Nick Clegg on global cooperation and tax policy

Here’s the key extract from Nick Clegg’s speech to the Royal Commonwealth Society on Liberal Democrat tax policy and also the party’s approach to global cooperation:

This is a time of crisis for Britain, and for the world. The banking collapse will lead to a global recession; that much is now certain. And its implications will be profound.

The very model of capitalism that America has promulgated for generations is now being questioned. The rise of China, India, Brazil and oil-rich Gulf States will be accelerated by a prolonged American recession. And instability and conflict will be driven by the shifting of global power, and by the need for resources – food, water and energy.

Global cooperation is the best – I believe the only – answer to these problems. The only way to dig our world back out of recession. The only way to create the growth, trade, and international rules we need for a fairer, greener, safer planet.

I am an internationalist to my fingertips. I’ve spent a huge amount of my working life in Europe, engaged in multi-lateral projects and negotiations. And with a half Russian father, and a Dutch mother, internationalism is quite literally in my blood. Nothing will turn me away from the belief that we are – all of us – better off acting together…

It is beyond debate that we need a “new Bretton Woods”. The Bretton Woods institutions have a somewhat chequered history but they have on balance, been of benefit to global development. Now they need to be remade for the 21st century.

Let’s start with the IMF. Its funding structure needs to be modified, and its resources increased substantially…

The World Bank needs similar reforms to the IMF. Transparency and resources are key to its success, and should be at the root of reform.

But there is one further change that must be made to both organisations. The world’s economic centre of gravity is moving. Decision-making in the future has to reflect this. India, China, Brazil, Venezuela, South Africa. It is absurd that these countries have been excluded for so long while the old gang try to keep things between themselves…

But there is a caveat. Many of these powers – notably China, Russia and some Gulf States – have questionable, or worse, records on human rights, freedom of the press and the rule of law. While the rise of new powers is unstoppable, we need to do all we can to strengthen liberal and democratic values as it happens…

Finally, of course, there is the UN. Any number of experts and commentators would agree: it is deeply flawed. But the barriers to reform are so high, I believe we must work with it as it is, and not seek institutional change.

Instead we should do all we can to strengthen the UN as it is. Here again, the more positive approach taken by the new US president will help give a clear signal to the world.

Once reformed, these institutions can play a vital role in the creation of a new model of global capitalism:
sustainable, fair and green. Where finance plays a vital role, but as servant, not master.

The global financial system is truly staggering in scale. The notional value of all outstanding global contracts at the end of 2007 was $600 trillion, some 11 times world output. That’s a phenomenal change – the scale has increased eight-fold in the last 10 years. This behemoth of finance needs regulation to match.

And on tax:

It is a time for ambition. An opportunity to fundamentally rebalance Britain’s unfair tax system.

Real tax cuts – big, permanent and fair – for the people who need them. Funded by making the wealthy pay their fair share, ending the special exemptions and loopholes they’ve profited from for so long.

Liberal Democrats would reduce basic rate income tax by 4p in the pound. That would give nearly £1000 back to a worker on £30,000 a year. Funded by four changes.

One: ending upper rate pensions relief – so the wealthy don’t get extra pension help from the tax man. Two: taxing capital gains at the same rates as income. So bankers and executives can’t get away with paying 18% tax while their cleaners pay 31%. Three: green taxes to protect our environment. And four: tackling the scandal of corporate tax avoidance – a subject I’ll be addressing in a speech tomorrow.

This is an opportunity for a new, fair tax system. And an opportunity to change the way government spends money, too.

Gordon Brown has doubled public spending. £18,000 a second. And his faith in big government means even at this time of international crisis, he’s still going to spend our money on IT systems that don’t work, identity cards, and surveillance databases.

Liberal Democrats will change this. We are identifying £20bn of government spending that can be redirected to our priorities. We need to redirect spending to the things that people really need in a recession: homes for hard-pressed families; good child care, so that people can go out to work; and training for people who have lost their jobs. And, if there’s money to spare, the rest will go to deepening and extending our tax cut plans.