THE Liberal Democrats’ tax package would have been described, and dismissed, as “bold and courageous” by Sir Humphrey Appleby in the Yes Minister series. Or, as Robert Chote of the Institute for Fiscal Studies put it at a fringe meeting at the Lib Dem conference, “the potential losers will be disgruntled and many of the potential winners may be unconvinced”.

The package consists of much more than the hotly disputed question, to be resolved today, of whether to retain the party’s commitment to a 50 per cent top marginal rate of income tax. That would raise £2 billion, or just a tenth of the total increases in tax proposed in the party’s policy paper. The big revenue raisers would be abolishing the present taper relief on capital gains tax and reducing the allowance on the tax, and having a single rate of tax relief on pension contributions. Together these would raise £10.5 billion. Additional environmental taxes would include: an emission-based tax on each aircraft flight, raising four times as much as the current duty; emissions-related increases in duty on cars; and a new carbon tax. They would raise £8 billion.

On the other side, the bottom and upper income tax thresholds would rise, national insurance would be restructured and rates of income and corporation tax would be cut. This would be linked into the replacement of council tax by local income tax.

Overall, this is not far short, as Mr Chote noted, of all Gordon Brown’s tax measures to date. The IFS analysis suggests that the Lib Dems may be too optimistic in their estimates. Income tax cuts may be more expensive and there may be practical difficulites in restricting pension tax relief to the basic rate. Moreover, an increase in fuel duty in line with inflation is already assumed in the Government’s plans, creating a potential shortfall of £2 billion after three years.

The top 10 per cent of earners would lose an average of about 4 per cent a year, while the rest would be gainers, particularly those on below-average incomes. The very poorest would not benefit much, partly because they would not gain from income tax cuts or the abolition of council tax but would be hit by environmental taxes. So, according the IFS, the package will do very little to reduce poverty where money will have to be found by cutting back spending programmes.

The amendment by the Oxford West MP Evan Harris to retain the 50p top rate, at a higher threshold of £150,000, would make only a modest difference to these much larger shifts, and would do nothing for the very poorest. Mr Harris and his allies do not oppose the main package, but seek to supplement it. This is mainly an argument about symbols rather than substance, though no less important for that.

Defeat for the leadership on the 50p would produce embarrassing headlines. But far more important is the likely approval of the main package. The other parties have predictably focused on the unpopular rather than the popular elements, such as higher taxes on cars and air travel. Of course, the Lib Dem package is highly unlikely ever to be implemented, but it does challenge Labour and, particularly, the Tories to explain how they would translate their vague aspirations to be more “ green” into specific policies that benefit the environment.

Times Recommends

• Stand-ups laughing all the way to the bank
• How Britain’s wildlife fared during the year
• UK charity bids to save Borneo’s orang-utans