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Saturday, September 16, 2006

Tax debate

The morning of Conference has arrived and I am pulling all my stuff together for an exciting three days before I have to abandon all the important debates on the future of the party and head back to Cardiff to discuss the future of Wales instead.

In this morning's Western Mail the Welsh Liberal Democrat Assembly Leader, Mike German, makes much the same point. In previewing the Conference and next May's Welsh Assembly elections he underlines some of the uncertainties our party needs to overcome before we have a settled programme to put before the electorate.

I was particularly disappointed at his characterisation of the tax debate, in which he seems to have swallowed the party line completely, that this is a vote of confidence in Ming and that the switch to greener, fairer taxation is somehow in jeopardy. This is nowhere near the truth.

In fact, my reading of the situation is that the package has wide acceptance and that all the debate will centre on the Evan Harris amendment over whether to add on a 50p tax rate for those earning more than £150,000 a year. As Evan has said himself in discussion with Lynne Featherstone on the new Liberal Democrat Voice website, the amendment accepts the Vince Cable/Tax Commission package and seeks to make it more resdistributive again by adding a clear headline level of tax that will take more money from those with higher incomes. This will be used to remove even more people from paying income tax:

The package on offer delivers less not greater redistribution than the package would deliver if amended to include a 50p rate raising £2bn more to be re-distributed to the poorest taxpayers. The difference is - surprise, surprise - £2bn less redistribution without the 50p rate.

Her misunderstanding arises because she - and others - assume that we are calling for the retention of the manifesto policy which was 50p rate to pay for personal care and abolish tuition fees. Those were means-tested charges and therefore the manifesto policy was less redistributive than tax reform. When doing tax reform you have shift a lot more money than small increases in tax take to get small increases in public spending which is why the overall £10bn tax shift needs every £2bn raised fairly as it can get!

That would also deal with Mike German's concern that we are not raising enough money to meet spending commitments such as the abolition of tuition fees and free home care for the elderly. In fact it is proposed to find that money from our subsequent spending review but it will help to have an extra £2 billion in hand from the tax package as a starting point as well.

Mike also argues that we want to keep the current Welsh settlement on tuition fees until at least 2009. As it stands at the moment the Welsh Assembly pays the top-up fees for Welsh Students at Welsh Universities. This is affordable but it may become more difficult to pay for them if the Government lifts the cap on top-up fees in 2009 and raises the fee grant at the same time. My view is that we should be anticipating that and pledging to at least retain the present settlement for the whole of the next Assembly term. We should not be hedging our bets at this stage. This though is a debate that will be had as we draw up our manifesto for the elections and no doubt will feature in it as a fully-costed pledge in one form or another.

Hope you get a chance to visit the ALDC agm where they are launching the new version of "Theory and Practice of Community politics" my former landlord, and best man at my wedding, Bernard Greaves is one of the key speakers.
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