April Tax Changes

This April will see the introduction of a number of changes to the tax and welfare system that have been championed by the Liberal Democrats.

• A tax cut promised. A tax cut delivered – April 6

Cutting taxes for working people is our number one priority. It is so important to Liberal Democrats that we put it on the front page of our manifesto, argued for it in the coalition negotiations and are delivering it in government.
From this Saturday more than 20m working people will be paying £600 a year less than they were under Labour, as the tax threshold rises to £9,440. Someone earning the minimum wage will have seen their Income Tax bill cut in half.

• April 8th: State Pension “Triple Lock” – April 8

On Monday the full basic State Pension will increase by 2.5%, or £2.70 a week, to £110.15 per week. This is in addition to last year when the triple lock ensured pensioners benefited from the largest ever increase to the basic State Pension of £5.30 per week.

As a result the basic State Pension will represent a higher share of average earnings than at any time since 1992.

Lib Dem Manifesto: “We will uprate the state pension annually by whichever is the higher of growth in earnings, growth in prices or 2.5 per cent.”

• Private Jet Levy – April 1

The Liberal Democrats want to ensure that pollution for flying is properly taxed. But under Labour’s rules, families going away on their holidays paid more tax for flying than millionaires using their private jets.
The Liberal Democrats are making sure that millionaires flying in their private jets pay the same tax as someone going on holiday abroad.

From April 1st, Air Passenger Duty has been extended to private jets and smaller aircraft. A new higher rate of tax will also be payable on flights aboard luxury aircrafts of 20tonnes and above with fewer than 19 seats.

• Mansion Tax for tax dodgers – April 1

Labour’s tax dodgers’ charter allowed multi-millionaires to use complex tax wheezes to buy expensive properties and avoid paying their fair share of tax. The Coalition has already introduced a 15% stamp duty on the purchase of homes worth over £2million by certain companies.
From April 1st, those who wrap up their properties in companies to avoid tax will now have to pay a Mansion Tax of up to £140,000 every year. And they will now have to pay 28% capital gains tax on any profits when they are sold. Taken together, these three changes will raise over £250million over the next five years

• Tycoon Tax – April 6

It isn’t fair that someone earning millions of pounds a year can use all kinds of tax loopholes and reliefs so that they end up paying less tax on their earnings than those faced by ordinary workers.

Tax reliefs exist for good reasons, to promote activities such as business and investment. But it is unfair that reliefs can be used without limit to reduce tax liabilities, so that some taxpayers with very high incomes have very low tax rates.

We are stopping the wealthiest people in society from exploiting Labour’s tax loopholes by introducing a tycoon tax to put a cap on previously unlimited income tax reliefs.

Individuals will be limited to the greater of £50,000 or 25 per cent of their income in tax relief.
Tax relief on charitable donations will be exempt from the cap following consultation with the charity sector.

• Carbon Price Floor: April 1

The Liberal Democrats are determined to encourage a step change in low-carbon investment in the power sector in the most affordable and cost-effective way.
The Carbon Price Floor is a tax on fossil fuels used in the generation of electricity, which over the long term will ensure the UK stands to benefit from cleaner, cheaper and more reliable sources of low carbon energy
By establishing a minimum carbon price, it sends an early and credible signal to drive billions of pounds of investment in low-carbon electricity generation now, ensuring the UK’s long-term energy security.

Labour and tax

When Ed Miliband and Ed Balls were in the Treasury Labour’s top rate of tax was 40p. It was 40p for 12 years and 11 months of their 13 years in power.
50p was a temporary, desperate measure in their dying days. Until those final few days, Labour cut income tax for millionaires every single year.
Don’t let Labour forget:

1. Labour cut Income Tax for millionaires, by raising their personal allowance, every year until their final month in office. 
2. Over the five years of this Parliament under the Coalition, a millionaire (earning £1m p/a) will pay £381,000 more tax on their income (income tax and NICs) than they did under the last five years of the Labour Government. 
3. Labour cut Capital Gains Tax for the richest every year, and slashed the rate they paid from 40% to 18%. We have increased the rate to 28%. 
4. Despite their U-turn, Labour’s fiasco over 10p tax rate left more half a million low-paid workers worse off.
5. Under the last Labour government the poorest fifth of the population paid a greater proportion of their income in tax than the richest fifth.

