Lib Dems to tax wealthiest to cut UK's debt

by Beth Abel

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10 Jun 2014

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Liberal Democrat leader Nick Clegg

THE WEALTHIEST can expect higher taxes instead of welfare cuts under Liberal Democrat plans to balance the country's books.

In his first major speech since their humiliation at the polls last month, Nick Clegg (pictured) said that while the Lib Dems are dedicated to getting rid of the structural deficit by 2017/2018, they would do so in a "fundamentally different" way. He added that Tory plans to get rid of the structural deficit would involve cutting £12bn from the welfare budget, due to the party's ruling out of tax increases.

Principles that he believes should apply to budgets after 2017/2018 were also announced, including combining a renewed focus on paying down debt with leeway that allows borrowing for projects that encourage economic growth, the Guardian reports.

Two new rules will be proposed in relation to budgetary policy after 2017/2018. The first is a "debt rule", involving largely reducing national debt as a percentage of GDP year-on-year when growth is positive, so that it reaches sustainable levels around the middle of the next decade. The second is a "balanced budget rule", ensuring the government runs a balanced budget over the economic cycle, excluding capital spending that is beneficial to financial stability or growth.

Clegg's "balanced budget rule" could be compared to Gordon Brown's golden rule of the current spending budget balancing over the economic cycle, and that borrowing should only be for investment.

Clegg's proposals, in accordance to the Lib Dems, would allow borrowing to fund such areas as transport, housing and communications which promote growth, but schools and hospitals would have to be funded from ordinary tax revenues.

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