UK LibDems Outline 'Robin Hood' Tax Policy

by Robert Lee, Tax-News.com, London

24 September 2009

The Liberal Democrats (LibDems) – the UK's third political party behind Labour and the Conservatives – have proposed a number of tax changes that would see wealthier individuals taking a bigger tax hit should the party win next year's election.

Speaking at the party’s annual conference in Bournemouth on September 21, LibDem Treasury spokesman Vince Cable said that a LibDem government would exempt low-income taxpayers from income tax. "It is wrong that people on the minimum wage should be dragged into tax. Lifting the threshold to GBP10,000 would mean that 4 million low paid workers and pensioners would no longer have to pay any income tax,” he said. "So, my priority would be to cut income tax for those on low and middle incomes. Any such tax cut would be paid for by closing tax loopholes and privileges enjoyed by the relatively wealthy …"

The proposals include the introduction of a new tax – which has been dubbed a "mansion tax" by the UK media – of 0.5% on residential real estate with a value above GBP1m, as determined by Land Registry valuations. It is estimated that around 250,000 taxpayers would be affected by such a tax, each paying on average an additional GBP4,000 per year.

The proposals have, however, drawn criticism from other parties and from within the LibDem party itself; indeed, the mansion tax was brushed over during party leader Nick Clegg's keynote speech on Wednesday, in which he focused instead on tax cuts for low-income taxpayers, support for the growing number of unemployed and for public services, pushing for a "polluter pays" environmental tax, and attempts to distance himself and his party from claims that they are too similar to the Conservatives.

While a LibDem victory at the next election is deemed by most political pundits as unlikely, some have pointed to the possibility of a hung parliament owing to the huge swing the Conservatives would have to achieve to defeat the Labour government outright. In that event, the LibDems could taste power.

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