In a speech to the Commons, chancellor Darling claimed that this increase will amount to an extra £120 in the wallets of lower and middle-income people.

Simultaneously, the chancellor also pledged to lower the threshold for the 40 per cent income band by £600, a move he argues is to ensure the wealthy do not benefit from the increased personal allowance.

However, according to Nigel May, tax principal at MacIntyre Hudson, despite this promise, Darling has actually ensured that 40p taxpayers will gain £120.

He says, ‘In addition to leaving 1.1 million of our lowest earners worse off and stealthily lowering the threshold for the 40p tax rate, it appears the chancellor simply hasn’t done the maths.

‘The effect of the increased personal allowance on higher-rate taxpayers is to save them 40 per cent of £600. They therefore stood to gain £240 from the larger personal allowance. To combat this, the Chancellor has lowered the threshold for the 40p rate by £600. Yet this costs the higher-rate taxpayer only £120, meaning they remain £120 better off overall. This is simply astonishing.’

In benefiting all those who earn up to around £41,350, this move also proves to be more expensive than is necessary, at a cost of £2.7 billion to the government.

May explains, ‘Darling has successfully placated his irksome backbenchers – and elicited an apology from sustained critic Frank Field – but at an extremely high cost. Rather than focus on the 5.3 million lower income taxpayers he has let down, Darling has decided to award a £120 bonus to 22 million people. This smacks of panic, and eagerness to please the crowd. Yet even as he broadens the net to include middle earners (at least for now), he still manages to fail 1.1 million people genuinely in need, in spite of this extra cash injection.

‘The chancellor may be hoping the increased allowance will stimulate the economy by pumping more money into it. Yet this is a potentially perilous gamble. The deficit looks set to widen in line with the downturn we are currently facing, as banks’ dwindling profits translate into lower corporation tax bills for the treasury’s purse. This will leave Darling with only one course of action: raise taxes to plug the gap.’