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Lib Dems in Government delivering Fairer Taxes

February 8, 2013

I campaigned at the last general election for a fairer, more balanced tax system. I’ve long thought it unfair and economically perverse to give bigger tax breaks to speculators than employees. It sounded like a bit of spin but it was really the case that a City trader could pay a lower effective rate of tax than the person who cleaned his office. That was the tax system left to the Coalition Government by Gordon Brown.

The last Labour government didn’t just drift into an unfair tax system. Nor was it a result of the financial crash during their last two years in office. It was by design. Blair and Brown promised to hold down taxes for the rich. They kept the top rate of income tax at 40%, the rate set by Nigel Lawson in 1988. But they slashed capital gains tax from 40% to 18%. I often taunt Labour MPs with Mandelson’s assertion that New Labour was “intensely relaxed about people getting filthy rich” and usually stop there. To be fair, he went on to say “as long as they pay their taxes.” Taxes, that is, which were held down by his government and a tax system that was somewhat leaky. For thirteen years Labour refused to introduce a general anti-avoidance rule.

So what have the Liberal Democrats done in government? Well we made sure that our number one manifesto commitment, a £10,000 annual income tax allowance, was the fiscal priority in the Coalition Agreement. Each Budget has seen us get ever closer to the goal of giving everyone £10,000 of tax free pay. The next tax year starts in April, when the allowance will be £9,440 which means that someone will pay £600 less tax than when the Coalition came to office. A dual income household will receive a £1,200 tax cut, thanks to the Liberal Democrats.

I’m hopeful that we will hit the £10,000 allowance in April 2014. As chair of the Lib Dems’ Parliamentary Economic Affairs Committee, it’s top of the list of my Budget submissions to the Treasury.

But that’s not all. As well as giving a big tax break to low and middle earners we’ve made sure that the rich make their fair contribution to reducing the budget deficit. For the first three years of the Coalition we will have kept the 50% top rate of income tax, put in place by Alistair Darling a month before the 2010 general election. From April we will have put in place more effective taxes on the wealthy, bringing in more money. The tax rate will be 45%,broadly in line with most other major economies.

As well as a top rate higher than the one set by Labour for all bar 36 days of their time in office, we will have slashed the tax relief high earners get for contributions to their own pension funds. Under Labour a rich banker could put £250,000 into their fund and get tax relief. The new limit will be just £40,000. We’ve also introduced a new higher rate of stamp duty of 7% on house purchase over £2million. And we’ve slapped a big surcharge on houses held in trusts and companies, a form of tax avoidance that grew unchecked under Labour.
To tackle tax avoidance by both companies and rich individuals we’re putting in place a general anti-abuse rule. I’ve been raising the issue of international corporate tax avoidance for the last couple of years, calling for action by the EU and the OECD. The Coalition is now making combatting tax avoidance a major aim during our presidency this year of the G8. Corporate tax avoidance also harms developing countries. I’ve been working with Action Aid and Christian Aid to highlight these issues in Parliament.

Oh, and finally, we’ve increased capital gains tax to 28% so a city trader no longer pays less tax than the cleaner.

At just over half way through the Coalition these are significant achievements. Liberal Democrats in government have done much to achieve that fairer more balanced tax system that we all campaigned for in 2010. We’ve put more money in the pockets of ordinary families and taken more off the wealthiest. A record to be proud of and something we should shout about from the rooftops.

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3 Comments leave one →
  1. February 9, 2013 5:07 pm

    Which figures have you been looking at Stephen? And through what haze?

  2. February 11, 2013 5:16 pm

    Thanks for your blog, after which I finally figured out where this £600 claim comes from. But don’t you think the libdem ad is a bit misleading, asking what WOULD you do with an extra £600, when some of the change already happened? The CHANGE that people experience will be what happens in April compared with NOW. Or at least it’s possible to be confused by that if you’re not sure what you’re comparing with, it had me confused anyway. I take the point the total is nearly £600 but not compared with the current time, compared with when the coalition took power. it could be expressed better in that ad, more along the lines that you have expressed in your blog.

  3. D donkey permalink
    February 17, 2013 11:21 pm

    Stephen you are looking at a big massive picture, then again you are a Member of paliament. This is a letter I had from a disgruntled person. I will not write to you the filthy language he used but conventional with the anger I suppose .

    Dear sir.

    I find it very difficult to complain about the services and/ or fairness of price online or telephone no more. I get listed into various places given various numbers. Then i have to give up. Is this the way the government is publicizing the statistics as hrrrumpph we r doing better than the last lot. buggers mate we elect you and you close the doors for us where we can complain about you. Check it now how to complain aout the SKY to the complaining authorities OFT. Then you goto the next page n next n then back where you started. You are a waste of time ,,,u humbug.

    Ok if i say name withheld it is in poor taste. But there is a very bad taste in my mouth when i read it.

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