LibDems plan to make the pips squeak

Yesterday was a very bad day for the airlines industry and the LibDems have chosen today to confirm the introduction of a 'take-off' tax that could add £35 to the cost of every airline ticket.  Gaz-guzzling cars will see a near 1000% increase in vehicle excise duty.  The LibDems' Vincent Cable hopes to raise another £4.5bn from removing allowances on capital gains tax - changes that will devastate the incentive to innovative.  Wealthier Britons will also be hit by changes to pensions allowances, stamp duty and inheritance tax.

In return for all of this the LibDems promise a 2p cut in the standard rate of income tax.

Vince Cable's plan to abolish the manifesto commitment to introduce a 50% top rate of tax may not win approval from next month's LibDem conference.  Evan Harris is campaigning for a LibDem commitment to tax all income over £150,000 at a 50% rate.  Even if Cable overcomes Harris' resistance the tax burden on higher earners will treble under the LibDem plans.

Shadow Chancellor George Osborne has attacked the LibDem plans and questioned whether the devastating changes to CGT could begin to raise the revenues that are included in the LibDem figures.

Related link: Ming wants a 21st century dominated by the left

11.15am update: Mark Hoban MP, Shadow Financial Secretary, issued this statement yesterday: “The Liberal Democrat tax plan looks typically ill thought out and would mean soaring tax bills on hard-working families across Britain. Allowing town halls to impose a local income tax would mean even more money grabbed from your pay packet. Their plans to abolish tax relief on pensions would make Britain’s pensions crisis even worse and discourage people from saving. They are the kind of wild assumptions that only a party that knows it is never going to have to introduce a real budget will produce."

Comments

[Chad]

So an enviromentally aware person (not taking too many flights, not running a gas guzzler) will be better off, but the gas guzzler will be worse off and you oppose the plans?

Are you sure your new logo should not be a tree that has withered and lost all its leaves due to environmental pollution?

[Editor]

The CGT changes concern me most, Chad.

[HF]

Well since Tim Yeo's all party group came out a couple of days ago with similar transport tax demands, where does that leave us?

Presumably Yeo is a loose cannon unless these transport taxes are also envisaged by Letwin's policy reviews?

We shall see.

[malcolm]

Not sure that George is in a position to attack anything given his refusal to say anything substantive.
Cables' plans may well be more popular than we thought and even though it is all irrelevant as Cable won't be the next chancellor dimissing all their ideas as a joke (Francis Maude 2001) might be premature.

[Steve]

The irony here is that the least environmentally friendly cars aren't Chelsea tractors but older cars quite often driven by those on lower incomes.

Classic Lib Dem fatuous tax changes with little appreciation of the real world.

And I agree Editor, the proposed CGT changes are ludicrous. God these people are so economically illiterate it's frightening.

[Inamicus]

That would be the economically illiterate Vince Cable, former chief economist for Shell, would it? Or perhaps you were thinking of the economically illiterate Chris Huhne, prominent former economic journalist and City economist? Or was it David Laws, former MD of Barclays de Zoete Wedd?

Remind me again what Boy George has done?

[Chad]

"The irony here is that the least environmentally friendly cars aren't Chelsea tractors but older cars quite often driven by those on lower incomes."

I thought the LibDem tax plans were only aimed at new car purchases in order to influence people's future purchase decisions, and thus slowly improve the environmental efficiency of cars.

I'd personally prefer scrapping road tax and putting in the petrol cost, as fuel efficiency is only one part of the calculation, with obviously, miles travelled the second part, but at least the LibDems are making an effort to suggest real plans rather than drift on vague clouds of fluffiness.

[Mark Fulford]

The irony here is that the least environmentally friendly cars aren't Chelsea tractors but older cars quite often driven by those on lower incomes.

Provided you ignore the environmental footprint of production and destruction, the road space consumed, the choices available and that lower incomes generally drive less miles.

[Michael McGowan]

Mark, poor people in rural communities (of whom there are a lot) often drive older cars. They have few if any transport choices and are therefore compelled to drive a lot of miles. I do agree with you though about the footprint of production and destruction: one reason why I have kept my ageing Rover going even though its resale value is now the princely sum of £400!

