LIBERAL Democrat Treasury Secretary Danny Alexander threatened a vicious new wave of public spending cuts yesterday with a £12.2 billion election vow to slash taxes.

He said the party’s pledge to raise tax-free allowances to £12,500 — a policy also being discussed by the Tories — would “be fair and help to make being in work pay.”

The step would benefit those on “low and middle incomes,” Mr Alexander suggested.

But research by the Institute for Fiscal Studies punctured his claim that a higher tax-free allowance would help the worst off.

The policy would see 69p for every pound of tax breaks — £8.4bn — lining the pockets of the wealthiest 50 per cent of working families.

Just 15p for every pound — £1.8bn — would find its way to the lowest-earning half.

Its detailed study also found that the price tag of the headline-grabbing gimmick would run into billions — which would likely be paid for via public spending cuts.

Tax expert Richard Murphy said the Lib Dem claim to be aiding people on low incomes was “pure politics” masking a “poorly targeted and very expensive mechanism.”

Slashing the “oppressive” 20 per cent VAT rate to 17.5 per cent would cost the same and do much more for the lowest-paid who “spend all of their income and very often more than their income,” he said.

And Left Economic Advisory Panel spokesman Andrew Fisher said the Lib Dem announcement reflected the party’s “utter desperation.”

Millions of people on £12,500 or less on part-time, minimum wage or zero-hours contracts wouldn’t see “any benefit at all.”

But people like “poor” Tory ex-minister Mark Simmonds, who resigned from his £89,435-a-year post this week complaining that his £27,875 expenses allowance was intolerably low, would get a tax cut, said Mr Fisher.

With corporation and other taxes slashed, he predicted that the multibillion-pound price tag would be plundered from the social security bill and services — hitting the low-paid and unemployed hardest.

“To really help you would increase tax credits, build council housing and provide childcare.”