Jeremy Browne is right to question Lib Dem enthusiasm for further tax cuts

Sooner or later Labour governments run into a paradox. The more ambitious their spending plans get, the more they have to tax the very people those plans are intended to help.

So I was happy to support the Liberal Democrat policy of significantly raising the tax threshold to take a lot of poorer people out of the system altogether. And pleased to see the Coalition put the policy into effect so that people do not pay tax on the first £10,000.

Now the Lib Dems and the Conservatives are engaged into a contest to raise the personal allowance even further.

As Huffington Post reports it:

Clegg has said he would like to see the income tax threshold raised to £10,500, worth £100 a year to basic-rate taxpayers. 

The deputy prime minister has said his ambition is to eventually raise the rate even further so no one pays any tax on the equivalent of the minimum wage, which would work out at a threshold of around £12,500. 

And Lib Dem chief secretary to the Treasury Danny Alexander said it would be a "top priority" of the party to "raise the personal allowance dramatically" in the next parliament - suggesting it would be a red line for the Lib Dems in any coalition negotiation.

But hold on. The setting up of the Coalition was predicated on the need for unprecedented austerity. If we can't afford to maintain public spending at levels that Liberal Democrats would like, how come we can afford further substantial tax cuts?

That Huffington Post article quotes Jeremy Browne on the subject:

Browne said he was "slightly unnerved" by the "Dutch auction" at the last Lib Dem and Conservative conferences where the two parties traded off policies. 

"The Conservatives promised extra money for a marriage tax break and the Lib Dems promised to spend extra money on giving free school meals to all infant school aged children," he said.                         

"The message I find that sends is there is money to splash around and I think it's a difficult message to send at the same time when you told the electorate that educational maintenance allowance or child benefit for taxpayers above a certain threshold is unaffordable." He added: "We still have a big deficit by any standard, just because it's less colossal than before doesn't mean its not still big." Browne said there was a "tendency of all parties to start getting ready to do the giveaways before there is anything to actually give away."

My feeling is that Nick Clegg's support for further tax cuts is driven by politics rather than economics. He hopes that the Lib Dems will be identified in the public mind with these cuts and reasons that the more of them there are, the more popular we shall be.

But, like Jeremy Browne, I wonder whether there is any economic justification for these cuts at a time when public debt it still growing.

Perhaps unlike Jeremy, if there is scope for reigning back on austerity then I would rather see the funding of local services - the sort we have always taken for granted, like buses and museums and libraries - given priority.

That is, after all, what people thought they were voting for when they voted for our councillors and for our candidates at the last election.

Thanks to Lib Dem Voice for putting me on to this article. Incidentally, their picture of Jeremy Browne' is much better than Huffington Post's because he has a beard.