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This morning Nick Clegg is again seeking to take Lib Dem “ownership” of tax cuts for those on lower and middle incomes. The earnings threshold, when Income Tax kicks in, is already due to rise to £10,000 in 2014/15. Mr Clegg wants it to rise further to £10,500 in 2015/16. It would be a very welcome change. We can all have an enjoyable time thinking about much-needed tax cuts in various areas.

The difficulty for the Lib Dems is that they have no credibility as a tax-cutting party because they have no credibility as a spending-cutting party. Their message on spending cuts has always been that the Lib Dems have had to go along with some of them, but have sought to resist them as much as possible. Without the calming decent moderation of the Lib Dems in Government, runs the refrain, the cuts would have been deeper. So the Lib Dems stress that it is for the Conservatives to take “ownership” of spending cut – and of tax increases such as on VAT. When it comes to raising the Income Tax threshold, however, this is something that the Lib Dems not only wish to claim as their own, but say they would like to go further – and, indeed, would have done so had it not been for the Tories with their spiteful wish to grind down the poor.

When do we ever hear a Lib Dem politician detailing spending cuts in order to pay for tax cuts for the low paid?  When David Cameron said that benefits should not be paid to those under 25, that would be a spending cut. If under-25s were no longer paid Housing Benefit and had to go on living with their parents, there would be a saving of £1.8 bn. According to PriceWaterhouseCoopers each £100 increase in the income tax threshold loses the Government £0.5 billion.  So ending Housing Benefit for the under-25s would allow the tax threshold to increase from £10,000 to £10,330. Both changes would greatly reward work. The hitch is that the Lib Dems have blocked the Housing Benefit cut.

If we didn’t have to pay our £8 billion EU membership sub then we could raise the threshold from £10,000 to £11,600. But Mr Clegg doesn’t like that idea either. Roughly the same figures would apply to scrapping Overseas Aid.  Again Mr Clegg would not be keen. I recently offered nominations for £106 billion of savings (which did not include either of those options). I haven’t noticed Mr Clegg pushing any of them.

I suppose Mr Clegg might suggest higher taxes on the rich to pay for the tax cuts for the poor. But as the Sunday Times reminds us (£) this morning, these tax hikes might satisfy populist envy but they do not increase revenue to the Treasury. The richest one per cent pay 30% on income tax. In 1979 when the top rate of income tax was 83 per cent the richest one per cent provided 11 per cent of tax revenue.

The Conservatives are the party of tax cuts for the rich and the poor. They should not allow the Lib Dems to get away with saying anything different.

84 comments for: Lib Dems lack credibility on tax cuts

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