MP issues challenge to Chancellor – make taxes fairer and greener

15/03/2007

Ahead of next week’s budget Mike Hancock, MP (Lib Dem – Portsmouth South) has issued a challenge to Gordon Brown to make taxes fairer and greener.

He is challenging the Chancellor to take more than two million people out of paying income tax at all by reducing the 10p tax rate to zero. And take 1.3 million people out of paying the top rate of income tax by raising the threshold to £50,000 per year.

Mike Hancock said: “More hard-working people than ever before have been dragged by this Labour Government into the net of having to either start pay income tax even though they are on low incomes or having to start paying the top rate of tax. It is outrageous that someone working as little as 18 hours a week at the minimum wage has to pay income tax. The Lib Dem reforms will make the system fairer for those on low and middle incomes. I challenge Gordon Brown to take the same action in this Wednesday’s budget”

The Lib Dems are proposing three income tax cuts. Reduce the 10p tax rate to zero. Cut the basic rate of income tax to by 2%. And raise the point where people start paying the top rate of income tax to at least £50,000. The point where people start paying employee NI contributions would also rise.

Examples of the reduction in income tax and employee National Insurance Contributions that people would make include:

Teacher on £25,000 (single person household): £807
Average household (double earner on a combined £25,000): £1,114
Nurse on £20,000 and police officer on £25,000: £1,514
The income tax cuts will be paid for in two ways – cutting tax breaks for the super-rich and environmental taxes that will cost the average household £331 a year. The environmental taxes proposed include increasing the Vehicle Exercise Duty on cars that emit the most CO2 to £2000 while the VED for cars in the bottom three bands will remain the same or be reduced. Mike Hancock said: “People want to do their bit for the environment. Cutting income tax and putting taxes on the production of harmful greenhouse taxes is the way forward to help combat global warming.”

And with the Lyons Report on local taxation also due to be published next week with the budget, Mike Hancock has re-iterated his call to scrap the council tax and for a Local Income Tax (LIT) based on the ability to pay. People would pay approximately 4% of their income after their personal allowance in LIT – saving the average household over £400 a year and particularly helping pensioners. Mike said: “Every council has had to put its tax up dramatically under the ten years of this Labour Government. I am pleased in that in Portsmouth, the Lib Dems managed to get a below average increase this year but the Council Tax is becoming increasingly difficult for people to pay. Local Income Tax based on the ability to pay would mean those on average or below average incomes paying less.”