Category Archives: lib dems

Tax lesson Nick Clegg should learn

According to the Sunday Times there is apparently to be  a minimum tax of 20% applied to ‘tycoons’:

“Clegg disclosed that he had decided on the need for a tycoon tax after he read that Mitt Romney, who is on course to be the American Republican presidential candidate, had admitted he was paying just 13.9% tax on his multi-million dollar earning.”

Is the Deputy Prime Minister not aware that the UK and US have different tax systems?

Mitt Romney can pay a low headline tax rate because the US tax system a) treats dividend income very differently from wage income, b) has a low capital gains tax rate, and c) allows very substantial exemptions, e.g. for mortgage interest.

Who are these UK ‘tycoons’ that Clegg thinks pay less than 20% tax in the UK? None of the features of the US tax system that allow rich people there to pay low rates applies in the UK.

Indeed the only one that did apply – b) – no longer applies because Nick Clegg and his party succeeded in raising the capital gains tax rate from 18% to 28%. That dealt with the complaint of at least one UK private equity boss that he paid a lower tax rate than his cleaner by virtue of paying only 18% capital gains tax on his ‘carried interest’ earnings.

Why then is Nick Clegg apparently making UK tax policy on the basis of an article he read about what Mitt Romney pays in the US?

End the  Foreign Resident Capital Gains Tax Exemption on UK Property

The only relevance of that article to the UK is that wealthy Americans can buy and sell property in the UK without paying UK capital gains tax.

Therefore, if the Deputy Prime Minister is genuinely keen to close tax loopholes that benefit the wealthy, then he should work with the Treasury, not just to end the stamp duty abuse, but to end the capital gains tax exemption on property for non-residents.

Why should foreigners be able to buy and re-sell investment properties in central London, and extract perhaps tens of millions profit, without paying capital gains tax, when UK residents are taxed on capital gains?

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Child Benefit 40% Tax Policy in Trouble

The government’s plan to withdraw child benefit from households in which one or more taxpayers pay 40% income tax is in serious trouble.

I have just come from a parliamentary debate in which Christopher Chope, MP for Christchurch, exposed a whole series of problems with the policy to which the minister, David Gauke MP, had few if any answers. The government line is simply not convincing, one suspects because the policy was drawn up in a rush before our 2010 Conference without being properly thought through.

More seriously still from the government’s perspective, it is not clear that it has a majority in Parliament for the policy. The LibDems, of course, love the idea, but Labour appears set to oppose it, having somewhat opportunistically deemed the households affected to belong to Ed Miliband’s rather elastic “squeezed middle”.

Meanwhile, a very significant number of Conservative backbenchers have concerns and, in many cases, these are sufficiently serious that I would expect them to be expressed in the voting lobbies.

The policy is particularly toxic for colleagues who want to see the government do more to promote marriage and the traditional family, given the lack of movement so far on the government’s promise to recognise marriage in the tax system. However, the policy is also objectionable for those who want the tax system to be neutral between personal choices, since it clobbers single earner householders, most usually with a stay-at-home Mum, relative to dual-earner couples.

Ministers cannot answer colleagues who question them about the sheer unfairness of one family with a single earner on £45,000 losing their child benefit, while a family with two earners, each earning around £40,000, get to keep their child benefit. Certainly, I don’t feel that I am currently able to give constituents a satisfactory answer as to how this is fair, particularly when we continue to pay child benefit to many thousands of children in EU countries such as Poland and Lithuania, where costs are much lower, even when they have never set foot in the UK.

Given the four figure sums involved, the equivalent of £4,000 of marginal gross income for a family with three children, it is no surprise that many people have contacted their MP on this issue. I have had several dozen constituents raise it with me, but another MP says that he has been contacted by over a thousand people. Adding to the weight of such representations is the fact that, at least in my case, they do not appear to be part of an orchestrated campaign.

Colleagues had expected the Treasury to come forward with proposals to mitigate the unfairness of the policy, but now it is suggested that this would be too complicated and difficult, given the implications of household means testing for independent taxation.

If so, the Treasury would be well advised to use the Budget to drop this policy. The alternative may be that it is defeated on the floor of the House.

The Price of Coalition

Subjugation to the Human Rights Act and the European Convention on Human Rights, and the consequent release of Abu Qatada, is part of the price we pay the Liberal Democrats for the votes of their MPs in the House of Commons.

Last week at Prime Minister’s Questions, David Cameron raised the intriguing possibility that we may not need to pay that price much longer. He noted that Labour “even support our police commissioners so strongly that droves of Labour MPs are going to quit to try to become them”.

Yesterday I followed up, asking the Home Secretary “We cannot currently repeal the Human Rights Act because the Liberal Democrats will not let us. However, so many Labour Members are running in the police elections that, come November—if they all win—it is possible that we may have a Conservative-Democratic Unionist party majority. Will we use it?” 

If even a few Labour MPs step down to become police commissioners, or big city mayors with Gisela Stuart and Peter Ainsworth for example keen to run for Birmingham and Coventry, it would be a crucial development because the current parliamentary arithmetic that makes us dependant on the Liberal Democrats is so tight.

Current House of Commons

Con 305                Lab 256    SNP 6   Lab ‘rainbow’ allies 9

DUP 8                    LD 57                (PC 3 + SDLP 3 + NI Other 2 + Green 1)

= 313                     =313                                     

(Sinn Fein and Deputy Speakers excluded)

Fear that Labour could cobble together a ‘rainbow’ coalition with the Liberal Democrats and several minor parties (although not the SNP) caused us to offer the Liberal Democrats concessions for a coalition which included no action on the EU or the Human Rights Act / ECHR.

