FactCheck checks it out
The Liberal Democrats could well be the deciding party if this election ends up in a hung parliament. So, even after mammoth manifestos from Labour and the Tories, we were raring to give the Liberal Democrat manifesto for 2010 the proper FactCheck treament. Here’s what we came up with.
The analysis
“We have already identified over £15 billion of savings in government spending per year, vastly in excess of the £5 billion per year that we have set aside for additional spending commitments. All our spending commitments will be funded from this pool of identified savings, with all remaining savings used to reduce the deficit.”
In the last few weeks, Labour and the Conservatives have battled it out over who has the most coherent and prudent policy on ways to cut the deficit. We can cut more than the government, the Tories claim, and we’ll start now. Your plans are based on a “flimsy four page document” and would put the recovery at risk, Labour shouts back.
Today’s manifesto launch was the Lib Dems’ turn at austerity. “There isn’t a line or policy in this book that will cost money that we haven’t accounted for with savings elsewhere,” Clegg claimed in his speech. So did the party fare any better than their two main rivals in spelling out its policy?
Well, FactCheck will have a more detailed look at the numbers in the next few days, but for now we will defer to the Institute for Fiscal Studies. The IFS says the Lib Dems have indeed included more extensive and detailed tax and spending proposals than the other two.
But, they say, “the document is less clear than it could be in setting out how these proposals fit into the party’s overall plan to repair the public finances.”
In terms of cutting the deficit, the plans once again depend on whether the sums the Lib Dems put forward for tax and savings add up, and on taxes, the IFS says “it is very hard to be sure”.
“The poorest fifth of the population pay a higher proportion of their income in tax than the richest fifth.”
How unfair the tax system in Britain is, claim the Lib Dems, if you’re poor you pay proportionately more. But the Institute for Fiscal Studies says the comparison is “meaningless at best and misleading at worst”.
At face value the statistics are right – if you take Office for National Statistics data for 2007-08, add together the direct taxes and national insurance contribution with indirect taxes and calculate that as a percentage of income, then the poorest fifth of households paid on average 38.7 per cent of their income in tax, compared to 34.9 per cent for the richest fifth.
But, the IFS points out, because the poorest fifth get more of their income from benefits and tax credits their “net taxes” tell a very different story. On average, it says, the poorest fifth (with an average income of £11,105) gain £2,151 from the tax and benefits system while the richest fifth (with an average income of £74,247) contribute £24,259.
The IFS also queries the way in which indirect taxes are dealt with. “We get a different impression of the impact of indirect taxes by ranking people by their level of spending,” they say.
“That shows, for example, that VAT is progressive as a percentage of spending, since zero- and reduced- rated goods (such as food, children’s clothes and domestic fuel) are necessities that are bought disproportionately by the poor.”
“Under a Liberal Democrat government, you will not have to pay any income tax on the first £10,000 you earn. This will put £700 back into the pockets of millions of people on low and middle incomes and free 3.6 million more people on low incomes from having to pay any income tax at all.”
It’s one of the central planks of the Lib Dems’ tax reform plans – the poorest will pay less and the richest will pay more, the promise.
And yes, as FactCheck found after Vince Cable’s performance at Ask the Chancellors, the numbers do stack up.
3.64 million people do indeed earn between the current tax threshold and £10,000. And £705 is the 20 per cent in tax you wouldn’t pay on the £3,525 difference between the current threshold and the Lib Dems’ proposed £10,000 threshold.
But fair? The think-tank Reform told Channel 4 News that 85 per cent of people benefitting from the changes would be those already earning over £10,000.
And, the IFS added in its observations on Lib Dem policies on Monday, “it is less clear that the proposal to increase the income tax personal allowance to £10,000 will help many of the poorest households, as the poorest fifth of households will contain those with incomes too low to pay income tax.
“The largest beneficiaries of the higher personal allowance will be families with two earners (where both earn less than £100,000).”
“Give people a direct say in how petty criminals and those who engage in anti-social behaviour are punished by setting up Neighbourhood Justice Panels (NJPs), like the one run by Liberal Democrats in Somerset where 95 per cent of offenders have been turned away from further crimes.”
An impressive statistic, and certainly one that caught FactCheck’s eye.
