Lib Dem leader Nick Clegg has again pushed the party’s proposals of tax cuts for the poorest to stimulate the economy, while attacking the Tories’ promises of tax cuts for savers. Speaking on BBC News, Nick commented:
This is a fake giveaway. It only amounts at today interest rates to an extra 40p a year for someone saving £100. What people need is much more money back in their pockets now. That’s why we have a plan to deliver big, permanent, fair tax cuts.” (Source: PoliticsHome.com)
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14 Comments
Will these big, permanent, fair tax cuts be funded by more borrowing or by big, permanent and fair cuts in government spending to reduce the size of government?
Neither – the cut in the basic rate from 20p to 16p would be paid for by a mixture of new taxes. Some are on the highest earners (CGT changes, abolition of higher rate pension relief) others would hit all the way down the scale (Green taxes).
Certainly permanent, the fairness and bigness are open to question.
That was me (boxes not autocompleting for some reason 🙂
I think 4p off the basic rate of income tax is quite big . . .
Clegg says “If David Cameron is going to be taken seriously he has to identify what cuts he will make”, but then equally Cameron could say “If Nick Clegg is going to be taken seriously he has to identify what extra taxes he will raise”.
If it is written anywhere, I haven’t been able to find it apart from some very vague hand-waving stuff. Potentially this is exciting, and though I’ve been very anti-Clegg ever since he was put to us as the inevitable next leader, if I really could see some details which convince me he has proper plans to find the money from somewhere else – it has to be taxing the rich more to give the poor more money if he is being at all honest – I would change my mind. As the Fabian Society are saying, at the moment there’s a real public appetite for this sort of thing, whereas until a few months ago the political right would probably have been able to spin the whole thing off as some terrible tax on enterprise or on “middle England” (“middle England” being right-wing speak for “the wealthiest 10%”).
But I still wonder, once the pips start squeaking, and they are going to have to if it’s to pay for “big” tax cuts, will it be quite so easy? As we’ve discovered in the past, green taxes sound fine in theory until people meet them in practice. The sort of people who get hit by closing loopholes are just the sort of people most likely to make a fuss about it. Any closure of loopholes on taxes on businesses is bound to be put by them as a terrible thing which will cause large numbers of companies to go under, and hence jobs to be lost.
Except it won’t be 4p by the time you take the balancing green taxes (and the introduction of LIT balanced by the abolition of Council Tax) into account
Well, I suppose the argument on green taxes is that they’re there to discourage certain types of behaviour. You’re right on the LIT/Council Tax point – effectively the 4p and LIT would cancel each other out, and so you’d be better off to the tune of your council tax . . . funny, you don’t really hear our front bench talking about LIT any more.
Its well worth reading the full statement from Nick which is up on his website rather than the selective quote used here and on politicshome. All in all it sets up some facinating positioning.
1. When refering to Cameron ( and Brown )as “Con Men” he cites the need to fund the tax cuts from lower expenditure. fair enough. However he then goes on to use the line about the Conservatives having to explain how many Police officers they will cut or who will get a smaller pension to pay for it.
Is there a political journalist in Britain who won’t instantly say “Hang on, this is the guy who spent all summer saying we could cut £20bn from public expenditure without cutting services ? ”
The awkward fact (IMHO ) is that arguing as we have that you can cut tax by tackling waste without cutting front line services was brave, correct and needed saying. However by doing so we were always going to give the Conservatives a get out of Jail free card when they eventually decided to go for tax cuts as well.
If “Tory Tax Cuts equals Sacked Police/Nurses/Kitten Handlers” is our line of attack then we had better be ready for a whole volley of quotes from our own leader fired back and then have a plan B when that arguement collapses as a result.
2. Have we rejected the higher Allowance Threshold for pensioners as well ? the increase in the personal allowance from £9000 to £11000 ? The release doesn’t say that we have but it gives the impression that we are rubishing the whole thing. Why the lack of clarity ? I have lost count of the number of Focus i have delivered citing the pensioner on a fixed income as an example of tax injustice linked to LIT/AXE THE TAX. have we just rushed to rubish a proposal which delivers a tax cut for pensioners ?
