Headphones in, press play and read on.

This is what I’ve been waiting to hear:

The Liberal Democrats will fight the next general election with a pledge to cut income tax bills by £700 for people on low and middle incomes.

The party will promise to raise the income tax personal allowance to £10,000 by closing tax loopholes exploited by big businesses and the wealthy.

The internet is positively stuffed with my repeated opinion, in threads, on message boards, and here, that this is by far the most important and liberal step any liberal party wishing to reform the  tax system could take. I have also said that the first party to realise the need to do this, whoever it is, will reap a large and just reward. Let’s see if I’m right (and let’s see if Labour don’t follow suit on Wednesday).

Note: This is not the tightest and most beautifully arranged recording of the Hallelujah chorus I have ever listened to. I chose it because of the fabulous your-muzzer-was-a-‘amster accents and because, rather like us, the Saint Severin Choir at Church Saint Jean-Baptiste de Grenelle in Paris may not be the most co-ordinated lot, but by god, they’re enthusiastic.


  1. Great.
    I’m sure there’s some devil in the detail, and we need to make sure we are reducing the entire tax burden on the poor, not just shuffling it around, but this is a great start.
    And I haven’t (yet) seen it being cast as ‘hammering the rich’ which makes this even better.

    Just hope that the overall tax burden is being decreased at the same time (ie not raising any other taxes)

  2. Yes, I fully concur Alix. Great move which I have also posted about here.

    It wouldn’t be at all surprising to see this, or a variant of it magically appearing in the budget on Wednesday. Darling/Brown have form for this sort of “lifting” after all.

  3. So if I understand this correctly, the difference between this and the previous policy of 4p off basic income tax is not the size of the tax cut (about £20bn), and not who it is aimed at (low to middle income earners), but how the cut impacts on those targeted. Raising the threshold weights the cut more towards the poorest earners.


    1. Yup. About 4m people will be taken out of tax altogether, and everybody else earning all the way up to £100,000 gets around £700 cut off their tax bill – same amount in absolute terms for all, but obviously proportionately far more important for the lower end.

      One caveat is that I don’t know exactly how near the £20bn this package is. They’re not putting a figure on it as they say they can’t know until the budget(s) between now and the election have happened. Still chewing over whether I think that’s a good thing or not.

      1. Yes, but they won’t be taken out of tax altogether! The working class pay enormous amounts of indirect tax, most of which are unannounced & people dopn’t think about & may not be aware of.

        We’re parting with a lot more than it says on our payslips, & too often that goes unannounced because it is found to be convenient by politicians.

        1. Agreed, completely, however there are definite ways of getting around that anyway, and these should be done—I’d personally like to see the amount paid in VAT displayed on any item purchased, but that’ll probably not happen immediately.

          Ideally we replace most indirect taxes with a purely pigouvian excise, but, as with LVT, that has to be a mid to long term objective.

          This policy is clear and easy to explain, and it deals with the 10p people more effectively than anything else.

  4. Closing one loophole only ever opens more. Tax avoidance is a battle of wits in which the state is largely unarmed. The best brains in the country are tax lawyers and accountants whose skills, if redeployed to productive purposes by the simplification of the tax system (the **only** tax reform they need fear) would create far more value.

    Unless you introduce exchange controls and close the borders, uncompetitively progressive taxation is pretty much optional for those with the wherewithal for jurisdiction-shopping. I promise you, you would not “save” a penny from anti-avoidance. The bureaucrats would be out-thought, as they are every year.

    I do agree with the principle that tax cuts are best implemented by raising personal allowances though. Far too many people are taxed in Britain and there are bureaucratic cost savings to be made by taking small taxpayers (much of whose money is consumed in collection costs) out of the system altogether. Have the “LibDems” costed how many taxmen they can fire with 4 million taken out of taxation altogether? That might help fund it.

    1. Hehe. I like that idea!

      “The best brains in the country are tax lawyers and accountants”

      I used to be one. *Preen*. (I was bloody awful at it).

      I really should attach a massive health warning to any tax post I write which would say “If I was starting from scratch, the tax system would look NOTHING like this.” Because you’re quite right, it’s an arms race and from the govt’s point of view an unwinnable one.

      But we can’t start from scratch. Not for legislative or administrative reasons – it’d be fiddly and involve a hell of a lot of blind alleys, but it could be done. It’s more for credibility reasons. To explain: the problem we most often face as liberals (and libertarians even more so) is that the changes we want as a basic precondition of a liberal Britain are so fundamental and massive that people literally cannot compute them. How often have you been in a conversation with someone who has said “Yeah, but what about [insert current and highly specific problem here?]”. And you have to say “Your problem wouldn’t exist in my universe! A whole load of other problems might that we can’t even predict!”

