The increase in the national minimum wage should be welcomed and will hopefully be followed by a bigger increase next year. The decision to lift the poorest out of tax has benefited the average taxpayer to the tune of £700 a year and has taken 2.7 million people out of income tax. There should be an aspiration to build on this so that people on the minimum wage pay no income tax.

As well as boosting the minimum wage, it is also important for the Government to help middle income earners who have played such a big role in making sacrifices during the recession and in reducing the budget deficit. George Osborne should take a major step to unwind the undesirable drift towards an ever higher proportion of the working population paying higher rate tax. In doing so he could relieve the pressure on the squeezed middle, so many of whom have borne the burden of paying for Labour’s profligacy.

A number of Tory MPs have argued that the Chancellor should look to raise the higher rate threshold to £44,000. Our proposal at Renewal would go much further, taking many more people out of paying the 40p rate while simplifying the tax system. We believe he should scrap the 40p rate and start the 45p rate at a much higher level of income.

Potentially, this could take more than two million people out of higher rate tax, giving a significant tax cut to the squeezed middle. Our calculations, working off HMRC estimates, suggest that the break-even point for merging the 40p and 45p band is probably around £20,000 above the current limit – about £62,000. We assume that the National Insurance threshold would rise as well.

In other words, instead of paying a marginal rate of 42p on their earnings, anyone earning up to the new threshold would pay 32p (tax plus national insurance). For someone who is just below the new threshold, that would be a tax cut of about £2,000 per year. If they had children the tax cut could be significantly more, since we propose moving the child benefit threshold up to the higher limit.

We calculate that a person would have to earn more than £85,000 to be worse off with this proposal and those earning above that threshold would bear the burden of the change. Someone on £120,000 would be about £830 worse off and anyone earning £150,000 or more would be £2,400 worse off. As ever in taxation, someone has to pay and it is those who are very well off who will do so, meaning that the proposal is fiscally neutral.

When he was defending the 1909 “People’s Budget”, David Lloyd George said that “we are placing burdens on the broadest shoulders”. Under our proposals, the very richest would pay a little more, while the overwhelming majority of working people would benefit, some of them considerably.

A Budget that delivers a higher minimum wage, pulls more of the poorest out of tax and ensures that only genuine high earners are paying the higher rate of tax would be bold and radical, delivering a tax cut for 97 per cent of the population.

It would reward those who have carried so much of the burden of paying for Labour’s debts and would go down in history as a Workers’ Budget from a Workers’ Party.

David Skelton is director of Renewal, a campaign group aiming to broaden the appeal of the Conservative Party