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Danny Alexander: Balancing the books and investing in key public services

February 5, 2015 12:15 PM
Originally published by UK Liberal Democrats

Today (Thursday 5 February) Liberal Democrat Leader Treasury Spokesman Danny Alexander set out the Liberal Democrats' vision for delivering a balanced budget in the next Parliament.

Danny outlined how after 2017/18, our new fiscal rules will ensure that debt continues to fall as a share of the economy while allowing us to invest in key infrastructure and vital public services such as schools and hospitals.

Danny said:

"In 2010 our economy was on the brink - reeling from the effects of the catastrophic crash of 2008. Today we have the strongest growth of the major world economies. We have record numbers in work. We have low inflation and rising business investment. Life for many families remains challenging. But we are now seeing earnings pulling ahead of inflation.

"This has not happened by accident. Millions of people and businesses have worked hard to get us this far, supported by a clear, consistent, balanced government policy. Put simply, this recovery wouldn't be happening without the Liberal Democrats in government.

"Our policies of cutting taxes for working people, of boosting apprenticeships, of driving up investment in the regions are at the heart of the recovery. Most importantly, we have anchored the economic and fiscal policy of the Government where it needs to be, in the centre ground.

"Just like every house needs to be built on solid foundations, our society needs to be built on a strong economy. Prosperity cannot be secured, opportunity for all cannot be provided, on the back of broken finances. That deficit had to be tackled and the economy repaired. And the job had to be done fairly. We have asked those with the broadest shoulders to carry their fair share of the burden by increasing taxes.

"Britain is back on track. But the work of repair and renewal is not yet complete. I want to set out how we would finish the job of eliminating the deficit and do so fairly. Liberal Democrats are committed to eliminating the structural deficit by 2017/18, and getting debt falling as a share of GDP in 16-17. To do it sooner would threaten the recovery by going too fast. Doing it over a longer timescale would threaten the recovery by dragging the pain out over too long a period and burdening the next generation with yet more debt.

"Our goal means we will need to find around £30bn of additional measures to close the gap between what we spend and how much raise. It's incumbent on all serious parties who aspire to govern to set out how they will achieve it.

"Today, I want to set out the basic building blocks of our approach. And let me be clear, our plans, the Liberal Democrat plans, mean that we have no need to raise the headline tax rates that affect the majority of people. Because of our balanced approach: There is no need to increase National Insurance rates. There is no need to increase VAT rates. There is no need to increase Income Tax rates.

"And, for business, there is no need to raise Corporation Tax rates.

"Indeed, one of our main acts in the first year of the next Parliament will be to further reduce income tax for millions of workers by raising the personal allowance to £11,000.

"But it would be wrong and unfair to seek to deal with the deficit by cutting public spending alone, as the Tories propose. That would leave the lion's share of the burden to be carried by those on low and middle incomes. We will raise £8 billion in tax measures targeted at ensuring the wealthiest continue to make a contribution, and that large businesses pay their fair share. These includes: A High Value Property Levy;

"Increasing Non-Dom charges. We are also currently developing proposals on tax deductibility of interest payments; and increasing the Banking Levy. And we would abolish the Marriage Couples Tax Allowance.

"We will build on our record of clamping down hard on tax avoidance and evasion to raise a further £6bn. We will find cuts in departmental spending of £12bn, and a further £4bn from welfare budget. Our welfare measures will include limiting the uprating of benefits (excluding pensions and disability benefits) to 1% for two years, as well as removing Winter Fuel Payments and TV licenses from pensioners who are Higher Rate taxpayers.

"This approach is sustainable. It is balanced, and it is fair. It asks something from everyone, but the most from those who have the most. It broadly maintains the balance of tax and spend across the entire fiscal consolidation. It continues and completes the plan that has given Britain the strongest economic recovery of any major economy. It is in stark contrast to the dramatic lurches the other parties are offering.

"By placing all the burden on spending cuts - far beyond what is necessary - the Conservatives would lead an ideological drive to shrink the state with damaging social and economic consequences. Labour have theoretically signed up to tackling the deficit by 2017/18, but their plans reveal no intention at all to meet this goal. For them, it's deficit reduction on the 'never, never'.

"Our plan is based on our strong record of economic achievement in this Parliament.

"It's the only plan that keeps the foundations of our economic recovery intact. I believe both Labour and Tory parties, by themselves, would put that recovery at risk. Most importantly, our plan will allow the nation's finances to finally turn the corner, ten years after the financial crisis. In short, we are the only party that offers light at the end of the tunnel."