Lib Dems announce new tax policies that hit polluters

8.47.20am UTC (GMT +0000) Thu 8th Jun 2006

Vince Cable (left) and Sir Menzies (right) want to hit polluters

Liberal Democrat leader Sir Menzies Campbell has unveiled a radical shift in his party's approach to tax policy with a 2p cut in the basic rate. He said the proposals would raise about £20bn elsewhere to fund the cut which would be raised by higher green taxes announced earlier in "Green Switch". Plans to raise taxes to 50p in the pound for high earners have gone. Instead of being the party of higher overall taxes and spending, the Lib Dems will now champion "fairer, simpler and greener taxes".

The Party promises income tax cuts for everybody - 2p off the basic rate, and two million of the poorest people lifted out of income tax altogether. Between £7bn and £8bn of the £20bn needed to pay for this will come from environmental taxes, which would mean hitting airlines and people who drive "gas guzzlers".

Vincent Cable, the Lib Dems treasury spokesman, said the emphasis nowadays had to be on "value for money" after a "huge splurge of spending". "We are passionate about fairness in taxation and this, in our view, is what fairness means." he told reporters at a briefing in Westminster.

Mr Cable explained "What we would envisage is significantly cutting the direct taxes on people on lower and middle incomes. Around one million people would be taken out of the higher rate of tax. He added that the plan not to increase taxes would potentially leave them competing on the same political ground as the Tories who have ruled out tax cuts ahead of the next election. "I think it does put the Tories on the spot. Since they have made a very clear commitment not to cut taxes, they will presumably be fighting the next election on the same ground," he said.