The Liberal Democrat tax bombshell

Lib Dems want to spend today telling us the poorest would be taken out of Income Tax under their plans. They are less keen to talk about how they propose paying for that. Their tax policies include:

Higher Capital Gains Tax, at rates up to 50%
A £5 billion tax on pensions savings
A tax on more valuable homes
An aviation tax – the Lib Dems holiday tax
and £5 billion of unspecified tax rises by closing so-called loopholes which they do not name

If you enjoy it Lib Dems will probably want to tax it. Their lethal cocktail is anti enterprise, anti success, anti investment and anti jobs. Far from helping the poorest, Lib Dem policies would make it more difficult for them to get a job to get out of low incomes, because their tax ideas would damage job creating savings and businesses.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

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16 Comments

  1. Aes
    Posted April 14, 2010 at 9:49 am | Permalink

    Play nice, there's no way you guys will get a majority…you might have to sit round the table with them.

  2. Ian Jones
    Posted April 14, 2010 at 10:02 am | Permalink

    They want to remove the higher rate tax relief on pensions, obviously it doesnt affect the public sector but would destroy the private sector pensions.

    The Lib Dems are trying to be everything to everyone, people seem dim enough to believe it.

  3. david
    Posted April 14, 2010 at 10:03 am | Permalink

    The Libdems are at least being honest, they have said they will have to put up taxes, a certainty who ever gets in. As for the aviation tax, sorry wasn't DIY Dave, (Don't ask us anything we are only the government) pushing that as one of his green taxes only a short time ago.

  4. Brian Tomkinson
    Posted April 14, 2010 at 10:14 am | Permalink

    I see that even you think that if people are allowed to keep more of their own money, by paying less tax, then it has to be paid for by more taxation. In other words, the greedy hand of the state must find some other way of fleecing us. No politician wants to talk seriously about how they are going to cut the enormous government spending. You all want to keep on borrowing and drive us further and further into debt. One day the chickens will come home to roost and the consequences will be very unpleasant indeed.

  5. David B
    Posted April 14, 2010 at 10:51 am | Permalink

    Sounds very like Marx's views!!

  6. Lindsay McDougall
    Posted April 14, 2010 at 11:24 am | Permalink

    There are two problems with Capital Gains Tax:
    (1) You should discount inflation, which is created by government, and government sponsored, institutions.
    (2) In the interest of fairness, there should be tax credits for capital losses. Governments are not so keen on these.

  7. Norman
    Posted April 14, 2010 at 12:40 pm | Permalink

    A bold ploy, reducing the tax take at the bottom (by raising threshold) and top (by raising the tax rate) of the ladder. I wouldn't like to see the range of cuts proposed to match this reduction of income, they really must be swingeing.

    Taxing pension savings so that you have to pay people more in retirement is a bold shuffling of the deckchairs. We already the NI nonsense of taxing today for tomorrow but we also like the idea of spending it today, let's not introduce another one in a similar vein.

    How on earth drivel such as this can pass as policy to get us out of the hole we're in is beyond me.

  8. gac
    Posted April 14, 2010 at 1:04 pm | Permalink

    Neither the Libdems nor the other main parties will take the easy short term measures which will not only cut the spending deficit more quickly but will enable us to start to pay off the Debt earlier.

    Two things come to mind which are simple and would be very unpopular (yes unpopular because we are in thrall to the 'greens')

    1. Stop most of the overseas aid until we no longer have to borrow to fund it = £7bn+ per year.

    2. Stop this madcap insane investment in Windfarms. They only deliver c 30% of the installed capacity, ranging from nil to 100%. They are expensive to build and maintain, especially the offshore version. More to the point we have to have an equivalent 'certain' generating capacity in place for when the wind either is too light or too blusty. Surprisingly whilst we have lots of wind off our shores it is usually of the wrong variety.

    I cannot believe sane or rational politicians think that this is the way ahead. = c £100bn+ capital cost, c £10bn+ maintenance cost pa and cheaper energy for the UK as no subsidies will be given.

