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15 September 2008

‘Reintroducing fairness’

'By cutting taxes for those on low and middle incomes, and taking the poorest out of tax altogether,

By Vincent Cable

The fiasco over the 10p tax rate has highlighted more than ever the corrosive sense of unfairness created by Gordon Brown’s tax system; and the Tories have devoted themselves to making a virtue of having no policies at all, except those which favour dead millionaires.

On Monday Lib Dem Conference backed a new tax policy, which will bring fairness back into the tax system. This move separates us from the Tory-Labour cosy consensus on the level of taxation and marks us out by recognising that taxation is a means to an end, not beneficial in its own right.

It extends our existing commitment, passed by conference in Brighton last year, to cut the basic rate of income tax by 4p, funded by closing loopholes which benefit the very wealthy and environmental taxes. We recognise the benefits that wealth creators bring, but there has to be a sense of fairness in the tax system.

This is already by far the most radical tax package on offer in British politics. But the Liberal Democrats want to go much further. We propose cutting government spending by £20 billion, cancelling wasteful government projects such as ID cards and scrapping BERR (Department for Business, Enterprise & Regulatory Reform). We will use these savings to pay for our priorities, such as in education and health.

Any money to spare after spending on our priorities will be ploughed back in tax cuts for low and middle income earners who need it the most. It is ludicrous that the poorest people still pay a higher proportion of their income in tax than the richest do. Income inequality now is as bad as when the Conservatives took office and wealth inequality (of net assets) is worse. By cutting taxes for those on low and middle incomes, and taking the poorest out of tax altogether, we will finally be able to return a sense of fairness to the tax system.

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