The claim
“To pay for all these tax promises would cost £13.5bn. And the Conservatives have identified a paltry £100mn of alternate tax revenue to pay for it.”
Nick Clegg, Liberal Democrat leader, 8 April 2010
The background
Liberal Democrat leader, Nick Clegg, today launched a poster campaign evoking memories of the Conservatives’ devastating “tax bombshell” salvo against Labour in 1992. But the subject of the Lib Dems’ campaign is the Tories themselves and an estimated £13.4bn “black hole” in their taxation plans.
Nick Clegg points out that the Conservatives have committed to five tax cuts or tax rise reversals. He claims that the Conservatives have only specifically identified £100mn in either savings or tax rises leaving a black hole towards paying for £13.5bn worth of tax promises.
He notes that a 3% rise in the standard rate of VAT to 20.5% would pay for these unfunded promises.
So have the Lib Dems hit the target with their black hole claims?
The analysis
The Lib Dems claim that the only specific saving the Conservatives have identified is the £100mn levy on non-dom tax payers. And the lack of specific saving proposals contained within the Conservatives’ briefing on efficiencies supports this claim.
The Liberal Democrats’ £13.5bn cost estimate has been calculated by adding up the cost of the following Conservative proposals:
Council Tax Freeze £1,400m
Cut in NICs for small employers £240m
Marriage tax proposals £5,100m
Raise NICs thresholds £5,600m
Inheritance tax cuts £1,200 m
Total £13,540m
The Lib Dems say the figures come from three sources: the Government, the Institute for Fiscal Studies and the Conservative Party itself.
The Conservatives’ own costings for the council tax freeze and for raising the National Insurance threshold mirror those by the Institute for Fiscal Studies (IFS). But details of the marriage tax proposal remain uncertain and, last week, FactCheck revealed differences between Conservative and government estimates over the bill for this perk.
The uncertainty surrounding this proposal, and the likelihood that the Conservatives would initially restrict it to couples with children under the age of three, means that it may cost less than the Liberal Democrat’s £5.1bn estimate.
In fact, the IFS have told us that the Lib Dems have chosen a “rather expensive option” when costing this tax break. But until the Conservatives reveal exactly what tax breaks they are planning for married couples, we are left guessing.
In fact, we’ve been left guessing a lot as the Conservatives have not been able to give us any specifics on the funding of these proposed tax cuts.
As for the VAT rise, the Conservatives say that they have “no plans to raise VAT”. Instead, they are focusing on reducing spending and finding savings, to fund their commitments. But the party has left some wriggle room – it insists that no responsible Chancellor or Shadow Chancellor can ever rule out tax rises.
The verdict
Once again, the lack of concrete figures from the Tories make it difficult for FactCheck to verify these claims.
What is almost certain, according to the IFS, is that the Lib Dems have overestimated the cost of some of the proposed tax changes.
So – in a refrain that is becoming familiar – FactCheck needs to more details before we can make a properly informed decision.
