Wealthy have "Moral Responsibility" to pay more tax - Campbell

4.07.00pm GMT Tue 12th Sep 2006

Sir Menzies Campbell has said that he sees it as a "moral responsibility" to make the wealthy pay more in tax in spite of his plan to drop the Liberal Democrats' commitment to a new 50p top rate of income tax. In an interview with the Financial Times, the Lib Dem leader said the proposals to be put to next week's conference made up a firmly redistributive programme of tax cuts for the low paid and increases for the rich. But instead of a new higher rate of income tax, Sir Menzies wants to raise an extra £10bn from the wealthy by raising capital gains tax and cutting some tax relief. The proposals have been described as 'the most progressive policies proposed by any party in recent history'. [FT - Campbell interview]

NB. The Treasury Team is holding a web forum on the tax plans on Thur 14th Sept, 6 - 9pm. People can visit the forum during those hours or before and send in questions and comments. Questions and responses will be posted on the forum for anyone to read. [Tax Proposal Forum]

Summary of tax reform proposals

• Cut the basic income tax rate by 2p

• Raise income tax and employee NICs threshold to £7,185, lifting two million people on low income out of tax

• Raise top rate income tax and employee NICs threshold to £50,000, taking 1.3m people out of upper tax rate

• Boost business by cutting corporation tax by 1%

These tax cuts would be offset by the following measures:

• Tackle climate change by taxing pollution, including increases in road taxes for high-polluting cars

• Simplify the tax system, cutting the number of tax rates and reliefs for both individuals and businesses

• Raise the upper earnings limit for employee NICs to £50,000

• Reform capital gains tax, scrapping taper relief and reducing the CGT allowance to £1,000

These proposals would be revenue neutral overall. The net effect of the proposals would be no change in the amount of revenue raised, but a tax system which would be fairer, greener and simpler.