Danny Alexander unveils tax aspiration at Lib Dem conference and announces �500m 'Growing Places fund' to kickstart infrastructure projects
The Liberal Democrats should aspire to fight the next general election on a ticket of taking everybody on the minimum wage ? �12,334 a year ? out of paying tax, Danny Alexander has said.
In the first exposure of private Lib Dem work conducted on tax policies since they went into coalition 16 months ago, Alexander specifically proposed an income tax threshold of �12,500.
The chief secretary to the Treasury, who is a close ally of Nick Clegg, also set out the "next steps in our plan for growth", including a pot of �500m drawn from "unallocated funds" across Whitehall.
Although this is not new money, the cash will now be disbursed with more urgency to kickstart infrastructure projects currently struggling for credit with the hope of galvanising private spending.
It is the third indication from the Lib Dems that they intend to concentrate their efforts on infrastructure projects which do not bust the headline deficit reduction plan but at the same time makes a subtle shift in emphasis towards greater public spending.
Clegg last week made a speech on the subject, announcing that Alexander was now in charge of 40 projects across Whitehall, ensuring they are implemented rather than delayed.
The business secretary, Vince Cable, also evoked the policies of Franklin D Roosevelt in the 1930s when he called for a "new deal" for capital investment in an interview on Saturday with the Guardian.
As well as further schemes to drive capital investment, and the aspiration that the party go further in its bid to take the low paid out of tax, Alexander also set out measures to increase tax revenues.
He repeated a pledge made in last year's conference speech that there would be a clampdown on tax evasion with 2,250 HMRC staff cracking down on evasion and avoidance. He said the government was already raising �2bn in this way.
In one month's time an "affluent team" will begin looking at the 350,000 wealthiest taxpayers who each earn more than �2.5m a year, further to the 5,000 who are already monitored: "These are the people who pay or should pay the 50p rate of tax," he said.
"My message to the small minority who don't pay what they owe is simple, I agree with the chancellor. "We will find you and your money and you will pay your fair share."
He was sanguine about the 50p rate, not as trenchant in defence of keeping it as some of his colleagues. He said: "Fair taxation of the wealthiest is key to our deficit reduction plan. Of course, if a better way can be found to raise the money from this group, I will be willing to consider it."
Instead he placed an emphasis on how to push ahead with the Lib Dem income tax policy: "In the next parliament, I want us to go further; our aspiration should be that someone working full time on the minimum wage should pay no income tax at all. An income tax threshold of �12,500 ? think what that would do to work incentives, think what it would mean for basic fairness. Let's put that on the front page of our next manifesto."
The coalition agreement pledges that both parties in government will raise the income tax threshold to �10,000 by the end of the parliament and it is one of the policies the party is proudest of.
The policy has received support on the centre-right of the political spectrum with Tories sympathetic to its aims of cutting tax for the less well paid, but it has been criticised for being poorly targeted; in its original form this was a tax cut enjoyed by all, regardless of income.
The policy also has its Tory critics within the cabinet who fear a policy that removes people from paying tax would sever the relationship between government and the people.
Now the Lib Dems have committed themselves to raising the tax threshold still further, putting on the record an early indication of how they might seek to differentiate themselves from the Conservatives towards the end of the parliament.
Alexander's speech was occasionally heckled by one audience member with a shout of "rubbish" when Alexander criticised the Labour policies of Gordon Brown ? a reminder that some delegates in the hall do not agree with the party leadership's decision to back plans to eliminate the structural deficit by the end of the parliament.
Alexander also announced the creation of a new fund composed of money from existing budgets but newly targeted at galvanising economic growth in local areas.
The announcement is part of a shift of emphasis towards capital spending and infrastructure within the deficit reduction plan. The coalition is currently trying hard to devise policies that will stimulate the British economy without busting either of the two targets they hope to hit at the end of the parliament ? eliminating the structural deficit by 2014-2015 and bringing down the debt-to-GDP ratio.
While insistent they will not resile from the so-called "plan A" both on and off the record, the new imperative is to find ways of using existing capital spending commitment to encourage the private sector to part with their capital and increase the amount of capital in the economy.
Last week Clegg delivered a speech on the subject, announcing Alexander would be in charge of corralling government departments to ensure capital spending committed actually ended up getting spent and no part of Whitehall ended up underspending.
On Friday, the business secretary Vince Cable, published a pamphlet for the CentreForum thinktank in which he suggested that alongside a new round of quantitative easing, he also believed new infrastructure projects were necessary including new roads built as toll roads.
This would have the advantage of encouraging the private sector to embark on a capital investment with a certain revenue stream not coming from the public purse.
Insisting his proposals amounted to a radical Keynesian package ? using language and ideology not associated with the Conservative chancellor, George Osborne ? Cable said that in the face of a stagnating economy ministers had to "pull all the levers available to government. We are not powerless."
Cable said: "It was four years after the Great Crash that Roosevelt came in and several years before they could do anything. Dams started being built 10 years after the Great Crash. What I have set out is a Keynesian approach to a demand crisis, but operating in a new world in which governments are highly constrained by these very febrile international financial markets. We constantly have to pay attention to them."
Now Alexander will disburse a "Growing Places fund", which he hopes enable the creation of local infrastructure across England.
"�500m to deliver key infrastructure and unlock development and create jobs. Providing a one-off upfront capital investment to kickstart developments that are stalled due to cash flow problems or lack of confidence.
"Putting local areas in the driving seat, enabling local government to invest in the key strategic infrastructure projects that they have identified as priorities and getting people into work."
Alexander said: "As Liberal Democrats, our judgments about what needs to be done should be driven by the liberal economy we want to build ? sustainable, balanced, competitive, fair. To get there we must break down the vested interests ? the enemies of growth that stand in the way of future prosperity."
"Too many businesses are being held back by congested roads, slow railways, inadequate broadband. Now more than ever, we need to get on with this work."
Source: http://www.guardian.co.uk/politics/2011/sep/18/lib-dems-income-tax-threshold
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