Saturday, October 06, 2007

A battle we must win- Liberal Democrat Income Tax Policy Vs Conservative Inheritance Tax cuts

U-Turn, retreat, humiliation; brand it what you will, Gordon Brown's lengthy flirtation with a November election is officially over. The inherent cautiousness of the man aside, this decision has undeniably been hugely influenced by the spate of opinion polls that have shown a Conservative resurgence in the last week. Delve deeper into the poll data and you will discover that the reason most commonly cited for a floating voter switching to the Tories is their enthusiasm for Cameron's policy on inheritance tax. Announced at the Tory conference earlier this week, Cameron's party pledge to use money raised from a new tax on non-domiciles to raise the threshold at which inheritance tax has to be paid on an estate to £1millon pounds.

The message from the Tories is clear; we will virtually eliminate the dreaded 'death tax'. Millionaires alone will pay inheritance tax, whilst the rest of the hard working British population can rest easy, safe in the knowledge that their final legacy to family and friends cannot be touched by the greedy chancellor. As a Liberal Democrat, i recognise it is imperative we never understimate the Conservative party. This is unquestionably an extremely astute move. Cameron has recognised that swathes of 'Middle England', (Express, Mail, Sun readers) live in perpetual fear of having to pay so called 'death taxes'. Accordingly, when the Conservatives announce that 'normal people' will no longer have to pay inheritance tax, 'Middle England' feels a collective sense of relief and believe that they have been awarded a significant 'tax cut'. Of course, nothing could be further from the truth.

Despite the hysteria generated on the subject, Polly Toynbee rightly recognises (http://www.guardian.co.uk/Columnists/Column/0,,2181677,00.html) the reality is that only the wealthiest 6% of estates have ever actually had to pay inheritance tax. If we wish to maintain this state of affairs, the threshold at which estates pay inheritance tax needs to rise in accordance with rising house prices. It is for this very reason why the Lib Dems have already stated that under our fully costed tax plans, only estates worth over £500,000 will have to pay inheritance tax. This is entirely the right approach, ensuring that middle income earners are not burdened by inheritance tax and quashing any notion that this is a tax that will impact upon anyone one other than the most affluent in society.

The most important task for the Liberal Democrats is therefore to expose the myth that the Conservative policy on inheritance tax represents a unique tax cutting policy for middle earners in the UK; it unequivocally does not. Despite the furore over 'death taxes' caused by papers such as the Daily Mail; the reality is that with the threshold rising to reflect house price appreciation, it will remain the case that only the very highest earners will have to pay any form of inheritance tax. The Conservative policy is not a tax cut for middle Britain, it is a tax cut for high earners and for obvious reasons, it is a tax cut that wont make any immediate impact on people's livelihoods.

The Liberal Democrat inititative to cut 4p in the basic rate of income tax could not provide a more stark contrast to the Conservative proposals. Here is a bold proposal that will disproportianately benefit the lowest earners and most unfairly taxed people in our society. A cut in the basic rate of taxation from 20p to 16p in the pound will make an immediate and drastic difference to the quality of life for someone earning the average wage (or below) in the UK. It means that industrious, low and middle income earners will recieve greater rewards for their efforts and will have a significantly greater dispensable income. Under our complete tax proposals (which can be found at www.libdems.org.uk) the IFS have confirmed that the great majority of people in the UK will be better off than they currently are.

Our tax policy is an embodiment of timeless Liberal principles; it is progressive, rewards effort and only increases the burden upon the very wealthy. It is imperative that every Liberal Democrat campaigner makes this same point across the length and breadth of the country. If you want a fairer tax burden for Britain, it is the Liberal Democrats and not the Conservatives to whom you must now turn.

No comments: