Clegg sets out the Lib Dem approach
Peter Hoskin 7:30pm
Nick Clegg's giving a speech tonight in which he outlines the Lib Dem's approach for dealing with the downturn. You can read the full thing here, but it's centred around these passages on taxation and borrowing:
"How should Britain deliver economic stimulus? We hear talk of tax cuts emerging from Downing Street, but they are likely to be small, and short term. Funded through borrowing, the money will have to be paid back later. So it’s meagre tax cuts today, giant tax rises tomorrow from Brown.Meanwhile the Conservatives want a piffling incentive for businesses to take on new workers that won’t put a penny in the pocket of a single family in Britain...
...Liberal Democrats would reduce basic rate income tax by 4p in the pound. That would give nearly £1000 back to a worker on £30,000 a year. Funded by four changes.
One: ending upper rate pensions relief - so the wealthy don’t get extra pension help from the tax man.
Two: taxing capital gains at the same rates as income. So bankers and executives can’t get away with paying 18% tax while their cleaners pay 31%.
Three: green taxes to protect our environment.
And four: tackling the scandal of corporate tax avoidance - a subject I’ll be addressing in a speech tomorrow."
Now, there's plenty in the Lib Dem proposals that I'm dubious of - the heavy leaning on business, for instance. But there's a directness to their tax-cutting message that's quite admirable. Let's lower taxes for low and middle-income earners and let's do it without imposing a debt burden on their children, they say - and rightly so. What's more, they've been pushing this line for long enough that - rightly or wrongly - it doesn't smack of opportunistic posturing as the recession bites. What Clegg is saying tonight isn't substantially different from what Ming Campbell proposed in July last year. Now how's that for consistency, Mr Brown?
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Tanuki
November 11th, 2008 7:59pm Report this commentThe man's a fool - he just doesn't get it, does he.
His comment "Up to £40Bn/year is lost through tax avoidance" shows just how out of touch he is. Tax avoidance is 100% legal and, to my view, a moral imperative for any business or individual in the current climate.
Then there's his 'green' tax suggestion: well, in my world 'green' means naiive and easily-fooled. We've been soaked with new taxes described as 'green taxrs' - and our preparedness to take more such nonsense is at an end.
Travis Bickle
November 11th, 2008 9:08pm Report this commentClegg can afford to be bold because he'll never get the chance to implement any of this stuff.
TGF UKIP
November 11th, 2008 9:25pm Report this commentOh, what a good Speccie employee you are Pete and how plainly you value your job so conspicuously do you avoid contrasting the Clegg with the Cameron approach.
Obviously as long as Matthew d'Ancona remains editor? your job will be secure.
Terry
November 12th, 2008 9:41am Report this commentThese ideas are shot full of holes. Just two examples:
Giving only basic rate tax relief on pension contributions. This will only work if employees make the contribution. If employers fund all or part of the scheme the employee is not taxed on the company’s portion. If he is not proposing to apply the tax to company contributions, employees can enter salary sacrifice schemes, whereby salary is reduced and replaced by tax free contributions to pension schemes by the employer.
If Clegg is proposing to change that and tax company contributions, millions of employees will be affected. Also, in final salary schemes contributions can fluctuate wildly depending on the state of the fund and therefore the potential tax bills of employees would also fluctuate wildly. Indeed, the company funding could relate to employees who have left or already retired. Also, what are the contributions in non-funded schemes such as apply to public employees?
If the tax rate on capital gains is to be increased is he also going to re-introduce indexation. If not, please await the outcry. Part of the trade off for the lower rate was the ending of indexation which at least simplified matters. If he re- introduces indexation he may find the extra taxes raised a great deal smaller than he expects.
Blue Porcupine
November 12th, 2008 7:57pm Report this comment@Terry, "If employers fund all or part of the scheme the employee is not taxed on the company’s portion."
No, and nor do they get tax relief on it. It's the relief that Clegg is seeking to end and the immediate saving so far as I recall is worth about £4bn. It's no surprise if this saving declines over the years. Salary sacrifice would indeed be a good get-round if it was practical in other respects, but there'll always be a get-round. That's tax for you.
On CGT, I agree there would be an outcry. Tough. Relevant though the recession has made it, this was originally a plan devised to bring about (a) a fairer tax system and (b) one that taxes work less, and economically less valuable accretions of capital more. Increasing CGT (since it affects only a wealthy minority and shifts the burden from income to capital) is in line with both these goals.
Tanuki, I rather sympathise with your avoidance point - but all politicians say avoidance when really (one suspects) they mean evasion. Not just Clegg.
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