Budget Resolutions - Income Tax (Charge)

Part of the debate – in the House of Commons at 2:02 pm on 1st November 2018.

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Photo of Vincent Cable Vincent Cable Leader of the Liberal Democrats 2:02 pm, 1st November 2018

My hon. Friend is absolutely right. I am amazed that the Chancellor is not even aware of this. Many mainstream schools have seen cuts in teaching assistants, teachers, curriculums and so on. This will be compounded because there is nothing in the spending envelope that offers any hope that the problem is going to be dealt with.

That leads on to the question about how tax should be raised. The Government have offered tax cuts in the form of lifting the tax threshold for low earners and for middle earners. In principle, lifting the tax threshold is an attractive policy. I like to think that I was the author of the one we introduced in government. It was strongly resisted by the Conservatives at the time, but they have subsequently adopted it and claimed credit for it. The attraction was not just that poorer people pay less tax, but that the marginal rate of tax is removed when they move out of the welfare system, which encourages work.

In an ideal world, everybody should have a tax cut, but there is an issue about priorities here. Extending the tax cut to the upper threshold is, frankly, something that the country simply cannot afford. At a time when universal credit is being only partially financed following the cuts made by the Osborne Budget three years ago—only about half of that cut has been reinserted—that should be the priority. It is absolutely wrong that priority has been given to lifting the upper tax threshold. Because the two proposals are amalgamated in the Budget statement, I and my Lib Dem colleagues—and, I hope, others—will vote against this.

Beyond that, what this country now needs above all is a mature, grown-up debate about how the end of austerity will be managed. It is going to involve higher taxes for almost everybody—obviously, mostly at the top end, but there is going to have to be a general increase in taxation. I am afraid that the Chancellor’s pretence that we can have our cake and eat it is not realistic. It will rebound on him and on the Government.