The Liberal Democrat manifesto includes a summary of costings, showing that by 2024/25 there will be an extra £63bn of spending, funded by taxes and the “Remain bonus”.
The headline tax measure is a 1p increase in income tax, at all rates (basic, higher and additional) which raises £7.7bn in 2024/25 and will be ring-fenced to be spent on the NHS and social care.
The revenue will be neither levied nor spent in Scotland.
The separate capital gains tax-free allowance will be abolished, raising a further £5.7bn.
Whilst it may seem unfair that those with capital gains get a separate allowance (on top of the personal income tax allowance, currently £12,500) and so abolishing it seems an easy measure to raise revenue, it will have an impact on those with smaller gains – for example, from share schemes in relatively small businesses – and is likely to mean that many more people have to complete a self-assessment tax return. Retaining the allowance, perhaps at a lower level, could be a simpler measure.
The other personal tax measure is the abolition of the marriage tax allowance, but the fact that this is only predicted to raise £630m illustrates how small, and relatively complex, this allowance is.
Individuals will also be affected by the proposal to reform air passenger duty, raising almost £5bn, by levying much higher charges on those who are the most frequent flyers.
This is part of an ambitious “green agenda”, with a clear move towards much lower emissions targets. However, one item not mentioned is any increase in Fuel Duty – some years ago, Parliament committed to increasing the rate of fuel duty in line with inflation, but in practice the level of duty has been frozen since 2011.
The projected increase is still included in the Office for Budget Responsibility (OBR) baseline forecasts, and it is therefore likely that fuel duties would rise under the Liberal Democrats – meaning that petrol prices will go up.
The business tax measures include a rise in corporation tax to 20 per cent (compared to the Conservative Party proposal of 19 per cent, and Labour’s 26 per cent), which would take it back up to the rate it was at prior to 2017.
But there is also a proposal to raise a further £5.7bn from anti-avoidance measures, and to triple the proposed Digital Services Tax from 2 per cent to 6 per cent, raising a further £1bn.
Both of these proposals are likely to be difficult to implement, and may well not raise as much as anticipated – for example, the total HMRC Tax Gap figure for avoidance in 2017/18 was only £1.8bn.
The manifesto is silent on any possible changes to inheritance tax or entrepreneur’s relief, both of which have received significant attention elsewhere.
Overall, the manifesto sets out ambitious spending plans, with a clear summary of where most of the money will come from – with higher taxes on both individuals and companies.