Page last updated at 14:22 GMT, Tuesday, 20 May 2008 15:22 UK

Clegg sets out tax-cutting plans

Nick Clegg
Mr Clegg said governments must not tax "for the sake of it"

Liberal Democrat leader Nick Clegg has marked a party policy shift by signalling his intention to cut tax for low and middle-income families.

He said he wanted to go "much further" than previous tax-neutral packages and to see if overall levels of tax taken by the state could be reduced.

In a speech in London he said he would tighten loopholes but fight against "excessive taxation" levels.

Labour said Mr Clegg promised "every audience what they want to hear".

Mr Clegg outlined plans to crack down on tax avoidance and reform capital gains, corporation tax and pension tax relief in a speech to the Policy Exchange think-tank.

'Means, not an end'

He said he would tighten loopholes which allow individuals and firms to do business in the UK but keep their wealth in off-shore trusts.

The party would also cut the headline rate of corporation tax and would limit relief on pensions for higher rate taxpayers.

It is ludicrous that the poorest people still pay a higher proportion of their income in tax than the richest do
Nick Clegg, Lib Dems

Mr Clegg said: "We are not ready to accept the government's proposed overall level of taxation, and will look in depth at whether it can, and should, be cut.

"Over the course of 11 years of the Labour government, we have seen National Insurance bumped up, council tax sky rocketing, stamp duty quadrupled, dozens of minor stealth taxes imposed, and now the 10p rate of income tax doubled.

"It is ludicrous that the poorest people still pay a higher proportion of their income in tax than the richest do. It is an immoral use of excessive taxation on those who can afford it least."

Council tax

He criticised Gordon Brown's record as chancellor, including the manner of the abolition of the 10p income tax rate in his final Budget and the "fiendishly complicated" tax credits system.

Mr Clegg said: "It's a tombola tax system. Gordon Brown treats tax likes Forrest Gump treats a box of chocolates - you never know what you're going to get."

And he accused Conservative leader David Cameron of shedding "crocodile tears" about the impact of high tax rates on the poor, when his main tax pledge was to reduce inheritance taxes.

At the Liberal Democrat spring conference in March Mr Clegg suggested that tax cuts should be on the agenda.

The party is already committed to a 4p reduction in the basic rate of income tax, but Mr Clegg said he would "look in depth" at whether to go further.

'Hit families hard'

He also reiterated his party's policy of scrapping council tax and replacing it with a local income tax.

But minister Jane Kennedy said Mr Clegg would cut tax credits for families and scrap the Child Trust Fund which she said "would hit families hard".

She added: "After backing Labour's spending plans just a few months ago, he is now planning to cut public services.

"But the Lib Dems still haven't dropped their many expensive spending pledges, such as a UK wide high speed rail network, promising every audience what they want to hear, regardless of the cost."

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