- The Guardian, Wednesday September 19 2007
The party is confident, based on its own polling, conducted by YouGov, that the vast majority of voters believe growing levels of inequality in Britain are unacceptable and need to be tackled.
The Lib Dems did not define what they meant by rich when they asked voters whether they thought the gap between rich and poor had become too wide. Vince Cable, the party's Treasury spokesman, said the tax package would help 90% of voters, and start to hit households which earn more than £68,000 a year.
The former Liberal Democrat leader Charles Kennedy drew strong applause when he said he was challenging head-on "the usual suspects and all the usual sources" who claimed the party was committing electoral suicide by hitting the rich.
He said: "We have been here before. I was a few years ago a member of that much smaller parliamentary party which on the eve of that general election committed us all to a penny on income tax devoted to education.
"The sceptics said, 'You are committing electoral suicide.' It was one of our most salient, telling policies."
The precise impact of the tax package on individual voters is hard to gauge, since it depends on a wide range of variables including levels of council tax currently paid and pension contributions. The party backed a 4p cut in the basic 20p rate of income tax which would be financed by higher pollution taxes - from petrol and car taxes to a tax on aircraft emissions - plus what amounts to an extra 10p in the pound on higher incomes. It would be levied via national insurance contributions, while average families could be £1,000 a year better off, Mr Cable said. Avoidance of inheritance tax, set at a higher threshold, would also be made more difficult.
Lord Newby explained to delegates that the Lib Dems' "clear and principled alternative" to Labour and the Tories would also replace council tax, which hits poorer families hardest, with local income tax, reinforcing local accountability.
People earning £250,000 a year would pay three times as much as under council tax. The package would also end so-called taper relief on capital gains tax and restrict tax relief on pension contributions to the basic 16p rate. Such measures would further hit higher rate earners.
Mr Cable later said: "Our critics focus on the remaining 10%, saying we are punishing the rich. But if you are well off you can very substantially reduce your tax bill if you pursue an environmentally friendly lifestyle, using an environmentally friendly vehicle and flying less."
Later the party voted to raise £3bn by removing means-tested tax credits from 2.5 million people, and using the cash to set up a £1.5bn fund to help the poorest children in schools and to raise child benefit by £5 for every family, so taking 400,000 out of the government's definition of child poverty.
Announcing a review of the sustainability and affordability of public sector pensions, party spokesman Danny Alexander warned that failure to deal with the potentially explosive problem now risked a "backlash" against teachers, police officers and nurses in future.
"We want to tackle this issue now, before we get a few more years down the line and there is a backlash potentially against public sector workers, which a rightwing government - if we ever get such a thing again - could take advantage of," he told a briefing for journalists.
The impact:
How well-off would you be under the Liberal Democrat tax plans?*
Household
· Young professionals (two incomes, £50,000), Change of: - £1,669
· Pensioner couple (total income £15,000), Change of: + £1,563
· Young professionals (two incomes, £38,000 and £25,000), Change of: + £372
· Teacher (single person household, £25,000), Change of: +£574
· City banker (£250,000 single income), Change of: - £11,800
· Four nurses (earning £20,000 each), Change of: + £1,669
*Includes environmental taxes, pension tax relief and capital gains tax changes with pension tax relief based on 9% of income, and assuming environmental taxes affect households equally with a negative impact of £289 per household
