Liberal Democrat manifesto – detailed costings published

The Liberal Democrats have published the detailed costings for their 2015 manifesto here.

Ahead of the manifesto launch tomorrow, the document shows how the party will close the deficit in a fair way (50% through spending cuts, 50% through tax adjustments), while providing the funding needed by the NHS and ring-fencing spending for education from 2 to 19 years old, science and 0.7% of GDP on international development.

Thanks to Mark Pack for producing the document in question with his usual unerring efficiency.

* Paul Walter is a Liberal Democrat activist. He is one of the Liberal Democrat Voice team. He blogs at Liberal Burblings.

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12 Comments

  • Eddie Sammon 14th Apr '15 - 12:17pm

    I disagree with some of the tax rules from a technical perspective. The language used of tax “alignment” is wrong and suggests everything should be taxed the same as income tax, even if you’ve just paid tax on it. We also have to face with threats of price controls in other sectors, including from some Lib Dems, so it feels like too much of a squeeze.

    The rule on limiting debt interest deductibility seems just as bad. This is a fair expense and will make companies with debts struggle more. The OECD is probably my favourite economic think tank, but I don’t think I’ll agree with them here.

    Creating a general “anti avoidance” rule sounds like an attempt to criminalise fair tax planning, often used to avoid double taxation measures I have already mentioned.

    I don’t see employed people getting targeted in the same way, so I guess I’ll have to see how I feel on polling day.

  • Eddie, re: The rule on limiting debt interest deductibility

    I suspect as this is coming out of the OECD work, the basis for this is discourage companies from taking out ‘artificial’ loans. For example, Apple US, taking out a loan in the US, so that it can pay a dividend, thus enabling it to use oversea’s profits to replay the loan and so pay no US tax on those oversea’s profits. But I agree, implemented in a simplistic way and many companies with genuine finance needs could fall foul.

  • These financial plans are not very clear and there must be things that are assumed but not stated. Also these are for only two years and not five!

    I don’t understand why we want to increase the personal allowance to £11,000 from April 2016 instead of keeping it as already announced as £10,800 from April 2016 and £11,000 from April 2017, which costs £1.01bn in 2016/17 and for reasons I don’t understand £790 million the next. There is £895 million new money for the NHS in 2016/17 but nothing on top of this for 2017/18. The only other spending is on the bedroom tax (sorry the Spare Room Subsidy) of £310 million in 2016/17 rising to £315 million the following year.

    It appears the extra savings from tax avoidance are £3.5bn in 2016/17 and a further £3.5bn in 2017/18 making the £7bn by 2017/18.

    The 1% cap on benefits must really be just a further extension of the policy for another year into 2017/18 saving £160 million that year. This doesn’t seem to be not making the poor pay, but making those on benefits pay for a further £40 tax cut for those earning more than £10,800pa. In fact this cut is not needed because in 2017/18 the total saving in £27,305bn and without this cut the savings would still be £27.145bn! We are also hitting those on Universal Credit to the tune of £450 million in 2016/17.

    It is clear we are using smoke and mirrors regarding our £3.5bn commitment to increase spending on mental heath. We are saying that in 2015/16 there is an extra £1bn which needs an extra £193 million for Scotland, Wales and Northern Ireland making £1.193bn. The budget for 2016/17 only has £250 million not £1.193bn, but this £250 billion is all allocated for mental heath. Instead of promising to spend an extra £1.193bn and an extra £250 million for mental heath it seems we are only promising £1.145bn.

  • Sorry “£250 billion” should be “£250 million”.

  • “the party will close the deficit in a fair way (50% through spending cuts, 50% through tax adjustments”

    You mean tax increases.

  • Philip Thomas 14th Apr '15 - 9:30pm

    @Eddie Sammon. Is not there an argument that earned income should be taxed less than unearned income because it is, well, earned?

  • Eddie Sammon 14th Apr '15 - 9:39pm

    Philip, there are lots of manual workers who pay themselves in dividends, so the idea that dividends are unearned is nonsense.

    If they pay themselves a salary instead then they have to pay employer’s NI, employee’s NI and income tax. Public sector workers only pay employee’s and income tax.

    In fact that point is going near the top of my list of articles to write about, of which I have hundreds.

  • Philip Thomas 14th Apr '15 - 10:08pm

    @Eddie Sammon Right, so we should reform the tax system so that earned income earns more (net) for everyone.

    Anyway, your point eludes me. Surely all those whose employers have to pay employer national insurance earn potentially less than they would if there was no employer national insurance (as employer costs would decrease so they could afford higher wages)?

  • Eddie Sammon 14th Apr '15 - 10:35pm

    Hi Philip, I do accept the premise that employer’s NI reduces pay for employees too, but companies also pay for it through lower profits, so at most I would be willing to say employee’s pay 50% of the cost of this.

    If we include employer’s NI, employee’s NI and also Class 4 NI which is 2% on profits above the higher rate threshold then I have the following figures:

    Tax on company directors: 46.48%
    Tax on employed people: 48.9%

    However if you add half of VAT to the business’s costs then the figures are as follows:

    Tax on company directors: 56.48%
    Tax on employed people: 48.9%

    Well done for making the point on employed people, but as you can see VAT changes things. It is a difficult issue, but my point is that for people like me and my family who are in industry’s where full VAT is applicable over the revenue threshold, along with the regulatory burdens and sometimes fees then it feels like too much.

    Best regards

  • Malcolm Todd 14th Apr '15 - 11:00pm

    Philip Thomas
    “Surely all those whose employers have to pay employer national insurance earn potentially less than they would if there was no employer national insurance”

    Yes, exactly. Eddie is making an understandable but serious error in comparing two different styles of payment. The key question is how much of the total payment made by the employer goes to the exchequer rather than to the employee (or indeed director-cum-shareholder) in respect of whose work the payment is made.

    Eddie
    For a higher-rate taxpayer, for every extra £1 the employer pays 49p to the treasury (35.1p income tax, 1.8p employee’s NI, 12.1p employer’s NI) and just 51p to the employee. In a comment elsewhere, I think you had worked out that the marginal rate for an employee-shareholder on his dividends would be about 45% under the party’s proposals, isn’t that right? Sounds like still a pretty good deal.

  • Eddie Sammon 14th Apr '15 - 11:01pm

    In fact the 2% Class 4 contributions don’t apply to limited companies, so please ignore them.

    Sorry about that. But still, I feel there is too much tax.

  • Eddie Sammon 14th Apr '15 - 11:04pm

    Malcolm, please see one of my replies to Philip. If people want to start adding employer’s NI to the employee’s tax bills then we should be able to add half of the VAT bill to the businesses tax bills, so if we include VAT it is more like 54%, than 44%, so no, I do not feel it is a pretty good deal.

    Regards

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