellor before the election, said ‘ordinary, hardworking people’ who were far from well off were now paying the higher rate of tax. He insisted there should be no further increases in the £10,000 starting threshold for income tax if it meant more people being pulled into the 40p rate. The intervention of the former Scottish Secretary is particularly significant as it was his report in 2006 that recommended lifting the basic rate threshold to take 2.5million people out of tax altogether. Some 4.4million people now pay the 40p rate, up from just 3.02million when the Coalition came to power and only 1.35million in 1988. Mr Osborne is expected to increase the basic rate threshold to around £10,500 in next week’s Budget. Some senior Conservatives believe he will then call a halt to personal allowance increases to concentrate tax-cutting measures on National Insurance and the 40p threshold. But he is still expected to cut the £41,450 starting rate for 40p tax in real terms next week, increasing it by only 1 per cent – less than inflation. This will push more workers into the higher rate. Two former Conservative Chancellors – Lord Lawson and Lord Lamont – have suggested that too many ordinary middle class professionals are being made to pay 40p tax. Lord Lawson, who introduced the 40p rate in 1988, said yesterday that ‘far too many people’ were now in the band. About 4.4million people now pay the 40p rate, up from just 3.02million when the Coalition came to power and only 1.35million in 1988 (library image) And Lord Forsyth said a big hike in the threshold for the basic rate of tax was the 'first recommendation' of the Tax Reform Commission report he wrote for the Chancellor in 2006. But he added: ‘What I regret is that the Chancellor is funding it by robbing Peter to pay Paul, and making people who are earning more pay more. ‘He should acknowledge that he has been funding this by squeezing the middle classes.’ David Cameron has vowed to hand sweeping new tax-raising powers to Scotland if they vote ‘no’ in this year’s independence referendum. On a visit north of the border yesterday, the Prime Minister gave his first clear statement that he will back more devolution if the union is preserved on September 18. He did not reveal which specific powers would be given up by Westminster, but said the shake-up would allow Tories in Scotland to campaign for lower taxes. Currently, Scotland only raises about 15 per cent of its budget. However Mr Cameron told the Scottish Conservative conference in Edinburgh that the party was ‘committed to making devolution work better still’. He went on to say that: ‘A vote for no is not a vote for  “no change”.’ He added: ‘We have to reduce the burden of tax and not just shift it from one group to another. It doesn’t resolve the fundamental problem of the state taking too much, and has become the cuckoo in the nest which is destroying fledgling businesses and making people’s living standards fall.’ Lord Forsyth said a basic rate threshold of £10,000 was ‘absolutely’ high enough. ‘We have to recognise that we have exhausted the possibility for squeezing revenue out of the higher rate,’ he insisted. ‘It’s having a very damaging impact on ordinary hardworking people – the people that actually make Britain work. ‘If Osborne hasn’t got money to raise the basic rate threshold without dragging more people on relatively modest incomes into the upper rate of tax then he shouldn’t do it.’ Increasing pressure on the Chancellor, Ukip will fight the election on a policy of raising the 40 per cent income tax threshold to £45,000, although they have so far given no indication of how the move would be funded. But David Cameron told the Mail: ‘Anyone earning up to £100,000 has benefited, so it has been a tax cut for all those people and it’s important to bear that in mind.’
in the threshold for the basic rate of tax has the 40p rate. Critical: Lord Forsyth, who said further increases in the £10,000 starting people now pay the 40p rate, up from just 3.02million when the Coalition came to power and