    • Simon
      Posted April 14, 2010 at 2:38 pm | Permalink

      What is your opinion of tidal ? It's reliable and on the face of it looks cheaper than wind .

      The tide moves water around our islands so it should be possible to harnessed it at many points around our coast , not just in tidal estuaries like the Bristol Channel where it goes in and out .

      • gac
        Posted April 14, 2010 at 8:33 pm | Permalink

        I have read somewhere that for Tidal Power generation to be effective it needs a minimum range of 5 meters which is big for most parts of our coastal regions etc. except for Spring tides.

        It appears to be much less expensive however and I suppose it is not beyond the wit of the scientist to solve the wave height problem if they only had a fraction of what is being wasted on wind. Living and playing golf on the Kent coast it is only too apparent that wind power is making a lot of money for a few people at our expense, whilst making politicians sound environmentally with-it.

  9. Antisthenes
    Posted April 14, 2010 at 1:18 pm | Permalink

    I have never much bothered to look into the darker recesses of Lib-Dem policies as considering them an irrelevance. This manifesto has proved my lack of ambition to be correct.

    I suppose this will appeal to the economically illiterate voters much as the Labour policies do.

  10. Simon
    Posted April 14, 2010 at 2:25 pm | Permalink

    If I understand correctly , a 40% income tax payer would be able to put 75pence of every pound they earn before tax into a pension whereas today they can put the whole pound in .

    When they come to draw their pension , then everything above the 20% tax threshold will be subject to 20% tax so that the 75p drops back to the same 60p they would have had in their pocket if they had not made the pensions contribution !

    Can anyone see any incentive for a higher rate tax payer to attempt to generate a pension which would break into the 20% tax threshold ?

    When the restrictions and lack of flexibility of a private pension are compared with the relative freedom of an ISA , then even with full income tax relief at source , private pensions are NOT that attractive IMHO .

    All policeman and teachers would be in the 40% band if the cost of providing defined benefits pensions for them was taken into account . Are the Lib Dem's proposing reduce to reduce teachers and policemans pensions accordingly too ?

    • Simon
      Posted April 14, 2010 at 2:58 pm | Permalink

      Presumably it would get even worse if your pension reaches the 40% threshold because not only would you be taxed on the way in but you would also be taxed to the max on the way out .

      Every pound before tax which would be taxed on the way in down to 75 pence and then at 40% on the way out leaving you with only 45p , ie you would be 25% worse off for having put it into a pension !

      I must have my maths wrong or be misunderstanding the Lib Dem's proposal . Which is it ?

    • Henry
      Posted April 15, 2010 at 12:25 pm | Permalink

      Simon, you do realise that when you come to draw your pension, the state pension is un-taxed. It appears the DWP is incapable of taxing this income at source, like your employers pension. The state pension is then added to your employment pension as 'unearned income' (along with any savings interest, dividends, etc!) and therefore your employment pension has to pay the tax on the state pension. So for all the years of paying an extra tax to provide for your state pension (NI?), you have to pay tax again when you actually get it. It therefore shows that it would not take a great effort for your total income (even after tax) to exceed the 20% tax threshold. And God help anyone who thought they were doing the right thing by putting large sums into their pension pot. The 40% threshold would soon be breached!

  11. Steve Cox
    Posted April 14, 2010 at 4:12 pm | Permalink

    The Lame Dems can propose what they want, and continue to live in their fantasy world with Vince 'I Saw It Coming' Cable as their left-wing financial guru. I don't believe the British people are so stupid that they will fail to kick out the one-eyed Scottish idiot on May 6th, let alone allow the Lame Dem other-worlders to have a say in anything important.

  12. Michelle
    Posted April 19, 2010 at 10:04 pm | Permalink

    I have never much bothered to look into the darker recesses of Lib-Dem policies as considering them an irrelevance. This manifesto has proved my lack of ambition to be correct.

    I suppose this will appeal to the economically illiterate voters much as the Labour policies do.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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