Thursday, January 26, 2012

How will Nick Clegg's call for more tax cuts be received by his fellow Liberal Demcrats?

At the last election my party promised to raise the personal allowance to £10,000 for ordinary taxpayers. And I am extremely proud that the Coalition is on track to do so over the course of this Parliament. We’ll make sure that anyone earning £10,000 or less will pay no income tax at all and for those on middle incomes, the first £10,000 they earn will be tax free. 
For millions of basic rate taxpayers – ordinary, hardworking people – that means paying £700 less in income tax each year, around £60 a month. 
In the 2010 Budget we increased the tax allowance from £6,475 to £7,475. This year we have already announced a planned rise of an additional £630 - meaning that a total of 1.1 million more people will no longer pay income tax at all. 
But today I want to make clear that I want the Coalition to go further and faster in delivering the full £10,000. Because, bluntly, the pressure on family finances is reaching boiling point.
Nick Clegg's speech to the Resolution Foundation today has been well received by the press and Liberal Democrat bloggers.

"Nick Clegg's call for tax cuts may save the Lib Dems from annihilation" suggests Daniel Knowles on the Daily Telegraph site (a trifle melodramatically, but then - judging by his photograph - he is only 14). While Prateek Buch for the Social Liberal Forum is enthusiastic, seeing the proposed changes as part of the Liberal Democrats' fairness agenda.

For what it is worth, I am enthusiastic too. One of the problems Labour regularly runs into is that, despite its rhetoric, it is difficult to make the rich pay more. Of course, there are things you can do, such as taxing property rather than income, but the result is that increased public spending tends to increase the burden on lower earners until they become unwilling to bear it.

Certainly, I found this argument easy to make during one of my rare television appearances.

But not all my Liberal Democrats will agree with me. Because this is very much the debate we had at our Bournemouth autumn conference in 2008. There the party agreed to fight the following general election promising tax cuts, but as a Daily Telegraph report from the time shows, there was a significant minority in the party that did not agree with this strategy:
Opposition to the programme was led by Evan Harris, the party's science spokesman, and fellow MP Paul Holmes, who argued that those in most of need of help were too poor to receive any benefit from tax cuts. 
Their amendment sought to bind the party to tax cuts only after other priorities had been met, including tackling child poverty and climate change. 
Telling delegates about the plight of hard-up families in his constituencies, Mr Harris added: "Most are so poor that they will never pay taxes."
The vote in Bournemouth was clear enough - conference voted three to one to approve the new policy - but no debate can settle such a question for all time.

And it is notable that those in the party who have been less enthusiastic about the Coalition have emphasised their opposition to cuts in public spending.

If money has been found to cut tax, won't they (whether they have called themselves "Progressives", "Social Liberals" or use some other slightly vaguely defined category) now be calling for a reduction in those cuts?

Or will they keep their heads down because Nick Clegg's speech has gone down well and it is good to see the party pursuing a clear strategy at last?


Anonymous said...

I am, at the very least, concerned by some of the cuts that are being made, and were I to take part in the absurd factionalism and narcissism of small differences that goes on I'd consider myself closer to the Social Liberal 'side' (though I just consider myself a Liberal), but I'm definitely in favour of these tax cuts.

They'll disproportionately help the poorest workers, make work a better option for those at the margins, and mean fewer people have to have recourse to state benefits. In a lot of cases (I don't know how many as a proportion of the people affected, of course), it's a choice between taking six hundred pounds off someone in tax then paying it back to them in benefits, or just not taking the money off them in the first place.

Seems a perfectly 'progressive' or 'social liberal' - or just Liberal - idea to me.

Anonymous said...

That last was from Andrew Hickey. No idea why it said I was anonymous, I ticked the 'Google Account' box...

Jonathan Calder said...

And then Blogger decided your comments were spam. Not your day, is it, sir?

Hywel said...

The £10k tax allowance policy wasn't about cutting overall taxation or spending but about redistruibuting taxation. IE the cost of raising the allowance would be covered by increases in other taxes such as CGT and the mansion tax.

Jonathan Calder said...

Sure, but if the government is raising extra taxation, some may want to see it used for extra spending rather than for cutting taxes elsewhere.