SIR MENZIES CAMPBELL survived the first significant test of his leadership yesterday after the Liberal Democrats backed his plans to impose significantly higher taxes on the rich.
Delegates in Brighton voted to support the tax overhaul after being told that the measure would squeeze the wealthiest even more than a 50p rate on high earners would have done. The plans would mean two million more wealthy workers worse off by £2,600 a year and being those earning £150,000 penalised by at least £9,000 a year, independent estimates say.
The proposals are designed to allow for tax cuts for 90 per cent of the population but also include a range of stringent measures to protect the environment, including higher taxes on cars and air travel.
All the main political parties have embraced so-called “green taxes”, but the Liberal Demorcrats have given them a positive bear hug. They have adopted plans for a dramatic £8 billion increase in taxes on flying and driving, and even mooted planting taxes on everything from patio heaters to electric light bulbs and excess packaging.
Vince Cable, the party’s Treasury spokesman, gave warning that people had to accept “policies that hurt”, while Chris Huhne, the environment spokesman, claimed that they were “the first party in Britain to face the reality of global warming”.
In a second boost for Sir Menzies, Charles Kennedy used his first public statement since stepping down as leader to suggest a great future for the party, but showed little sign of wanting to make an immediate comeback to frontline politics. The two did not shake hands or appear together.
He avoided talking about the alcoholism that forced him from office in January and urged members to avoid cosying up to rival parties in anticipation of forming a coalition in the event of a hung Parliament.
Attempts by left-wing members of the party to impose a 50p top rate on those earning over £150,000 a year failed by a margin of two to one, after a two-hour passionate debate.
There was a palpable sense of relief in the party high command at the failure of the rebellion, which was proposed by Evan Harris, the science spokesman, and supported by a dozen other senior figures, including Baroness Williams of Crosby.
Steve Webb, the health spokesman and prominent leftwinger, made an impassioned plea to support Sir Menzies and not to bring back the 50p rate because the rich would be penalised more by other elements of their tax reform: “Those of you round this conference chamber who want radically redistributive taxes have got far more out of this package than the package at the last election. We have a highly progressive package. Opportunities like this don’t come along very often.”
Phil Willis, the MP for Harrogate, who wanted to see the return of the 50p rate, said in an interview that the tax plans represented “a slippery slope towards more right-wing draconian policies”.
Just one delegate urged the party not to penalise the highest earners in society, and they were greeted by tuts and boos from party members.
After the vote, Sir Menzies called the decision a momentous moment, but denied suggestions from Mr Willis that this represented a lurch to the right. “I can’t say often enough that I am a politician of the centre Left. No one should be in any doubt about that,” he told a press conference.
He admitted that the proposals amounted to “penalising wealth”, but denied suggestions raised during the tax debate that the policies were too complicated, and would prove hard to sell on the doorstep.
Most economists and politicians agree in principle that it is better to tax activities you want to discourage, such as pollution, than ones you want to encourage, such as work.
Environmentalists say that green taxes have shot up the political agenda in the wake of concern about climate change. “Climate change is up the agenda compared with five years ago in large part because the science has hardened. Many people had doubts about the science then, but there is now almost no doubt anywhere that action is needed now,” Simon Bullock, of Friends of the Earth, said.
But it is far easier to endorse a difficult policy resoundingly in a conference hall in Brighton than to put it actually into practice as a government. Like the Conservatives, the Liberal Democrats are promising to reverse the decline in green taxes under Labour, which has seen them fall as a proportion of GDP from 3.6 per cent in 1999 to 2.9 per cent today.
When Labour was elected in 1997, it was also enthusiastic about increasing green taxes, and did just that until the fuel protests of 2000 literally brought the country to a halt. Since then, Labour has abandoned the policy of increasing tax on fuel above the rate of inflation each year — the so-called “fuel duty escalator” — which is the overwhelming reason green taxes have declined. Other green taxes that it has introduced, such as the climate change levy on industry and the aggregates tax on quarrying, have failed to make up the difference.
The Liberal Democrats want to bring back the fuel duty escalator and impose far greater taxes on car ownership and on flying. “These are big rises: a doubling of vehicle excise duty and quadrupling of aviation tax. It is a big rise in green taxes, but it is just returning it to the level it was in 1999,” said Stuart Adam, of the Institute for Fiscal Studies. For the Conservatives, the rhetoric on green taxes has not yet been matched by detailed proposals. George Osborne, the Shadow Chancellor, set out the party’s commitment to green taxes this month. He said that he wanted to increase taxes on motoring and flying, but has not yet specified exactly how or to what extent.
But even this vague commitment to increasing green taxes led to charges from Labour that the Conservatives wanted to hammer the motorist.
