Reaction to Lib Dem tax plans

The Liberal Democrats announced their tax platform for the next election yesterday.

The headline grabbing number is £10,000. Under the proposals, that is the amount that anyone is going to be able to earn before they start paying income tax.

This will be paid for by green taxes, particularly on aviation, restricting tax relief on pensions for better off people, increases in capital gains tax, closing tax loopholes and perhaps most controversially a 1 per cent tax on all who own houses worth more than £2 million.

This is an adapted form of Vince Cable’s “mansion tax” (it was previously 0.5 per cent starting at £1 million) that was floated during the Lib Dem conference in September this year.

Lib Dem leader Nick Clegg said:

“Our plans represent the most radical, far reaching tax reform in a generation.

“They embody everything the Liberal Democrats stand for: fairness, protecting the environment, rewarding hard work.”

Stephen Tall, writing on Lib Dem Voice yesterday, pointed out that whilst Susan Kramer, fighting off a challenge from the Conservative Zac Goldsmith in Richmond Park where lots of wealthy people live was “less than enamoured” of the original mansion tax proposal; she tweeted yesterday that starting the threshold at £2 million was “fair”. So perhaps an acceptable middle ground has been found to pitch this policy.

Stephen also points out that the policy could turn out to be very popular with three quarters of the British public supporting Vince’s original proposal.

Conservative blogger Iain Dale, however, seems less than impressed with the proposals and thinks that they are “mired in Lib Dem politics rather than economic”. He also suggests that the Lib Dems will never be in a position to do anything about them:

“Of course the fact of the matter is that the LibDems won’t form the next government, so in some ways I don’t know why I have spent so long discussing their tax plans, as it would take a political earthquake for them to be in a position to implement them.”

This seems to rather wilfully ignore three recent polls which suggest that there could be a hung parliament after the next election.

If the polls continue in this vein and perhaps even narrow as we get closer to an election as they usually do then in reality Mr Dale and many others from across the political spectrum will have to pay close attention to the Lib Dem position on tax. It could be the first time in a long while that that is the case and this makes yesterday’s progressive tax announcements from the third largest party all the more important.