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The Liberal Democrats have proposed a massive tax raid on Britain’s wealthiest people to fund investments in the NHS, social care, childcare and an increase in overseas aid.
Sir Ed Davey on Monday launched his party’s manifesto with a promise to boost capital gains tax, along with higher levies on frequent flyers and private jet travel.
Banks, digital services companies, oil firms, tobacco companies and polluting water companies would also pay more as part of a £26.8bn package of revenue-raising measures.
The most striking move is a plan to raise an extra £5.2bn from capital gains tax, with a new rate of 45 per cent for gains of more than £100,000 and 40 per cent for gains of between £50,000-£100,000.
Davey said: “Most people will pay the same or less. If you are very, very wealthy — 0.1 per cent of the population — you will pay a lot more tax. Multimillionaires and billionaires will pay a lot more.”
Lib Dem officials said they expected 30 per cent of theoretical extra revenues might be lost through “behavioural change” as wealthy individuals try to avoid the new rates.
Labour leader Sir Keir Starmer has refused to rule out raising capital gains tax rates if he wins the election, although officials insist the party does not need to raise taxes to fund promises in its manifesto.
Meanwhile, the Lib Dems forecast they would raise an extra £3.6bn with a sliding scale for air passenger duty, where people taking one international flight a year would be better off, but those taking more than three flights would be hit.
Davey also proposed a new 4 per cent tax on share buybacks to encourage companies to invest, and a supertax on private jet flights.
Lib Dem officials wryly note that Prime Minister Rishi Sunak would be among those to lose most from their tax plans, which puts the party to the left of Labour.
The party’s manifesto includes plans to overhaul the water industry and clean up sewage from Britain’s waterways, as well as improve social care provision, both of which are signature Lib Dem policies.
Davey committed to restoring Britain’s former promise to spend 0.7 per cent of national income on overseas aid, with more money allocated for welfare reform, tackling child benefit, and supporting rural communities.
Like the other main parties, the pro-European Lib Dems say relatively little about Brexit. A section on p112 of the manifesto says the party sees rejoining the EU as “our longer term objective”.
In the meantime, the party would seek to rejoin the single market, but only “once ties of trust and friendship have been renewed”, and the “damage” caused by Brexit had been repaired.
The capital gains policy comes on top of £4bn the party has previously said it would raise by reversing tax breaks given to banks over recent years.
Daisy Cooper, Lib Dem deputy leader, said the party’s plan to improve health and care provision in the UK is “going to require an additional £9bn per year and we’re going to get that money by taxing the big banks and billionaires”.
The party insists it is being more transparent about how it would fund its programme than the Conservatives and Labour. Paul Johnson, of the Institute for Fiscal Studies think-tank, has claimed there is a “conspiracy of silence” between the two bigger parties.
On capital gains tax, gains between £5,000 and £50,000 would be taxed at 20 per cent. The highest rate of CGT at the moment is 24 per cent for the higher rate earners.
Meanwhile, the lowest capital gains earners would be protected from the tax rise, with an increase in the annual tax-free capital gains allowance from £3,000 to £5,000.
The money raised from the tax overhauls would be used to inject £9bn into the NHS and social care services, the party said. This would enable it to hire 8,000 more GPs, improve early access to mental health services, offer a free care allowance to every person in Britain, and increase pay for care workers.
Meanwhile, the Lib Dems have not echoed Labour’s plan to remove the VAT tax break for private schools. Party officials privately admit the policy would not go down well in some of the Lib Dems’ wealthy seats, such as the Richmond Park and Kingston constituencies in south-west London.
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