Lib Dems’ tax plans set to hammer middle earners

Sep 17 2007 by Deborah James, Liverpool Daily Post

THE Liberal Democrats were caught up in a damaging row over plans to “hammer” middle-income households with tax hikes, as the party’s annual conference got under way yesterday.

Insisting the wealthy had done “too well” under Labour, party leader Sir Menzies Campbell put forward a radical tax shake-up – including removing 40% tax relief on pension investments for high-earners.

Sir Menzies insisted 90% of people would be better off under the package, which includes slashing the basic rate of income tax by 4p to a 90-year low.

But, in a pre-conference interview, the Lib-Dem leader agreed that the remaining 10% – those households earning more than about £70,000 – would be “hammered”.

The admission could prove costly across swathes of the South, where many families with £70,000 incomes and huge mortgages would not consider themselves rich.

Asked by the BBC if the Lib Dems planned to “hammer” the 10% who would be worse off, Sir Menzies replied: “Yes, those households whose income is in the order of £70,000 per annum.”

Senior Lib-Dems later sought to clarify the leader’s comments, insisting households on incomes of £70,000 to £80,000 would only pay “a little bit more”.

Nevertheless, the row came on top of renewed grumblings about Sir Menzies’ leadership. At 66, many consider him too old and the party’s poll ratings have dipped to around 15%.

Yesterday, Lord Rodgers, former Lib-Dem leader in the Lords, branded Sir Menzies’s performance “disappointing”, adding: “There’s a feeling that there is a lack of energy and an absence of direction.”

And a poll of 130 Liberal Democrat constituency association chairmen – including those of all the party’s current 62 MPs – found nearly a third were not convinced their leader was doing well.

However, few think Sir Menzies will be challenged for the leadership before the next election. Nick Clegg, the home affairs spokesman, said he could “absolutely rule out” a challenge.

And Sir Menzies dismissed suggestions that his support had collapsed, claiming: “We are, in truth, the real opposition, because the Conservatives and the Labour Party agree about so much.”

The tax plans – which would also add at least £10 extra duty on short-haul flights and hike road tax on gas-guzzling 4x4s from £300 to £2,000 – will be debated tomorrow.

The well-off would also be hit by replacing council tax with a local income tax and by closing loopholes on capital gains tax, exploited by private equity bosses.