Thursday, July 12, 2007

LibDem Tax Plans

The LibDems often tell us that they hate the headline grabbing antics of Labour and the bandwagon jumping of the Conservatives. Yet they managed to achieve both today with their tax cut plans. Apparently they will cut tax, raise tax thresholds and support businesses, all by increasing the tax on the super-rich and increasing green taxes. Apparently this is fairer. It may well be, but it also doesn't add up. Iain Dale does a pretty good fisk of the policy here.

However, and I urge the Tories not to fall into this trap either, politicians seem to think that green taxes are dreadfully popular and will pay for nearly everything you want (in the same way that "cutting costs" used to). Green taxes are a good thing, but they are not sustainable. If you are taxing bad things like flying short haul then you have to accept that people will not fly (if not, then the green taxes aren't very green and don't work!). If people don't fly then you don't raise the tax. And thus your tax take falls. So how will the LibDems pay for their tax cuts in two, three, four years time? Will they then raise tax again or cut spending on health and education? Green taxes sound good but in themselves cannot have a tax policy built upon them.

Please, by all means, raise green taxes to support the environment - but don't think it will last to provide meaningful long-term tax cuts. It won't.

It may have got short term headlines, but I think this may cause the LibDems a long term headache.

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