Samuel Brittan on the Lib Dem tax proposals

by Stephen Tall on September 13, 2006

Here’s what liberalism’s latter-day eminence grise thinks, as recorded in today’s FT:

While [the Liberal Democrat] party’s main attraction still lies in its greater commitment to personal freedom and due process than the Labour or Conservative megaliths, there is now at least a chance one might be able to vote for the party because of, rather than despite, its economic policies.

The part likely to attract the odium of the Lib Dem left at next week’s party conference is withdrawal of the earlier flagship proposal to raise the higher rate of income tax from 40 to 50 per cent. Nevertheless, Robert Chote, IFS director, regards the new proposals as more redistributive. The core idea is to abolish the 10p lower band and raise the standard and upper rate threshold. The basic rate would be cut by 2 percentage points and corporation tax by one point. The package would be financed partly by tightening up capital gains tax relief and pension contribution reliefs and by raising the anomalously low upper earnings limit of employee national insurance contributions. More interesting are the environmental taxes, expected to raise more than £8bn. Most of the measures would make for a healthier and cleaner environment even without bringing global warming into the reckoning.

He goes on to note – rightly – that this the party’s proposals are inconsistent with our still-favoured Local Income Tax, and that site value tax “would be a far better way of providing local government with its own source of revenue”.

Mr Brittan concludes:

Taken as a whole, the Lib Dem package is not Gladstone or John Stuart Mill. But it does mark an advance on anything the two major parties have suggested.