This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/uk_politics/7746088.stm

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Cable warning on tax 'tokenism' Cable derides 'fig leaf' tax cuts
(about 11 hours later)
Vince Cable has warned the government against "tokenism" in its plans to boost the economy. The government's plans to boost the economy by cutting VAT and to raise taxes on high earners are a "very limited, fig leaf", says Vince Cable.
The Lib Dem Treasury spokesman told the BBC a 45% income tax on high earners would raise "negligible" funds, without action to close tax loopholes. The Lib Dem Treasury spokesman said he failed to see how a temporary reduction in VAT from 17.5% to 15% would give the economy a "major stimulus".
He also said the expected VAT cut from would have little effect, if it is "small and temporary". Offering an extra £25 rebate to basic rate taxpayers was "pathetic" he said.
His party proposes income tax cuts for low and middle earners and to close loopholes that benefit the rich. He also questioned the "highly optimistic assumption about growth" in the chancellor's pre-Budget report.
Chancellor Alistair Darling is preparing to outline his plans to boost the British economy in his annual pre-Budget report. Responding to the chancellor's speech in the Commons, Mr Cable said a "national economic emergency" required radical action and "serious tax cuts" for low and middle earners.
'Avoid paying' Tax increases
He is expected to announce that VAT will be reduced from 17.5% to 15% - paid for in part by a new 45% income tax on people earning over £150,000 - the 45% rate would be brought in if Labour wins the next election. Mr Cable, whose party wants to lower the basic rate of income tax from 20p to 16p in the pound, partly paid for by closing tax loopholes they say benefit the wealthy, said Chancellor Alistair Darling was offering a "fig leaf".
But Mr Cable told the BBC his party's calls for an end to "loopholes" in capital gains tax and pension tax relief which favour high earners were more important than ever. He said the chancellor's plans were based on "a temporary small cut in VAT" adding: "What I fail to see is how the economy gets a major stimulus for, for example, a £5 cut in a £220 imported flat screen television or a 50p cut in a £25 restaurant bill."
WHAT IS EXPECTED VAT: Temporary 2.5 percentage point cutIncome tax: 5p increase for top earners after next electionVehicle excise duty: Postpone planned increase10p tax rebate: Extend for another yearCorporation tax: Next rise postponed href="/1/hi/uk_politics/7740897.stm">Live text: Pre-Budget report class="" href="http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=5701&edition=1">What would you like to see? PRE-BUDGET REPORT href="http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/24_11_08_pbr_completereport.pdf">Report in full Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader. href="http://www.adobe.com/products/acrobat/readstep2.html">Download the reader here
"If people pay capital gains they pay 18% whereas now they will be paying 45% of their income. So if they have got a good accountant, they will simply turn their income into capital gains and avoid paying tax altogether. He said income tax should be cut to give low earners money "directly in their pockets" not "the pathetic £25 they are being offered and if they earn over £25,000 a year - the prospect of tax increases".
"And if you pay money into a £1m pension pot of course you get relief at the top rate, so those are the things that have to be dealt with, otherwise there is a danger of just being tokenism." He was referring to Mr Darling's announcement that this year's £120 rebate for basic rate taxpayers would be extended for another year and increased to £145. National Insurance contributions will also rise by 0.5% from April 2011.
While he was in favour of the principle of cutting tax - the Lib Dems want to reduce the basic rate of income tax from 20p to 16p in the pound - he added: "A small and temporary reduction in VAT may not have much effect, that's why we believe that it's much better to give people their own money back." Later he told the BBC the people who would end up paying for a VAT cut that would achieve "very little" were those who paid National Insurance.
He also said the whole package assumed Britain would return to "buoyant growth" in two years, was based "on a highly optimistic assumption about growth" and that massive efficiency savings could be made without an impact on services.
Mr Cable said the government had acknowledged the tax system was unfair but their proposals to raise income tax on people earning over £150,000 a year would come in "in two years, possibly". The new upper rate would come in from April 2011 - after the next general election.
"What surely is needed is a comprehensive approach which cuts income tax on the low paid [and] middle income families, removing the plethora of tax reliefs and allowances which the wealthy benefit from - not this very limited, fig leaf for redistributive policy."
Earlier he warned that unless action was taken to close loopholes - the rich could avoid paying a 45% rate.
"If people pay capital gains they pay 18% whereas now they will be paying 45% of their income. So if they have got a good accountant, they will simply turn their income into capital gains and avoid paying tax altogether," he told the BBC.