Trident

The Liberal Democrats position on the renewal of Trident is clear – we don’t support a like-for-like replacement.

The world had changed and so has the defence assumptions that underpinned the position since the cold war. We support nuclear disarmament on a multilateral basis and we also agree that it is absurd to spend billions and billions of pounds to replace Trident especially at a time of austerity. That is why the Alternatives Review on Trident is exploring both security and cost issues regarding replacement.

A decision on renewal won’t be made until 2016.

We believe that MPs from all parties and senior officers in the military should accept there are credible and compelling alternatives to continuous at-sea deterrence, and Danny Alexander has warned that the Treasury did not have “a magic pot of money” to pay for a new generation of Successor submarines.

The Coalition Agreement states that ‘We will maintain Britain’s nuclear deterrent, and have agreed that the renewal of Trident should be scrutinised to ensure value for money. Liberal Democrats will continue to make the case for alternatives’. Therefore, any expenditure on Trident that has been made so far is within the terms of the Agreement of maintaining the current deterrent until a decision on its future has been made.

International aid to Pakistan
This International Development Committee report rightly sets out the urgent need for the incoming Pakistan government to deliver tax reform. That reform must start from the top down, with elected politicians and the wealthiest in Pakistan showing a commitment to reform by submitting tax returns and paying tax due.

Following the election we will make available practical assistance to the incoming government to help deliver reform of the Pakistan tax system and work with the International Monetary Fund, but tax and economic reform must take place.

Liberal Democrat chairman of the committee Sir Malcolm Bruce, said there was no issue with providing aid to help Pakistan’s poorest people, but “it was a question of how justified it is to increase it rapidly at a time when wealthiest people in Pakistan are paying little or no tax”.

Family nurse partnership programme
To build a fairer society, every child should have the opportunity to lead a healthy and fulfilling life. Family Nurse Partnerships play a major role in supporting children in some of the most disadvantaged circumstances to have the very best start in life.
Around 11,000 families are already benefiting from personalised support from family nurses, but we are determined that we should go further, and that is why we will expand the programme to support 16,000 families by 2015.
Earlier this year, the Government in partnership with organisations in healthcare, local Government and the voluntary and charity sector pledged to work together to improve children’s health. Expanding the family nurse partnership programme is just one of the things the Government is doing to give some of the most vulnerable children the vital support they need in their early years of life.

Welfare
We must ensure that work always pays, that a life on benefits is not better than being in work and a life on benefits must not be allowed to rob people of achieving their potential. This is crucial to delivering a fairer society enabling everyone to get on in life.

Nine in 10 workers will be better off from the Coalition’s changes. Fundamentally this is thanks to the Liberal Democrat plan to raise the tax threshold. The majority of working people will be getting a further income tax cut in next month’s pay packet.

The Coalition Government is increasing working age benefits and tax credits in cash terms, by one per cent. This follows a 5.2% rise, in line with inflation, last year. Average wages have only risen by 1.6% and many people in the private sector and everyone in the public sector have faced a pay freeze.

We will not balance the books on the backs of the poorest and Liberal Democrats have stopped those who have been calling for £10bn to be cut from the welfare budget, as well as proposals to remove housing support from vulnerable young people, restrict benefits for large families, and place a freeze on benefits across the board.

Universal Credit will make it easier for people to see that it’s always worth going to work, and exactly how much of their income they will keep. In this way we intend to encourage people who may have been out of work and claiming benefits for a long time to move gradually into work, starting with a few hours a week.

The IFS acknowledge that Universal Credit will substantially reduce child poverty. It will make work pay for the first time, tackling in-work poverty and lift more than one million people, including 450,000 children, out of poverty.