[legal eagle]

Does anyone know whether the changes they want to make to the CGT exemptions include getting rid of the exemption on your primary residence?

[Michael McGowan]

Their CGT proposals are absurd. The CGT yield is very low and always has been. To raise these sums, they would have to remove main residence CGT relief for starters. In any case, people will simply sit on assets rather than dispose of them in order to avoid the tax.....unless the Lib Dems are proposing a draconian tax on unrealised gains, which would make council tax look positively equitable. Nothing would surprise me: they are every bit as committed as Labour to the policies of tax, spend, waste and fail because their grassroots yearn for the 1970's. It is also pretty clear that your pension is not safe in their hands. I trust Gordon Brown with the contents of my wallet more than I trust Vince Cable: at least Brown is the devil I know and he understands, in part, the link between high taxation and loss of incentives. Has it ever crossed Cable's mind that the reason ordinary people hand over so much of their income in taxes is because we have such high levels of public spending? You simply cannot raise the sums in question without taking a lot of money from a lot of people.

[Chad]

Michael,
I 100% support the reduction in both the number of types of taxations, and the level of taxation itself, but the Tories are in no position to criticise Labour or the LibDems now they have joined the same club and dropped their low-tax approach for the new "economic stability before tax cuts"

[matthew]

hmm, £2500 tax on a renault espace... What are people with four kids supposed to do? Drive two cars instead? Put the kids in a trailer?

All fairy tale stuff though, as Lib Dem policies are never going to be implemented.

[George Hinton]

The Lib-Dems are a worthless lot of dilletantes.
Their tax proposals are a variation of the age old socialist tax and spend policies, that have been throughly discredited.
As usual it is find a politically accepatable proposal and it always ends at let's tax the rich. Well they don't normally pay tax. Ask Geoffrey Robinson, when he was Paymaster Gemneral and funding Mandelson's property aspirations about his Jersey stash.
No mention by Vince, my MP, about ending the anomaly of the low paid paying a disproportionate amount of earnings in Tax and NI. No, that would be too easy and might result in Tax Revenue's temporarily dipping. Rather that they find a new way of picking the pockets of ther long suffering tax-payer to fund what, yet more governmental waste and incompetence and more macro management.
We may as well have a dictatorship for all our complaints do, or perhaps the people should rise up and ditch the government. That's novel.

[Ted]

I seem to remember that Michael Howards proposals were investigated by the Institute for Fiscal Studies. Wouldn't mind seeing what they make of Mr Cables's.

The primary purpose of taxation is to raise revenues to enable the Government to provide those services expected of it by its electors. It sould do this in a way that is fair, supports enterprise & economic activity and perhaps (as for Tobacco, Fuel Taxes) are designed to manage consumer demand. As a Conservative I have major reservations for tax being used as a form of rationing or social control.

I find these proposals very pie in the sky. Soaking the rich has been shown to drive down economic growth, reduce overall tax take and have serious unintended consequences. The proposals on taxation of motor vehicles should deliver many South & South West seats to the Conservatives unless we make mistake of taking Tim Yeo seriously.

[HF]

For a typical car half its carbon impact is making it.

So to encourage people to change their present cars (like Ming) for a new one would actually boost carbon consumption.

[Chad]

"So to encourage people to change their present cars (like Ming)"

Oh come on, he's not encouraging people to buy a new car, just seeking to make those who are, take the environmental considerations into account.

[Steve]

Re Inamicus comments:

Yes that would be the economically illterate Vince Cable, Chris Hulne and David Laws.

Merely because these people once worked in a series of ivory towers doesn't mean their grasp of economics as it affects day-to-day life is particularly adept.

365 economists wrote to The Times criticising Mrs T's early policies. They were all proved wrong.

Still, you're comments about Osborne are right enough (as are Chad's). He's saying little of any use or substance.

Drop him Dave.

PS) Chad, some of us Tories are desperate to push the low tax economic arguments. At least we can criticise Lab and Lib Dems with some conscience!

[HF]

For a typical car half its carbon impact is making it.

