Tax: The missing ingredient from the Liberal Democrat conference agenda

There are many weighty issues on the agenda for the Liberal Democrat autumn conference in Birmingham, as well as some potentially significant debates over the party’s medium term strategy and policy outlook. There is also, however, a curious omission: tax.

The word tax is not completely absent from the agenda, but aside from a reference in one motion calling for the party to look at its tax policy as part of a big policy review, there is nothing about what the country’s overall tax system should look like.

Yet even a cursory following of political news will notice how often the question of changes to the UK’s tax system come up. The big risk for the Liberal Democrats is that a relatively modest pace of policy development following that one brief reference on the agenda leaves the party caught flat-footed as events overtake it.

The risk flows from a simple coalition calculation: Conservatives by and large want to cut taxes and Liberal Democrats by and large want to increase taxes on wealth. There is therefore scope for a package which appeals to both wings of the coalition whilst also having whatever net fiscal effect that George Osborne and Danny Alexander agree is necessary.

That is just what happened last summer, when raising capital gains tax – normally an anathema to most Conservatives – was packaged up with increasing the income tax allowance to produce a bundle that everyone was willing to support.

The idea of a similar repeat package is already finding favour in Conservative Party ranks, such as in the recent op-ed for The Guardian penned by ConservativeHome‘s Tim Mongtomerie: “We should be increasing taxes on wealth and pollution in order to afford cuts in taxes on families and employers”.

However, amongst Liberal Democrats the question of which wealth taxes to support is deeply controversial. There is no simple consensus in the way there was over capital gains tax.

Some are very keen on a land value tax, but it is a concept that is often ridiculed by others in the party (perhaps unfairly, though it has to be said that some of the land value tax campaigners do little to rebut the view that it is an eccentric policy). Vince Cable’s talk of a mansion tax before the last general election was not helped by a rushed and bungled consultation within the party, but even a perfectly paced and conducted consultation would not have avoided opposition – especially from those in the party who prefer more bands on council tax to any sort of mansion tax, whether it is on their values or on profits from their sale.

Thinking on tax is clearly going on in some sections of the party, as witnessed by not only the regular appearances of stories that “Vince Cable is considering…” but also from the sequence of written questions tabled by David Laws (note the emphasis on how to raise money by restricting pension tax breaks for the richest).

If decisions are made on tax for the next budget, however, it is very likely that this autumn’s party conference will become a missed opportunity to debate, agree and produce party unity on a subject that has so often been a matter of debate amongst Liberal Democrats (let alone those of differing political persuasions) in the past.

UPDATE: On a similar theme, see Mary Riddell’s piece in the Daily Telegraph earlier in the week: Deputy Prime Minister Nick Clegg focuses on wealth as he eases out of bed with the Tories.

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