Liberal Democrat leader Nick Clegg used his keynote speech at the party’s conference in Glasgow yesterday (7 October) to pledge an increase in capital gains tax to 35 per cent to pay for a further rise in the income tax-free personal allowance to £2,500.
FTAdviser’s sister paper the Financial Times reported that Mr Clegg wants to fund an across-the-board income tax cut for 29m people by raising CGT - a tax that applies mostly to higher earners - from 28 per cent to around 35 per cent.
Mr Clegg told the BBCthat Conservative party leader David Cameron had “plagiarised” his party’s longstanding objective of raising the personal allowance to £12,500 by 2020. The cost of increasing the personal tax allowance to that level was estimated at £1.5bn.
The coalition has increased the personal allowance substantially to £10,000 in this parliament, in what was initially seen as a major concession to the Lib Dems by their Conservative partners. The move has proved popular and both are presenting it as a victory from their time in government.
Mr Clegg said that if the party stays in power next May - a likely outcome given the polls - it is also looking at making changes to entrepreneurs’ relief, which allows people who sell or close their business to pay capital gains tax at only 10 per cent on profits of up to £10m.
The party reckons it can bring in the remaining funds needed from cracking down on tax evasion, while cutting the amount of capital gains individuals can take tax-free by lowering the annual allowance from £10,900 to about £2,500.
“I had to fight tooth and nail against David Cameron and George Osborne, who kept saying to me privately: ‘this is your tax cut. If you want this Nick, you are going to have to do this, that or the other’,” Mr Clegg told Sky News.
Last week, chancellor George Osborne outlined plans to save around £3bn by freezing most working-age benefits for two years, while Mr Cameron promised £7bn of income tax cuts.
In his speech, Mr Clegg said: “It’s easy to promise a tax cut, it’s much more difficult, especially in the current economic situation, to say who pays.
“We are clear that we will pay for this tax cut for millions of working people by asking wealthier people to contribute more. This is about priorities.
“The Conservatives may have copied our flagship policy but they would pay for it in a deeply unfair way – by hitting the working poor. And the Conservatives want to cut taxes for the better off by nearly five times as much.
“The difference between the Liberal Democrats and the Conservatives is that we want to cut taxes for working people, paid for by the wealthiest; they want to cut taxes for the wealthiest, paid for by the working poor.”
peter.walker@ft.com
