Date published: 2006/06/08
The BBC says:
Sir Menzies Campbell has unveiled a radical shift in the Lib Dems' approach to tax with a 2p cut in the basic rate.
The £20bn cost of the cut would be partially met by a £7bn increase in "green" taxes on cars and flights.
The other £13bn would come from the "very wealthy" via capital gains tax changes on second homes and shares.
Tony Blair attacked the plans as "completely unrealistic" and said airlines would simply avoid the new taxes by re-routing flights.
...
The party wants to introduce income tax cuts for everybody - 2p off the basic rate, and two million of the lowest paid will be lifted out of income tax altogether.The new environmental taxes would mean hitting airlines and people who drive "gas guzzlers" - with road tax likely to rise to over £2,000 for the most polluting new cars.
Sir Menzies said: "My aim is to cut the burden of direct taxes on the low paid and Middle Britain and pay for it by raising taxes on those who pollute the environment and on the very wealthy."
But it is not yet clear what the party means by "very wealthy", nor is there a figure of just how many people would be affected by the plans, although it is understood to be "hundreds of thousands rather than millions".
In part that would involve ending capital gains tax breaks for people who have second homes or large share portfolios.
Robert Chote, of the Institute of Fiscal Studies, warned that environmental taxes were difficult to manage.
"One dilemma they face here is that the more successful environmental taxes are in getting people to pollute less and getting people to drive less, obviously the less revenue you get in," he told BBC News.
If this is the best the Lib Dems can do they should pack up and go home. There is nothing wrong with environmental taxes but they should be based on two principles: the tax should be proportional to the (alleged) damage done to the environment; and everything should be so taxed. Otherwise the tax is unfair.
The Lib Dem proposals are short on detail, probably because there is little detail backing up the announcement. But the specific proposal mentioned to charge £2000 annual road tax for "the most polluting new cars" fails miserably on the first principle, and since there is no mention of charging environmental tax on electricity and gas used to heat houses, the second principle is also lacking. So the Lib Dems are just posturing in the usual comfortable middle class way, putting style above substance.
The reason the road tax proposal fails on the first principle is that it is based on car ownership which bears little (or no) relationship to environmental damage. So whether you drive your car 50000 miles in one year (so causing a lot of environmental damage) or 5000 miles (so causing a lot less) you pay the same amount. The only real environmental tax when it comes to cars is fuel duty. (Indeed that is the only substantive environmental tax currently existing in the UK.)
And although Campbell does not mention it specifically here, the other day his environment spokesperson suggested that airline flights should be taxed. This also fails the first principle. It should be airline fuel that is taxed, not airline flights. Otherwise airlines that have fuel inefficient airplanes pay the same amount as airlines that have fuel efficient ones, which is stupid.
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