3. I’m very surprised at the very dismissive tone Nick uses about the Savers tax cut. With respect to Nick there are millions of people with quite a lot more in savings than the £100 he quotes, they may not be in products tracking the base rate he quotes and if they are not they will realise that the current rate is an historic low. the one thing you can garentee about the kind of voter that has stashed those sort of sums is they will do the math.
The savers tax cut will really benefit millions of people with a massive propensity to vote.
4. Nick’s statement doesn’t deal with the moral case that cameron made. The Lib Dems have carved a niche on green taxes shifting tax onto things we don’t like/are bad. cameron is on the other side of the same coin shifting tax of something good/we want more of. By linking it to a “Debt got us into this/saving will get us out” he is setting up a “Thrifty Road out of Recession”. Whether you agree with it or not I’m not sure Nick’s dismisal is a sophisticated enough critique of an idea that will appeal to many.
5. finally in response we get the intriguing statement that under our plan “Families” on “Average Incomes” will get a tax cut of £1000. I assume this is per annum though unhelpfully it doesn’t say.
I suspect this is going to be the centre of much debate over the coming months. People assume Average means ordinary or median. Actaully average families can be in a higher decile for income. is this where our tax cuts are going ?
I suspect that this will prove to be one of Nicks most consequential Press releases of the year long after its January the 5th
MH,
whichever way we find of balancing the books our priorities are spot on.
Tax fraud should be a bigger concern than benefit fraud considering the levels of money lost.
It seems to me that the attack misses the point – Cameron’s proposals are economically illiterate. Whilst in the long run, we might wish to encourage more saving and less consumption, it is completely the wrong approach when facing a deep recession. We should not be giving tax breaks to savers which will discourage spending. Having said that, I consider that our policy of tax cuts and big investments in green technology is spot on.
David Morton
” arguing as we have that you can cut tax by tackling waste without cutting front line services was brave, correct and needed saying ”
No. It’s what anyone can say. It’s very easy to argue that there’s waste out there and we can go out and cut it without being specific. It plays well to the prejudice that politics and politicians are bad people, civil servants and local government officials are just lazy good-for-nothings who are only there because they couldn’t get jobs as bankers, and we could all instantly solve the world’s problems if only they’d let us.
In practice what it often means is “we’ll make the budget cuts and get someone else to take the blame for the consequences”. That’s why cuts in funding to local government are a real favourite.
I’m not saying there isn’t waste, but I am saying I would regard any that could be found, unless we are absolutely specific on what it is, as a bonus if we could get rid of it, rather than as something we bank on.
Matthew Huntbach, sorry this is off-topic,but maybe you would like to comment on this.
“Arguing as we have that you can cut tax by tackling waste without cutting front line services was brave, correct and needed saying.”
Matthew is right to disagree, and the reason is, that it just doesn’t work that way. What happens, if you are a spending-cuts Chancellor (whether it’s because of your ideology, or whether it’s just because we’re skint), is that you allocate a lower budget to each of the spending departments, e.g. health.
The spending departments than have to find the cuts. Of course if they can find “waste”, that gets cut first. They probably can find some waste, in a host of low-level detail mis-spending practices, in a way that a central top-down cutter like Cleggmeron cannot possibly do. But they will also find big new items on which money must necessarily be spent, such as that hospital that burnt down. Inevitably, they will then have to make cuts in real services.
To claim that you are going to make a permanent cut in waste, by doing a Gershon review or whatever, is just like claiming that you are going to make a permanent cut in dust by taking the Hoover round the house. It is worth doing it, but, waste and dust always come back.
For years and years, we have railed against the lying Tories who say they will cut tax by tackling waste and it won’t hurt a thing. Now we have stolen their lines instead. Wonderful.
Mark is exactly bang on the money (no pun intended). It strikes me that these proposals may have made sense a couple of years ago but make absolutely none now (unless you discount the political factor).
To benefit immediatly you will already have to have substantial savings actually in the bank and even then there is no gurantee you will actually spend what you have actually got back. So, they dont work as a spending situmulus and as to helping reduce debt well they simply don’t because people with savings tend not to be in that much debt so it’s a bad show all round from team Cameron.
As to the cutting services, I take Dave’s well made point that saying frontline services wont be cut is a bit of a misnomer. Cutting waste is temporary…