Robin Hood Tax

Liberal Democrats have proposed creating an immediate new levy on bank profits at a rate of 10%.  This would be a direct recognition of the beneficial and explicit taxpayer support which banks have received: the UK banks owe their very existence to the British taxpayer.  Some banks such as RBS, Lloyds-HBOS and Northern Rock have received direct taxpayer bailouts.  However, all have benefited from the explicit guarantee that none of them will be allowed to fail.

The Governor of the Bank of England has estimated that the UK banks have received the equivalent of £1 trillion in taxpayer support.  Further, the banking industry is unique in having the taxpayer acting as its safety net and the Liberal Democrats believe that this should be recognised. Our banking levy would be expected to yield around £2bn next year and this revenue would be used for the moment to tackle the UK structural deficit – thus ensuring that the banking sector helps to pay for the problems it has in part created.

The concept of a financial transaction tax is a good idea in principle and is something which the Liberal Democrats would be happy to pursue.  Although I am told that it would be technically possible to levy a small transaction tax on sterling transactions alone, it would be much better to have a common approach by leading financial centres including the US, German, French and Swiss governments. The proceeds from such a tax could provide a modest source of revenue to be used for funding overseas development.

The ʻTobin Taxʼ concept has been advocated for many years and progress has been hampered by a number of issues.  These have included technical problems with its implementation as well as competing and sometimes conflicting claims from its proponents over how to use the revenue raised. Demonstrating that the tax can work, by securing the co-operation of Europe and the US, should have priority over elaborate plans which are unlikely to be realised.

Senior Tory agrees with Nick Clegg

Norman Tebbit, not a natural Lib Dem supporter, seems to have come out in favour of the Lib Dem proposal for increasing the income tax threshold to £10,000.

In his blog, Norman says:

“And I hate to say it, but only one party leader seems to have grasped that if you construct a system where unskilled people are worse off by taking a job than by staying on welfare, they remain trapped in poverty …. but the two main parties are unwilling to bite on that bullet and commit themselves to raising the income tax threshold from £6,475 to  something like £10,000 or £12,000.”

Our objective in increasing the personal threshold is a matter of fairness.   Some of our better paid citizens pay less proportionally of their income in tax than our lowest paid citizens.  This is simply not fair.    A Liberal Democrat Government would introduce this radical tax switch, which would see the wealthiest and polluters pay their fair share and allow us to raise the income tax threshold to £10,000 – meaning four million of the lowest paid earners will pay no income tax at all and average earners will get a £700 tax cut.   This is one of our Four Steps to a Fairer Britain.

Wealthiest would benefit most from Tory’s marriage tax break

We’ve had the Tory inheritance tax policy – which would benefit the rich.  Now we have the Tory Tax Break tax breaks for marriage.  This would cost billions of pounds but would do nothing for the two in five children in poverty who live in single parent households.   There is no evidence that a tax break for marriage will encourage people to get married or stay married.  The money the Tories would direct towards this tax policy would be better spent tackling the poverty of all children, whether their parents are married or not.

Interestingly, last year Conservative Ken Clarke said “I got rid of the married couples allowance (when I was Chancellor) … I really don’t think it’s anything to do with politicians whether you (get married) and mot of the younger people I know don’t seem very keen on it.  My view of Conservatism is that it’s not for us to tell you (what to do through) the tax system … my wife didn’t put up with me because I was getting £150 by way of tax allowance.  This is social engineering for God’s sake and when I joined the party we weren’t in favour if it.”

The Tory proposals will do little to help many families in Mitcham and Morden.  However, the Liberal Democrat tax proposal to make the first £10,000 of income free of tax  would take around 4 million of the lowest paid out of tax altogether.   This would be a real benefit to people living in this area.