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Lib Dems Attack Tories' Election Tax Plans

by Jason Gorringe, Tax-News.com, London

17 April 2001

The UK's prestigious Institute of Fiscal Studies has said that a key Tory tax proposal will benefit only richer people - and written answers from the Treasury to parliamentary questions put by Liberal Democratic MPs show that the effect of three of the Tories' leading tax policies will be concentrated on higher income groups.

The news was immediately seized on with delight by Matthew Taylor, Lib Dem economic spokesman. 'It's lose-lose for Middle England under the Tory plans,' he said.

Tory Shadow Chancellor Michael Portillo's proposals are:

To raise the level of income at which people pay the top rate of tax, at a cost of £500m, to cut the basic rate of income tax on dividends and savings income, at a cost of £2.97bn, and to increase personal allowances for pensioners by £2,000, at a cost of £950m.

According to the Institute of Fiscal Studies, the top tax band reform would benefit only richer families: 'Of course the impact of such a reform is felt almost exclusively at the top of the income distribution where families containing higher rate taxpayers are concerned.'

Treasury figures showed that 92.5% of taxpayers are either not liable to income tax from dividend income or pay less £50, while 60% of pensioners pay no tax at all.

Increase personal allowances for pensioners by pounds 2,000, at a cost of pounds 950m. This would be of no benefit to typical pensioners, of whom 60% pay no tax.

Mr Taylor mocked the Tories' campaign themes, saying: 'This policy won't penetrate the pebble dash, and will leave Mondeo Man and Worcester Woman cold. Michael Portillo has abandoned the policy of tax cuts for all and replaced it with a policy of tax cuts only for the rich.

'Conservative policies fail both the pocket book and the public service test. Everybody knows you can't get something for nothing. Tory tax cuts will go to the rich at the price of schools, hospitals and pensions for everyone else.'

Tories shrugged off the Lib Dem offensive, accusing them of colluding with Labour, and saying that the Treasury was covertly helping to undermine the Tories' election campaign.

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