So to encourage people to change their present cars (like Ming) for a new one would actually boost carbon consumption.

[Chad]

"Chad, some of us Tories are desperate to push the low tax economic arguments. At least we can criticise Lab and Lib Dems with some conscience!"

Hi Steve, I know and more power to you!

Low-taxers should be friends and work together no matter what party we belong to.

It must be very frustrating for you at the moment to see the Tories drop their historic low-tax approach just when it seems more people are finally waking up to the fact that our high taxes are the very causes of our instability.

[Steve]

Too right. That and the badly managed social engineering that is the A list...!

[Mark Fulford]

but the Tories are in no position to criticise Labour or the LibDems now they have joined the same club and dropped their low-tax approach for the new "economic stability before tax cuts"

Chad, would you rather put tax cuts ahead of stability?

We can achieve tax cuts through borrowing, reduced spending or economic growth. Tax cutting through borrowing is risky at best, and there’s a strong argument in America that it has harmed the economy. Reduced spending should be the Conservative answer but, with so many people now deriving their income from the tax payer, it has to be a softly-softly process.

[Chad]

"Chad, some of us Tories are desperate to push the low tax economic arguments. At least we can criticise Lab and Lib Dems with some conscience!"

We need tax cuts to bring stability.

Don't fall for the Labour deception. Our international economic competitiveness is not stable, it is sliding.

If you genuinely believe that things are stable now, then you are accepting that Labour's high tax and spend approach has actually worked.

[Chad]

Oops, italics s/b
"Chad, would you rather put tax cuts ahead of stability?"

[Mark Fulford]

If you genuinely believe that things are stable now, then you are accepting that Labour's high tax and spend approach has actually worked.

I would also be a happy Labour voter.

I absolutely agree that Britain is in a worsening position. I agree that we need to take at least 4 points off tax take as a proportion of GDP. I disagree that borrowing is the right way to achieve tax cuts.

We also have to remember that the BBC is warm towards Labour economics and hostile toward Tory. Combine that with our damaged reputation and we are not in a position to offer radical changes.

[Chad]

But that's where I think Cameron's approach is going wrong.

A leader should seek to win people around to what they know is right, not seek to float on popular opinion even when they know it to be wrong.

Saying nice things might lead to a favourable response when questioned on the street about niceness, but a government needs backbone to argue its case.

[Mark Fulford]

Chad, when I read you using words like "backbone", I know you've been around UKIP too long ;-)

I'd say that Cameron is doing exactly what you suggest - leading people to what he knows is right. He knows that tax changes have to be gradual.

[UKIP Fiend]

Chad has a lot to say - shame his UKIP chums are totally devoid of any policies whatsoever on this issue and just make them up as they go along! Are they pro nuclear power or against? Or they pro wind farms or against? Are they pre recycling or against?

And why does UKIP Chad want to spend so much time here? Of course his new UKIP chums at UKIPforum have banned him from their forum! With friends like these Chad who needs enemies!

[Michael McGowan]

The real problem, Mark, with Cameron's approach is that it implictly endorses Brown's carefully-nurtured theme that Labour is the party of economic competence -the single most decisive issue in a General Election. The longer that theme goes unchallenged, the more it becomes received wisdom (cf the NHS as the envy of the world "invented" by Labour and opposed by the heartless Tories - all utter bilge of course but widely perceived to be true).

I don't necessarily agree that some borrowing to fund tax reductions is irresponsible. It depends on how you do it. Bush's programme of tax cuts does seem to have fuelled economic growth, not jeopardised it, and the Federal Budget deficit is now forecast to drop steeply after an initial lag. The main problem with Bush is that he has let rip on Federal spending.

[Chris]

Mark Fulford,
You are 100% correct about us being in no position to push radical policies due to the BBC and the media's hostility towards tax cuts.

We ought instead to be engaging the public in a discussion about economics, so that eventually instead of us having to tell the electorate that tax cuts will help the economy, that we have the electorate demanding tax cuts or else.

I don't think there is a single Tory MP who likes Labour's ridiculous tax and spend regime, especially as the extra money is not improving the services. However I'd rather we had 320 softly softly Tory MPs in parliament than 120 radical Tory MPs.

