What would I / the Liberal Democrats have done differently with the Budget?

An emergency budget for tough times. Overall, although I was uncomfortable with some of the budget announcements there were few things in there I didn’t expect or which Labour would have done vastly differently. Cuts are needed, although timing is always questionable and to some degree it has been driven by the financial markets / ratings agencies (yes the same ones which thought Lehman Brothers was sound…).

I won’t cover what’s in there and how the Liberal Democrats have managed to get a few of our policies in the budget announcements, but rather to highlight the distinction between my party and the Conservatives I want to highlight what I would have done differently: 

  • I’m still uncomfortable with the £6bn cuts this year, given the need for public demand to fill the lack of private sector demand, this is a concern shared by the US, fuelled by the 1930s depression and the problems faced by Japan since the 1990s.
  • I would have kept child benefits rising year on year, but I would have withdrawn it from better off families via taxing of the benefit.
  • Invested more in capital projects such as green technology to kickstart the growth in the private sector which the Government is relying on.
  • Announced the renewal of trident to be included in the Strategic Defence Review to understand the potential for cost reduction.
  • Examined the case for road pricing along with investment in public transport (have the environmental costs fully accounted for).
  • Although I don’t want council tax increases, I would allow local authorities the ability to increase council tax if it’s needed to protect local services, many of the cuts will be at the local level due to tight budgets.
  • Look to increase the incentives to work via a greater personal allowance rather than just cutting back on benefits.
  • Not enforced the rule stating single parents must work when their child begins school, too broad brush and ignores the poverty trap.
  • Remove the winter fuel payments for pensioners.

 

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A fair tax system – income tax threshold increased to £10k

Nick Clegg on Monday outlined Liberal Democrat reform of the tax system to increase the income tax threshold to £10k a year, meaning that 3.6m people will be taken out of taxation and a tax cut of up to £700 a year for most working people and £100 for pensioners.

The proposals will make a huge difference to many people, especially those on low incomes, our proposals will make a bigger difference to ordinary hardworking people than the Conservative scrapping of the National Insurance increase and their marriage tax allowance. The Conservative proposals would give c. £300 back a year, or £450 a year per couple, compared to £1,400 per couple under the Liberal Democrats (married or not).

The change to the tax system will help to remove the poverty trap (which can be removed further in the long run with a local income tax to replace the council tax) encouraging people to work, as well as a great assistance to young people first starting work. The £10k income tax threshold has been welcomed by Lord Digby Jones and Norman Tebbit, not usual Lib Dem supporters, but policies which get cross party support is always good. 

The policy will cost £17bn a year, but will be funded by a mansion tax on properties over £2m, aviation tax on flights not per passenger, changes to the pensions tax relief for higher rate tax payers, aligning Capital Gains Tax with Income Tax to reduce the rich from tax avoidance and anti-avoidance measures.

Lib Dems believe in power at a local level to the people

I was watching Michael Portillo’s Power to the People , which was on over the weekend and he was advocating giving more power to local people and also for increased accountability. Not sure if Michael’s become a Liberal Democrat but that’s what we’ve been saying for years. I almost fell off my sofa when he even advocated “a local sales or income tax” to replace the council tax (Portillo was famously the Minister in charge of implementing the Poll tax).

Lib Dem measures to empower local people would be:

  • Local authorities to have the ability to set their own local income tax (in place of council tax) and keep the revenue.
  • Local authorities to set their own business rates, not have it set nationally, and also to keep the revenue. 
  • Locally elected health boards and police authorities so these services deliver what you need.
  • Allow local people to have a say in planning decisions and have the right of appeal.
  • Protect local shops and pubs, by cutting the business rate if they are the last one in the village.
  • Ability to sack your MP if they have done something wrong. Power should be in the hands of voters at all times, not just on Election Day.