Summation Speech from Tax Debate

Speech by Chris Huhne delivered to Liberal Democrat Conference Tax Debate on Tue 19th Sep 2006

The news on Thursday was shocking. An area of Antarctic sea ice the size of Turkey has melted in just two years. Climate change is urgent. It is the challenge of our times. In a recent survey of 923 articles in science learned journals, not one was critical of the notion that we human beings are causing climate change.

The science is clear. Rising sea levels. Storm damage. Crop Failure. Drought. This is the greatest threat to our civilisation - indeed even our species.

If anyone doubts this, go and see Al Gore's film "An inconvenient truth". See for yourself how we have unwittingly engineered an environmental tragedy.

The time to act is now. I am proud of this tax package. If you back these proposals, we will become the first party in Britain to face the realities of global warming. The first party to put forward policies to change our behaviour.

Green taxes raise the price of pollution, so we do less of it. Because they change our behaviour, rather than raise revenue, every penny can go back in income tax cuts. This is the green tax switch. Taxing pollution not people. Lifting two million people out of income tax altogether. Cutting 2 pence off the basic rate. Fairer and greener taxes, but not higher taxes overall.

First, Vehicle excise duty that rises steeply to £2000 a year on new high emission cars. The Energy Saving Trust says we need that to persuade two thirds of car buyers to buy cleaner cars. And to persuade car companies to cut emissions.

Secondly, aviation. A tax that is based on the emissions of the flight, not on each passenger. That will encourage airlines to fly full, not half empty. And it will cover freight flights as well.

Thirdly, fuel duty must not be allowed to wither away. Fourthly, the climate change levy must be raised in line with prices. And we are committed in this paper to moving back to the peak of green taxes within one parliament, and beyond it.

This is not just the right policy. It is a policy that provides us with a distinctive rallying cry. With this package conference, we reclaim the great tradition of this party. Of telling it like it is. Of being honest and open with the electorate about the hard choices.

Time has moved on, but the parallel is with the time before the 1997 election when we said what everyone knew was true. If we wanted better public services in Britain, taxes had to go up. Taxes overall no longer have to go up. But now we can say with equal authority that if we want to tackle climate change, green taxes have to go up.

To its lasting shame, this Labour government has gone backwards, cutting green taxes from year to year, and allowing carbon emissions to rise. And remember too that David Cameron has only proposed setting targets for carbon emissions without a single specific policy proposal on how to achieve those targets.

If the world could be improved through setting targets alone, this would be the most successful government in Britain's history. Targets are meaningless Mr Cameron unless you put up plans to meet them.

There is a second element of this package of which I am fiercely proud, and that is its commitment to fairness. We are a social liberal party because we believe in social justice.

This package proposes two big changes that take substantial sums from the most well-off in our society. The first is tougher capital gains tax, so that those who make windfalls will pay more. The second is ending pensions unfairness. In future everybody will receive the same amount of tax relief when they put money into their pension fund.

At present, if you are a high earner paying higher rate tax, you get £67 back from the taxman for every £100 you put into your pension fund. But if you are basic rate tax payer, you get only £28 back for every £100 you put into your pension fund. The rich get twice the tax rebate of the rest.

That's just ridiculous because the people we want to encourage to save are those who are earning less. They are the ones who need the rebate most. And the well-off will save anyway so they do not need the extra rebate. So our existing system funnels tax subsidies where they are least needed, and away from where they are most needed. It's daft. It's unfair. It should go.

The result of these two changes is to take three times as much from the best off in our society as we proposed at the last election, even though we have proposed to get rid of the 50 pence top rate of tax on those earning more than £100,000 a year. Moreover, we do so in a way that provokes far less complaint and less disincentive to work and risk. I make no apologies about that. This package combines fairness with efficiency, and puts substance above surface.

Now Evan Harris and Phil Willis do not believe that we are doing well unless they can hear some pips squeaking. This may be big-hearted, but it is also wrong-headed.

This party has always believed that reality counts not shadows. Substance matters more than appearance, and the substance of this package is that it is far more redistributive than the one it replaces. This package is a substantial step forward in the fight for justice, for equity and for fairness.

Why not go further as they propose? Because adding the 50 pence back would raise relatively little revenue for a large amount of opposition. It sends out the signal that we oppose aspiration and ambition, which no Liberal Democrat should ever do. And it raises a disincentive to work, effort and risk-taking that goes against every principle applied in the design of this package.

We are cutting income tax for the least well off by taking 2 million out of tax altogether. Their tax rates on extra effort and extra earnings are abolished entirely. We are cutting income tax for the middle income earners by raising their allowances and cutting the basic rate. Their tax rates come down by a tenth. Why mix up the message by raising income tax rates by a quarter on a relatively small group?

When we are trying to argue for the green tax switch - taxing pollution not people - this would be not just bad economics but bad politics too. Conference reject this amendment. Set the pace today on a policy of which we can be proud. That puts our party at the front of the national debate with fresh thinking and new ideas. Back the green tax switch because it makes environmental sense and economic sense. Support this motion.