Lib Dems promise to cut income tax

Menzies Campbell promises to reform the Liberal Democrats
Menzies Campbell promises to reform the Liberal Democrats

Menzies Campbell has today committed the Liberal Democrats to cutting 2p on the basic rate of income tax as he attempts to revitalise his ailing leadership.

Two days before he celebrates 100 days as leader, Sir Menzies outlined how he intends to reform the party to show people "we are serious about power".

A key element of this reform is cutting taxes on the low paid, and to this end he announced a cut in the national rate of income tax to 20p and an increase in the amount people can earn before paying tax, to £7,000.

He has scrapped the Lib Dems' policy of a 50p top tax rate, saying that although it was "an important symbol that we are a redistributive party", there were better ways to raise the extra money without alienating voters.

Instead, Sir Menzies promised to fill the £20 billion hole left by the tax cut in part with £8 billion in green taxes, including aviation taxes and a £2,000 road tax for the most polluting cars.

The Lib Dems would also scrap the tax relief available on shares and second homes held for more than ten years, which the party estimates will raise £5 billion.

"We are the one major party which takes the environment seriously and that does mean that environmental taxes will rise," Sir Menzies said today.

But the tax burden would remain the same, and the 62-year-old ruled out any major rises in public spending, saying: "I am quite clear that we are in a new political environment in which the era of big increases in central government spending is over.

"The Liberal Democrats will not propose any spending increases without identifying savings. We will move from tax and spend to save and spend."

Today's speech was an attempt by Sir Menzies to reclaim the initiative after what has been an uninspiring few months as party leader. Poll ratings remain the same, and the new leader has been criticised for his lacklustre performances in the Commons.

Cutting taxes and promising to cap public spending are not policies usually associated with the Liberal Democrats, and will no doubt confuse voters, coming just days after the Conservatives said they were unlikely to promise tax cuts at the next election.

But Sir Menzies insisted today: "Bluntly, if the Liberal Democrats want to show the country that we are serious about power - we must reform our party.

"Our party has remained largely unchanged since we came together in 1988. Change is overdue, necessary and urgent."

The Lib Dems have no black or Asian MPs and only a handful of female MPs, and today Sir Menzies said that while there was no question of introducing a Tory-style A-list, activists would be strongly encouraged to choose diverse candidates.

There will also be changes to the way policy is formulated - although delegates at the party conference will have the final say, proposals will be put out for discussion among all the party's supporters.

However, while Sir Menzies has received some support for the boldness of today's speech, his tax plans have been condemned by rival parties as impossible.

The Conservatives said they sounded as if they had been made up "on the back of an envelope", while Tony Blair told reporters at his monthly press conference that using environmental taxes to fund income tax cuts was "completely unrealistic".

"The idea that you can have nice, cuddly environmental taxes that are going to bring you huge gains on income taxes - forget it," he declared.


Politics @ Lunch

Friday lunchtime. Your Inbox. It's a date.