The new system is being carefully piloted to ensure a smooth introduction.

Spare room subsidy – ‘bedroom tax’
The Government is ending the spare room subsidy to encourage better use of the available social housing stock, support people in over-crowded accommodation and on waiting lists, and to contain growing Housing Benefit expenditure.
People renting in the private sector only get housing benefit for the number of rooms that they need, and it is only right that those people living in social housing face the same rules.
There are almost 1 million spare rooms being paid for by Housing Benefit for working-age, social rented sector tenants. This is not affordable when there are more than 250,000 households living in overcrowded accommodation in the Social Rented Sector in England.
The under-occupancy penalty will never be applied to pensioners, people with severely disabled children or people who need round-the-clock care.
In March this year the Liberal Democrats successfully secured important new regulations to give full protection to foster carers and families of members of the armed forces, as well as discretionary exemptions for children with disabilities. This builds on our earlier successful campaigned to provide local authorities with an additional £30 million of Discretionary Housing Payments to help disabled people and foster carers.

Minimum Wage

The minimum wage has brought substantial benefits to a large number of workers, especially women and part-time workers, and it has established basic minimum standards in the labour market.

The Low Pay Commission report last year and made recommendations to increase the minimum wage. We supported the recommendations and the minimum wage rose by 11p per hour in October. The Low Pay Commission argued that a large increase would carry too big a risk to jobs.

It is important that we have a minimum wage that helps as many low paid workers as possible, while at the same time making sure that we do not damage their employment prospects by setting it too high.

In tough economic times, Liberal Democrats are focusing on making sure people keep as much of the money they earn as possible, instead of asking employers to take on this burden. By raising the income tax threshold to £10k, Liberal Democrats are making work pay, and helping all those on low and middle incomes.

Ed Balls, 1991: “The allure of a minimum wage is deceptive and should be resisted … Fostering a high wage, high skill economy is the only way to reverse Britain’s relative economic decline and to generate the resources to eradicate poverty. But the minimum wage is not the answer. If anything the minimum wage will make it even harder to achieve these ends.”

 

Police cautions

The Coalition has announced it will undertake a review into the use of police cautions for criminal offences in England and Wales. It is vital that the public have confidence in the system, and it is right to expect that serious and repeat criminals should not be given a police caution.

Cautions, issued at the discretion of police, are a way of sanctioning criminals without going to court. But serious concerns have been raised with the Government that cautions are being used to deal with repeat offenders and for those who commit serious crimes, contrary to MoJ advice. The use of cautions spiked under Labour, but has steadily fallen along will a fall in overall crime.

The review will look at the way cautions are used and consider whether there is any need for changes to current laws or guidance.

Fairer society

We are cutting income tax and fuel duty to help hard pressed families; supporting businesses to create jobs and cracking down on those who seek to avoid or evade paying their fair share.

In the Budget we announced:

• Cancelled Labour’s fuel duty rises – fuel will now be 13 pence per litre than under Labour plans. It will now be £7 cheaper to fill up your car than under Labour. Fuel Duty has now been frozen for almost three and a half years. 
• £1bn boost for childcare, to help working parents – worth up to £1200 a year for each child.
• Reduced beer duty by 2 per cent from this weekend (March 25th), worth a penny on a pint. And thanks to great campaigns from Greg Mulholland, cancelled Labour’s escalator for beer duty next year and instead increased it by inflation after 2014, all to support our community pubs. 
• A tax avoidance and evasion package worth £4.6bn in additional revenue over the period, including disclosure agreements with Jersey, Guernsey and the Isle of Man and new automatic exchange of information with these jurisdictions. 
• Confirmation that we will introduce Steve Webb’s single tier pension one year ahead of schedule in April 2016, to provide clarity and confidence for those saving for retirement.
• Confirmation that we will implement the £72k cap on reasonable social care costs one year ahead of schedule in April 2016, drawing on the Dilnot Commission’s recommendations, and extend the means test to give more people access to financial support for their residential care costs.

