By Alex Stevenson

Pressure for tax cuts in next month's Budget is intensifying, as Liberal Democrats lay the groundwork for relief benefiting low-income workers.

All three parties are calling for tax cuts to ease the burden on Britain's struggling economy. Labour want a VAT cut and the Tories are seeking sweeping reductions.

Deputy prime minister Nick Clegg is using a party political broadcast to call on his coalition partners to accelerate moves to raise the threshold for income tax to £10,000.

That move follows a suggestion by Mr Clegg's close adviser David Laws, the former chief secretary to the Treasury, that higher rate pensions tax relief could be cut from 40% to 20% for the top five per cent of earners – those earning over around £60,000.

"What we've been doing as a nation is subsidising the most affluent people when actually you'd think we'd be subsidising people on lower incomes," Mr Laws told Newsnight yesterday.

"We can make changes that take away some of the subsidies that are going to the top one per cent or five per cent of the income distribution and get them to where they're really needed – those on low and middle incomes," he said.

Lib Dems are determined to gain credit for shifting the tax burden towards the more affluent in society, as they seek to improve their party's popularity ahead of this year's local elections in May.

George Osborne will deliver his third Budget on March 21st.