Oh, and everyone don't forget that come party conference not a single one of Vince Cable's policies is likely to be accepted by the sandal wearing delegates, and 50% income tax will be re-instated.

[Yet Another Anon]

The CGT changes concern me most
Except for in coalition with Labour they have no hope whatsoever of implimenting them, the Alliance and Liberal Democrats hit a ceiling at 25% of the vote in 1983, they just can't breakthrough beyond that, their 22.3% at the last General Election was achieved on a low turnout and was only their first actual gain in total votes since 1983, just as a dying creature can spasmodically move so the Liberal Democrats are doing, they are doomed.

[Kevin Davis]

Unfortunately what the lod giveth the lord taketh away. The 2p reduction on low earners will quickly be "guzzled" up by the £650 pa increase in road fund tax on Mondeo owners.

Clearly they have taken the decision to abandon their Conservative held seats and concentrate on labour ones.

[Chad]

"And why does UKIP Chad want to spend so much time here?"

[rolls eyes] I've been a member here long before joining UKIP. I use my real name and link to my site.

Don't you love the 'bravery' of anonymous posters who comment using a mask to hide their agenda.....

[Chad]

"Are they pro nuclear power or against? "

Pro. Just like Cameron, only they are honest enough to admit and not use deceptive language like "last resort" etc.

[Danny Burns]

Why is there no mention of their Local Income Tax plans? from 3.75p to anything up to 7p in the ound their local income tax plans would hammer middle income families. As Kennedy tried to explain through his hangover last year in the General Election - any joint income of over 40,000 would pay more

[Nod Chable]

Only by voting UKIP and leaving the EU will beritain solve all these problems.

[Renny]

I like the idea of taxing the Chelsea tractor right off the road. There is a strong case to use taxation to achieve goals that improve communities (like the Chelsea tractor idea)rather than penalising risk takers and entrepreneurs (like the CGT stuff). imo

[Chris Palmer]

The thing is though, the Lib Dims can say whatever they want, since they'll never be in a position to implement these tax policies.

Further, although Limp Dim high command may have concocted these plans, will the conference (apparently the only way the Limps can create policy) accept them? Can you imagine the overly numerous wierdy-beardies actually accepting a potential tax cut for anyone?!

[Chris Palmer]

"That would be the economically illiterate Vince Cable, former chief economist for Shell, would it? Or perhaps you were thinking of the economically illiterate Chris Huhne, prominent former economic journalist and City economist? Or was it David Laws, former MD of Barclays de Zoete Wedd?" - Inamicus

Running a companies finances is vastly different to running the country's taxes, budgets and finances - or had that not occured to you up there in cloud-cookoo land?

[Daniel Vince-Archer]

"LibDems have chosen today to confirm the introduction of a 'take-off' tax that could add £35 to the cost of every airline ticket." - Editor

Whilst I set very little store by such hyperbolical figures, I'm quite a supporter of economic disincentivisation of harmful practice and applaud Chris Huhne for having the balls to propose the tough measures required to begin combatting air pollution.

There are far too many unnecessary flights taken as it is (Bristol to Plymouth anyone?) so if this helps to cut the number of those, then I'm all for it.

"hmm, £2500 tax on a renault espace... What are people with four kids supposed to do? Drive two cars instead? Put the kids in a trailer?" - Matthew

They could consider exercising a bit more control or, alternatively, consider the burden that having so many children places on the state and pay their dues accordingly.

[AB]

In 2005 there were 2,439,717 vehicle registrations, of these only 8 per cent (195,177) would have fallen in to the new VED band G covering CO2 emmissions of 225g/km and above. 4x4s that would not fall into this band include the Landrover Freelander 4x4 2.0 Td4 Adventurer Estate (205g/km), the Honda CR-V 4x4 2.2i-CTDi SE (177g/km), the Nissan X-Trail 4x4 dCi SE (190 g/km) and the Subaru Forresster (220 g/km). The UK's three best selling 4x4s are no longer or wider than a family saloon, and on emmissions their performance has improved by 15% in the last 7 years. If people when buying a new 4x4 (if they need one) switch to lower emission ones like those above, there will be market pressure on manufacturers (we do believe in market pressures don't we) to produce greener 4x4s.

