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Last Updated: Thursday, 20 July 2006, 15:02 GMT 16:02 UK
Lib Dem tax cut plans get bigger
By James Landale
Chief political correspondent, BBC News 24

Vincent Cable and Sir Menzies Campbell
Sir Menzies is changing Lib Dem tax plans
The Lib Dems are preparing to promise bigger tax cuts than expected when they announce their plans later this month.

Documents obtained by the BBC show the party will set "a long term ambition" of doubling allowances so no tax is paid until someone has earned 10,000.

In the short term they will promise to scrap the 10p starting income tax rate, in effect raising the tax-free personal allowance from about 5,000 to 7,000.

They will also raise National Insurance starting thresholds to similar levels.

These reforms come on top of previously announced commitments to cut the basic rate of income tax from 22p to 20p, and raise the threshold at which the top 40% rate of tax is paid from 33,000 to 50,000.

The document - a motion to be put before the party's conference in September - sets out "the long term ambition to raise the income tax threshold further - with an intermediate objective to raise the threshold to 10,000, the annual equivalent of the national minimum wage for a full time worker".

All these reforms still have to be backed by Lib Dem members who will have the chance to change them in a series of conference votes.

The party has already announced that it will pay for its previously announced tax cuts by introducing huge tax rises elsewhere.

Inheritance tax

These included cutting reliefs on capital gains tax and pensions contributions, and raising green taxes - such as establishing a new carbon tax and setting vehicle excise duty as high as 2,000 on the most polluting cars.

But the document shows that the Lib Dems also have further ambitions to "enlarge the tax base, tax unearned economic rent and stabilise the property market by further developing policies on land value taxation".

The party is also promising to reform inheritance tax so that it is paid by those who receive the money, not by the estate of the person who has died.

The Lib Dems' earlier tax plans - said to be "fairer, simpler and greener" - were called "completely unrealistic" by Tony Blair

For the Conservatives, shadow chancellor George Osborne said the earlier proposals looked like they had been "worked out on the back of an envelope".

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