If three or more Labour MPs step down in November, or just one if a Conservative MP were by then to have replaced Chris Huhne in Eastleigh, then the putative Labour, Liberal Democrat and ‘rainbow’ alliance would not have the votes to win a confidence vote in the Commons.

We could embark on repeal of the Human Rights Act and an EU referendum/repatriation and, if needed, force an election under the Fixed Term Parliaments Act whether Ed Miliband and the Liberal Democrats liked it or not.

Cameron v Clegg On EU Treaty: Analysis

Originally posted in the Daily Express, 12 December 2011

OUR Prime Minister was as good as his word.

He said that if he could not protect the city from EU regulation then he would veto any new EU treaty.

The Deputy Prime Minister agreed this moderate and reasonable demand, but it was too much for Chancellor Angela Merkel and President Nicolas Sarkozy. They want control of the City.

Therefore the Prime Minister said “no” and, for the first time since joining the then Common Market in 1973, we vetoed a European treaty.

David Cameron was as good as his word and said no to the EU treaty
Mark Reckless, Conservative MP

The other EU countries can create the political and fiscal union that they want, essentially a country called Europe, but Britain will be outside.

In the words of one of our most respected City figures, Terry Smith, Britain will be “as isolated as somebody who refused to join the Titanic just before it sailed”.

Of course, we wish our friends in Europe well, and want them to fit lifeboats for their currency.

However, Greece and Italy and Spain cannot compete in the same currency as Germany. Having the Germans tell their governments to make more cuts won’t help.

If they break free though, and return to national currencies, then they could sell to us competitively again, we could afford holidays there, and their economies would grow again.

We want to be friends with France and Germany too, to allow them to develop Europe as they would like, without us forever standing in their way.

They must in turn let us be an independent country, trading with Europe, but governing ourselves. It is better to be friendly co-operative neighbours, than for us to stay in their European home as a surly and unwelcome tenant.

Our veto logically leads to a better future, where the EU countries retain the EU institutions they spent 55 years developing, and where we have free trade access and democratic government, the EU deal with Switzerland.

Nick Clegg and the Liberal Democrats said before the last general election that we needed a real referendum on Europe. The Coalition is now working together to put Britain back on track.

If Nick Clegg wants to put the case for Britain to be part of a country called Europe, then we can have a referendum, rather then fight a general election.

The Daily Express made the right call, the UK/EU relationship is changing fundamentally, and our Prime Minister is standing up for Britain.

Mark Reckless On The Eurozone Crisis

Mark Reckless MP discusses the Eurozone crisis with LibDem MEP Chris Davies on Radio 4’s PM programme.

EU Referendum now ‘When, Not If’

We are told that the Foreign Office Sir Humphrey has asked each government department to report on opportunities (and inevitably for the FO ‘risks’) to repatriate powers from the EU. The fact that every department is involved shows how far the EU’s power intrudes and, of course, the principle of the acquis communitaire implies that once powers are taken by the EU they are not to be returned.

The only way we can even hope to get key powers back from the EU is to confirm that the result of any renegotiation will be put to the British people in a referendum, so that they can decide if they wish to stay in the EU on those terms. Only if there is the prospect of such a referendum will other EU countries or, equally importantly, the Whitehall mandarins, be incentivised to get power back.

Last Monday’s vote was on the principle of an EU Referendum and on this issue Conservative ministers cannot blame the LibDems for not doing what Conservative MPs and the electorate want, and holding a referendum on EU membership. That is because holding such a referendum was LibDem policy prior to the coalition. Indeed, until ten days ago, you could still sign up on the LibDem website to support their campaign for an In/Out referendum.

Some LibDems seemed to split hairs in last Monday’s debate, suggesting that their manifesto promise was for the next time there was a fundamental change in the EU, but Nick Clegg has now confirmed in the Observer that now is such a time, writing:

“the European landscape is about to change. European integration has always evolved in fits and starts, driven by crises and upheaval. Now it’s happening again and the question is: how do we in the UK respond?”

The LibDems answered their leader’s question in their manifesto. There should be a national referendum on EU membership. Last Monday’s debate and vote showed that this is also what Conservative MPs want.

We even now have the perfect opportunity for such a referendum – November 2012 – to coincide with the first elections for Police and Crime Commissioners (PCC).

Sir Humphrey is fighting a rearguard action against democratisation of policing, agreeing a Protocol to curtail PCC powers with the Association of Chief Police Officers (ACPO) after the police bill was through the House of Commons, and now trying to insist on Whitehall oversight of police budgets. Only a decision to hold a referendum on EU membership, and why not with those PCC elections in November 2012, will get Sir Humphrey to do the people’s bidding.

Back the Libdem Manifesto

Chris Huhne said yesterday that LibDems could not agree with Conservatives to bring power back from the EU to Britain. Thankfully, they don’t need to.

As I (at one with Peter Bone it seems) argued on Newsnight last night all the Coalition needs to do is carry through the LibDem manifesto commitment to have an In/Out Referendum on Europe. Then we can keep the Coalition together, both sides can make their case, and the people can decide.

We now have the perfect opportunity for a cost-effective referendum on November 15th 2012 when we will be voting for the first elected Police and Crime Commissioners. The case for a referendum on Europe is now becoming overwhelming. Add your voice by signing up at http://www.peoplespledge.org/.