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PRE-BUDGET REVIEW A MISSED OPPORTUNITY - WELSH LIB DEMS
November 24, 2008 5:05 PM
Speaking after the Chancellor made his Pre-Budget Report Statement, Liberal Democrat Shadow Secretary of State for Wales, Roger Williams MP, and Liberal Democrat Shadow Secretary of State for Work and Pensions and Cardiff Central MP, Jenny Willott, have accused the Government of missing an opportunity to help those on low and middle incomes.
In his statement, the Chancellor announced a temporary 2.5% cut in VAT, which is expected to cost £12.5 billion. The cut comes into operation on next Monday and will last until the end of 2009, when the 17.5% rate will be restored.
The Chancellor also admitted that borrowing would rise to £118 billion by next year, and would stand at 8% GDP in two years, the same level as in the recession of the 1990s.
He also announced that the rise in the tax threshold introduced to help those who lost out as a result of the Government's decision to abolish the 10p tax rate, would be made permanent and increased from £120 to £145.
The Chancellor announced plans to introduce a higher tax rate of 45% for those earning £150,000 or more from 2011. He also announced that fuel duty and duty on tobacco and alcohol would rise to make up for the fall in VAT receipts, and there would be an increase of 0.5% in National Insurance contributions, though the threshold will be increased to £20,000.
Commenting, Roger Williams said:
"The Government have missed a golden opportunity to rebalance the tax system in favour of those on lower and middle incomes.
"Everyone knows that down the line we're all going to be paying more taxes. The Government may be talking about a new top rate of tax after the next election, but that will not raise all the money that is needed, and I am worried that they are using this as a smokescreen for tax rises across the board - we have seen a hint of this with increases in National Insurance.
"The Chancellor is starting to sound like one of those adverts for sofas; buy now and pay nothing until after the election. The Government have crowed about the mess the Tories made of the economy, and rightly so, but now they are expecting borrowing to rise as high as in the Tory recession.
"I am pleased that the Government have acknowledged that there is a need to make the richest few pay more, but the statement contained no measures to end the scandal of millionaires paying less tax than their cleaners. Capital gains should be taxed as though it were income."
Commenting, Jenny Willott said:
"A cut in VAT is welcome and will put some money back into the economy, but the best way to help people on lower and middle incomes is to put as much cash as possible back in their pockets.
"A 4p cut in the basic rate of tax would be a simple and fair way to give people the help they need during these trying times. We need a permanent rebalancing of the tax system to reduce the gap between rich and poor -this cannot be done with temporary cuts to indirect taxes, like VAT.
"Those who lost out as a result of the 10p tax debacle need more support as they are the people struggling most right now. The Government should be doing more to put more money in their pockets but we will all need to study the smallprint before we can be sure that this isn't another tax con.
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