      Take the Lib Dem “direction of travel” of devolving 75% of all revenue and spending decisions to local level, for example. That’s just bonkersly unimaginable to most people. “Yeah, but most councils are rubbish.” Not with that budget they wouldn’t be. And these people actually, without a trace of irony, laugh at how far from reality these ideas are. They actually laugh about the fact that they can’t conceive of anything better than what’s here.

      Anyway, ahem, sorry. This is all by way of saying, if I were designing the tax system from scratch, I would probably start with LVT and tweak from there, and I would avoid as far as possible starting the loopholes arms race. But we can’t do that at mainstream high party level. It’s too whacky for much of the party, never mind the media and the electorate. So we’re stuck with trying to chase down abuses.

    1. That’s because you’re permanently logged in and auto-subscribed to all posts on here. There’s been a ticky box since the brought in notifications, but it defaults too off (poo) and breaks accessibility guidelines by not being available in the tab-field thingy (that has a technical name).

      Which means I keep missing it 😦

  5. Well, I’m neither a Lib Dem nor a tax accountant, but I used to be a singer, so I will confine my opinions to the bit of this post I understand:

    – the sopranos should remember to breathe before trying for a top F#. (The sop.’king of kings’ at 2.24 is fucking painful)

    – they should hire real tenors instead of baritones who’ve been at the pastis.

    – it doesn’t much matter what speed you go at, as long as it’s the same one for everyone. I think the brass section got a bit excited.

    But bless the timpanist though. He was having a ball. And the accents are simply wonderful.

    I like the sound of lower taxes.

    1. As an Economist, LibDem, and a singer, I couldn’t get to anywhere beyond 1:30 before I wanted to kill myself rather than listen to it. But then I wouldn’t be able to enjoy my future tax allowance, abut which I thoroughly agree with the consensus here. A great step in the right direction.

  6. In the beginning welfare and tax system was built on the premise that those with a lot would pay a lot, those who were middling would pay a middling amount, and those who were poor would largely be helped, but with taxes on things that were not necessary. Now those with a lot have or are bunking off with all they have, we have created a new nation of the poor, and the ones in the middle or amongst the working poor who can’t get out of it are paying for everything. It is not sustainable, and the attempt to make it work by fiddling the books has failed. The consequence is that most of us are going nowhere, and those who are rich have now moved their money away. This is why the politicians are awarding themselves ever longer holidays to enjoy their loot.

  7. Might I just say, however, not to put a dampener on this per se, that Gordon Brown has already mooted the idea back in January (though his was £9000) and it has been UKIP policy for a year.

    Now, we can lay claim to it being our idea first in that it was set out as one of the aspirational policies in the Tax Commission three years ago, but we didn’t announce it, preferring instead thesound bite of the “lowest income tax since 1916”.

    However it is noticeable that Lloyd-George’s first “permanent” income tax had a threshold (£200 in 1909) of nearly £80,000 in 2007’s money worth (by average earnings measure) or nearly a £100,000 (in the per capita GDP measure). The higher rate threshold from 1909 (£3000) is worth £1.2m and £1.5m today by the same two measures.

    Naturally, I don’t believe that a wholesale shift to LVT is impossible. I did some spreadsheets a couple of years ago now that showed how, whilst exempting the bottom 1/5th of land values relative to local district land values, you could raise enough to pay a £5200 Citizen’s income (c. £375bn when you include a declining age related portion for under 18s) based on residential land alone – then there would be airport landing slots, electromagnetic spectrum rent, corporate land ownership LVT, resource taxes, road user fees and so on to spend onanything else you wanted to throw money at.

    But for interest, have a look at Chris Dillow’s latest post analyzing just how little we do spend on benefits (excluding contributory entitlements), and think what a difference a distribution of £5200 to everyone might achieve.

  8. entirely agree – absolutely delighted and have also been arguing for min wage to be tax threshold for a long time!

    Good luck in the awards this evening btw…

  9. I like the policy.

    Hate the Messiah. Overblown, pointless, ridiculously repetitive. Maybe a trauma hanging over from schooldays.

    If there is a God, (and he is sufficiently vain to appreciate such hagiographic behaviour) then surely he would have started saying “get to the point” long before the end of half the pieces

  10. Alix, you are the best! Now Jack has stopped, you’ll walk it next year.
    It’s amazing to be there when this expansion of the means of communication are blossoming – it reminds me of when the Beatles recorded Strawberry Fields for TOTP in Knole Park in Sevenoaks (when I was at school there): only in retrospect do you realise the historical significance of the event. I love your insightful posts – long may yu continue.

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