Stronger economy

British Chamber of Commerce chief economist David Kern has this week said the organisation’s survey results suggest the economy had continued to grow in the first three months of 2013.

This is extremely welcome news from the BCC, but we must continue to do all we can to repair the damage left by Labour and the banks. We must ensure all focus is on delivering a stronger economy, and a fairer society enabling everyone to get on life.
That is why the Budget announced that the Coalition is investing in house building, increasing our longer term capital budgets, providing funding for Vince Cable’s industrial strategy, incentivising further employee ownership, and introducing a new national insurance employment allowance to help small and micro businesses hire their first employee or expand their workforce.

• A £5.3bn housing package to boost home ownership and kick start the building of new homes, including an extra £225million for another 15,000 affordable homes on top of the 170,000 that we are already delivering, and delivering Zero Carbon Homes. 
• A new £2,000 employment allowance towards their National Insurance Contributions bill, to help small and micro businesses who want to hire their first employee or expand their workforce.
• Funding of Vince’s Industrial strategy; £1.8bn of funding to support strategies in 11 key sectors. The Aerospace Technology Institute was launched earlier in the week by Nick and Vince and will provide a total of £2.1bn of R&D support over 7 years, with the Government and industry contributing equal shares.

Legal Aid

At around £2 billion a year we have one of the most expensive legal aid systems in the world. We firmly believe it is an essential part of the justice system, but can never lose sight of the fact legal aid is paid from public money and resources are not limitless.

Legal aid will continue to be provided to those who most need it, such as where domestic violence is involved, where people’s life or liberty is at stake or the loss of their home. But in cases like divorce, courts should be a last resort, not the first; and evidence shows that mediation can often be more successful and less expensive for all involved. There will be some instances where people do need to go to court in family law cases, for example if domestic abuse is involved. So we have ensured legal aid remains available for this type of case.

There is consensus on all sides of the house that there needs to be reform within the legal aid system. Liberal Democrats in both chambers have worked to ensure those who are most vulnerable are protected.

• The previous Labour Government failed to get to grips with this issue hosting more than 30 consultations since 2006, but delivered no systemic reform.
• The Coalition inherited a legal system that cost more than £2bn a year and was one of the most expensive systems in the world – £39 per head compared with £18 per head in New Zealand; Spain and France as low as £5 per head.

Liberal Democrats have ensure protections for vulnerable groups, including cases involving domestic violence and forced marriage proceedings, sexual assault and abuse claims, mental health, special educational needs, and international child abduction.

• Labour manifesto 2010: ‘To help protect frontline services, we will find greater savings in legal aid and the courts system’
• Sadiq Khan: “Let me be clear: had we been in government today, we, too, would have been announcing savings to the legal aid budget. That is a reality that we all have to acknowledge.”(15 November 2010, Oral Statement by Justice Secretary on the Legal Aid and Civil Cost Reform)

Road infrastructure

Britain’s roads are the arteries of the economy and the Government is determined to ensure that we invest properly in them. That is why we’re already spending more than £3bn in this Parliament on major road building projects as well as hundreds of millions on targeted schemes to remove bottlenecks and reduce delays up and down the country.

Immigration

The Liberal Democrats are laying the foundations for an immigration system that embodies this nation’s instincts and its values: our openness and tolerance on one hand; our sense of fair play, on the other.

We want to stay a tolerant Britain, and to that end we will be zero-tolerant of abuse. All the British people ask is for a system they can have confidence in. We hear that, and we are delivering it.

We are not entering into a rhetorical arms race on immigration, we are going to be a sensible voice in this debate. Immigration has made a positive contribution to this country, both economically and culturally, and we cannot allow it to be hijacked by extremists. As Nick said, we are “immensely proud of this nation’s wonderful diversity and openness”.

Labour’s mismanagement and chaos deeply damaged public confidence in our immigration system, and that is what this Coalition Government has been putting right.

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