In the run-up to May’s general election the Liberal Democrats have outlined their tax policy for a future government, which includes raising £8bn in tax rises and a further £6bn by cracking down on tax avoidance as part of a plan to reduce the structural deficit within three years
Lib Dem leader Nick Clegg said the party’s financial plans were intended to demonstrate ‘there will be light at the end of the tunnel: an end to austerity in three years’ time’. He outlined plans for £12bn of departmental spending cuts and £4bn of welfare cuts by 2017-2018.
The remaining £14bn of the deficit programme will be achieved by tax increases. Clegg said: ‘We have a balanced approach to tax and spend that asks the wealthiest in our society to contribute a little more. Our plans mean there is no need to increase income tax, VAT or national insurance rates.’
This commitment was echoed by the Lib Dem’s Treasury spokesman Danny Alexander who said the party’s ‘balanced approach’ meant there was ‘no need to raise the headline tax rates that affect the majority of people’. Alexander said the personal tax allowance would be raised to £11,000 in the first year of the new Parliament, and also ruled out increasing corporation tax rates.
Alexander said the Lib Dems would introduce a high value property levy and increasing non-dom charges. The party is also currently developing proposals on tax deductibility of interest payments, and is looking at increasing the banking levy.
It would also abolish the marriage couples tax allowance introduced by the coalition government. The uprating of benefits (excluding pensions and disability benefits) will be limited to 1% for two years, while higher rate taxpayers would lose their current winter fuel payments and TV licence exemptions.
Alexander said: ‘This approach is sustainable. It is balanced, and it is fair. It asks something from everyone, but the most from those who have the most. It broadly maintains the balance of tax and spend across the entire fiscal consolidation.
While Alexander said the party ‘will build on our record of clamping down hard on tax avoidance and evasion to raise a further £6bn’, he gave no further details about how this would be achieved in practice.
The Lib Dem leadership said its proposals mean that in the last year of the next parliament, the party would cut £38bn less than the Conservatives, and have borrowed £70bn less than Labour.