The boast is based on a scheme established at Lib Dem-controlled South Somerset district council. The council’s Community Justice Panels started in Chard, before being adopted in a few of its other areas.
The panel works by bringing together the victims of crime with the person – or persons – that caused the trouble, via the police.
Tony Fife, a Lib Dem councillor with the authority who works with the panels, told FactCheck the 95 per cent claim was “not too far out” as reoffending rates were running at “about 8 per cent”.
However, Fife points out that these panels only deal with “very low level” incidents, so perhaps cannot be heralded as the solution to crime they may seem to be at first sight.
The use of the words offenders and criminals in the manifesto is emotive, but it should be noted that these are people deemed by police to be not worthy of even a police caution – but rather a ticking off from a community panel.
“Ensuring pollution is properly taxed by replacing the per-passenger Air Passenger Duty with a per-plane duty (PPD), ensuring that air freight is taxed for the first time. We will also introduce an additional, higher rate of PPD on domestic flights if realistic alternative and less polluting travel is available.”
The Liberal Democrats calculate that switching from air passenger duty (APD) to a per-plane duty would raise £3.06bn. And that a higher per-mile duty charge on domestic flights – where train travel could be an alternative or the plane has high emissions – would raise £255m (both figures are based on projected 2011–12 prices).
This is not a new policy, switching from air passenger duty to per-plane duty was first mooted by the chancellor in the 2007 pre-budget report.
But, following a consultation, the Treasury said that it had decided not to proceed with a per-plane tax after all but to reform the air passenger duty regime instead.
On freight, the Treasury noted that: “Both airports and the freight industry were concerned that the duty would have a disproportionate effect on a highly competitive… This increased tax burden could see freight-carriers moving their transhipment hubs to the continent, and this could lead to significant job losses in the UK and displacement, rather than reduction, of CO2 emissions.”
This sentiment was echoed by the Air Operators Association today.
But is it possible to raise this much revenue? Yes, according to the Institute for Fiscal Studies. They say it “is perfectly feasible” for the Lib Dems to “set the rate as high as is necessary to achieve the £3.3bn extra revenue they want”.
But what we haven’t addressed is the potential fight any future government might have with an already beleaguered air industry, not to mention how much of this tax would be passed onto the passenger which is something we hope to look at in more detail over the coming days.
“We will close loopholes that allow playing fields to be sold or built upon without going through normal planning procedures.”
The current legislation on selling and building upon playing fields comes with a strict set of regulations however the loophole to which the Lib Dems are alluding is known as the “five year rule”.
If someone wants to build on playing fields which have been in recreational use within the past five years then, by law, they need to consult Sport England (for school fields it is ten years and must be signed off the Secretary of State for Children, Schools and Families).
The temptation here, naturally, is to let sites fall into disrepair, thus circumventing any consultation on planning, and effectively “manage them” out of existence.
We did ask both the Sport England and the Lib Dems for specific examples but they were unable to supply any so it’s unclear how much of an impact any change in legislation would have.
It’s also worth noting that there was an amendment in 2009 giving Sport England more power to protect smaller areas of land such as mini-pitches which were previously too small to qualify for protection.
“Require hospitals to be open about mistakes, and always tell patients if something has gone wrong.”
A worthy pledge from the Lib Dems, but isn’t it already happening?
After all, the NHS constitution says a major staff responsibility is to be open with patients, their families, carers or representatives, including if anything goes wrong. Care Quality Commission regulations also require that NHS organisations report serious patient safety incidents.
While there have been numerous initiatives, such as the The National Patient Safety Agency’s Being Open campaign. And it is also worth noting a professional duty to be open already exists in the codes of practice of medical professionals’ regulatory bodies.
Maybe the Lib Dems would do more, but it seems a fair amount has been done already…
The verdict
So the Lib Dems’ manifesto does indeed include more detail on tax and spending policies than either Labour or the Tories but it’s not yet clear how they will marry this with paying down the deficit.
However, when it comes to using misleading statistics then the Lib Dems fall more in line with the other two parties – their oft-repeated mantra on the poorest fifth paying proportionally more tax fails to offset it against benefits and their statistics on a reoffending pilot scheme are very impressive until you realise that these “petty criminals” are not worthy of a police caution.
