Nick Clegg’s speech: tax, injustice and the NHS
Cathy Newman checks it out:
This time last year Nick Clegg said he wanted to be prime minister. Everyone listening took that with a pinch of salt. But he almost made it, and today he returned, not quite as the conquering hero, but as deputy prime minister. And his message to activists was simple: that he now leads a grown up party of government. So now he’s come of age, was he responsible enough to get his facts right?
“We’ve ended the injustice of the richest paying less tax on investments than the poorest do on their wages.”
Nick Clegg needs to prove to his party that even though he and his cabinet colleagues are rubbing shoulders with Tory millionaires in the cabinet, the Lib Dems still care about the poor. Hence his claim today about the taxes paid by rich and poor. Capital Gains Tax (the tax the “richest” pay on investments) has been increased from 18 per cent to 28 per cent, while the basic income tax rate has remained at 20 per cent.
But, of course, low earners will also be paying another 11 per cent on National Insurance, taking their total contribution to government coffers to 31 per cent. So people on modest salaries will be paying more tax on their wages than the rich pay on their investments.
The DPM’s on safer ground if we look at the very poorest. They don’t pay tax on their wages at all – and didn’t under Labour. But the Lib Dems have taken a further “900,000 low earners” out of income tax altogether.
“(The deficit) is the same as a family with earnings of £26,000 a year who are spending £32,000 a year. Even though they’re already £40,000 in debt. ”
Nick Clegg suggested that the deficit the government’s accrued is equivalent to a family earning £26,000 a year, spending £32,000 annually, despite having a massive £40,000 of debts.
His figures look OK, but as the Institute for Fiscal Studies points out the government doesn’t face the kind of pressure families do to pay off their debts. There are no bailiffs knocking on the door of the Treasury.
As tax expert Richard Murphy puts it: “His analogy utterly misses this point.”
“A country, if it jettisons costs by sacking people still has to feed the people it has jettisoned. They don’t go away, like a child thrown out of home to cut the household bills does…Worse, because they aren’t working now they aren’t adding to national income or paying tax either.”
“We have protected the funding for the NHS, the biggest public service of all.”
True enough – though no thanks to the Lib Dems, who didn’t want to ringfence any government spending. But even protecting NHS funding doesn’t mean the health service won’t feel any strain.
The NHS was accustomed to an average 6.7 per cent spending increase under Labour. By ringfencing spending on the health service, the government is ensuring there will still be above-inflation increases, but they’re likely to be pretty meagre. So the times of plenty are well and truly over – and an aging population is putting further demands on the service.
The nurses union has already warned that 100 NHS organisations they surveyed are cutting jobs. And Age UK warns that because social care – paid for by local authorities – is under pressure, the elderly could end up relying on NHS services instead.
“We will be tough on welfare cheats. But unlike Labour, we’ll be tough on tax cheats too.”
Nick Clegg’s Lib Dem sidekick Danny Alexander announced this policy yesterday and FactCheck’s ears pricked up. Their promise to claw back an extra £7bn by cutting down on tax avoidance sounds rather back of the envelope. There’s no certainty they’ll be able to recoup that kind of money. The tax avoidance industry could simply adapt. And the HMRC still faces cuts of between 25 and 40 per cent like any other government department, so they may not have the staff to tackle the tax cheats.