Page last updated at 16:22 GMT, Monday, 20 April 2009 17:22 UK

Lib Dems proposing 700 tax cut

Nick Clegg: 'A 17bn tax switch away from working people'

The Liberal Democrats have said they want to cut the amount of income tax paid by most workers by £700 a year.

The party proposes raising the threshold at which people start paying to £10,000, with all those earning under £100,000 paying less.

BBC political editor Nick Robinson said this move replaced the commitment to cut the basic rate of income tax by 4p.

But Labour said it was "policy on the hoof" by a party which had changed its tax policy twice in 12 months.

Introducing the proposal Liberal Democrat leader Nick Clegg said "big businesses and millionaires" would make up the shortfall in revenue.

It was "nonsense" to say cuts could not be brought in during a recession because a "tax switch" was "affordable", he said.

'Pension relief'

His Treasury spokesman Vince Cable said this could be "fully funded by closing tax loopholes and cracking down on tax avoidance".

The party says that raising the personal allowance to £10,000 for all people will mean an effective tax cut of £705 to anyone earning over that amount.

These plans will give money back to the people who really need it at the time when they need it most
Nick Clegg, Lib Dems

It estimates the overall cost of the pledge will be £17bn a year - slightly less than the cost of the previous pledge to cut 4p in basic tax, which was estimated at £19-20bn.

The Lib Dems say they would find the money through raising taxes on richer people, for example cutting top rate tax relief on pension contributions, raising capital gains tax and closing some loopholes for companies and high earners.


But Financial Secretary to the Treasury Stephen Timms said: "This is another example of a policy on the hoof by the Lib Dems.

"By completely changing his tax plans for the second time in less than a year, Nick Clegg is showing that he is out of his depth and incapable of making serious proposals for serious times."

At last year's party conference, the Lib Dems backed plans by Mr Clegg to cut taxes for people on low and middle incomes - on top of the 4p income tax cut - paid for by public spending savings.

But Mr Clegg denied the change in policy made it appear the party had not thought through its proposals.

"It is an evolving situation. What everyone has understood since last autumn is the recession is falling hardest on people on middle and low incomes," he told BBC Radio 4's World at One.

The new pledge would make the tax system even fairer than the 4p promise, he said.

Among current government spending commitments, Mr Clegg said the UK's military role could be reconsidered, along with government "targets" such as getting 50% of young people into higher education.

Other outgoings to be looked at could include the Child Trust Fund, he added.

Under a Lib Dem government, measures aimed at increasing revenue would include tackling stamp duty avoidance and subjecting "benefits in kind" to National Insurance.

Aviation taxes should be levied per plane, rather than per passenger, Mr Clegg said.

He said: "These plans will give money back to the people who really need it at the time when they need it most.

"It is time to end the unfairness that sees big businesses and the wealthy treating taxes as something to be easily avoided, leaving everybody else to pay out.

"For too long governments have been letting companies stash their money in offshore tax havens while taxpayers are left to foot the bill.

He said the plans "wouldn't add a penny to the overall tax burden, but they would spread that burden far more fairly".

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