[Richard]

"They could consider exercising a bit more control or, alternatively, consider the burden that having so many children places on the state and pay their dues accordingly"

I would have thought having more children ought to be encouraged bearing in mind our ageing population?

[Daniel Vince-Archer]

"I would have thought having more children ought to be encouraged bearing in mind our ageing population?"

I've never really bought the 'we need to breed more to deal with the growing OAP population' argument - to me, that just seems to be a vicious cycle which will extend the problem into perpetuity, with an ever-increasing number of dependents at both ends of the age spectrum.

[Deputy Editor]

Full details of their tax proposals ("the most progressive launched by any party in recent history, according to Cable in the LibDem e-Supporters email") are here:

http://www.libdems.org.uk/tax-commission.html

[Michael McGowan]

For "progressive" read "confiscatory".....

[Denis Cooper]

"We will reform Vehicle Excise Duty (VED) on new cars purchased in future so that it is much more sharply graduated according to CO2 emissions, with the most highly emitting vehicles paying £2000 per year."

Our car is sitting in the drive at the moment, emitting no CO2. Irrespective of engine capacity, that's true of all cars - they only emit CO2 through being used, not through being owned or being licenced for use. And when they are being used, the duty paid goes up in direct proportion to the amount of fuel burnt, and therefore in direct proportion to the CO2 emitted. So if the primary objective is to make drivers pay more for the (allegedly) harmful CO2 their vehicles emit, please can anybody explain the rationale behind complicated schemes for differential VED, or hugely expensive schemes for road pricing, rather than simply increasing the tax on fuel? I wasn't surprised to see Tim Yeo going along with this idiocy.

[Matt Wright]

I am worried about the impact of middle class environmental anxieties on lower income families. The net effect of all these laws, taxes and bureaucracy (eg on cars)is to drive lower earners onto the fringes of criminality,

Cllr Matt Wright

[matthew]

I fail to see how my friend with her 2 kids + now twins = four, is a burden on the state, given that all four children will be privately educated and likely to follow in her footsteps as a lawyer. Obviously best if no-one breeds at all...

[Sean]

The Lib Dems have effectively decided to shift the tax burden onto upper middle class families. While I agree with the notion that we need to have more environmentally-focused tax initiatives, what this should do is provide the funding in order for the Government to provide incentives for people to switch to more fuel-efficient cars.

Though the Lib Dems do have some former economists in their team, I think they have failed to properly assess the dilemma that the British economy faces over the next ten or more years. The underlying problems are: reduced competitiveness, reduced reinvestment from business into their capital stock and innovation, the looming pensions crisis and the ever-larger demands from the public sector.

A sane tax plan can help the underlying private sector competitiveness and return the private pensions plans to their former glory. Instead the Lib Dems have opted for a different path. I do not think that this is as "radical" as it could, or should have been for the third party in British politics.

[Richard]

"The Lib Dems have effectively decided to shift the tax burden onto upper middle class families."

They can kiss a load of southern seats goodbye then, along with the chance of winning any more!

[Mark]

I've never really bought the 'we need to breed more to deal with the growing OAP population' argument

Daniel - I fully agree. Care for the elderly has effectively become a pyramid scheme and, as with all pyramid schemes, it's going to end in tears.

The only workable approach is Matthew's friend's: you support yourself.

[Daniel Vince-Archer]

"I fail to see how my friend with her 2 kids + now twins = four, is a burden on the state, given that all four children will be privately educated and likely to follow in her footsteps as a lawyer. Obviously best if no-one breeds at all..."

In which case, I imagine she can afford to pay the extra tax on people-carriers that you were wringing your hands about.

[Account Deleted]

So, the Lib Dems propose simplifying CGT, taxing negative externalities in the form of pollution and reducing tax on people's hard work...

And yet we seem rather against these proposals...

Obviously not because those who would lose are the rich (in general...) No, of course not.

Personally I generally like these proposals. And Steve Norris seems to as well.