Lib Dem Conference: Treasury spokesman questions need for penny on income tax policy

The Liberal Democrat commitment to a penny-in-the-pound tax increase was the party's most prominent election campaign policy. Anthony Bevins, Political Editor, thinks its future is now in doubt.

Opening the economic debate on the first day of the Liberal Democrats' Eastbourne conference, the party's Treasury spokesman, Malcolm Bruce, told representatives: "After almost a decade dominated by huge public- sector deficits, I believe individual provision in such areas as pensions, along with greater economic stability, could usher in a new era with the resources available to create quite simply the best education and health services in the world here in Britain ...

"Of course, if pubic finances do dramatically improve, there is no reason why the tax burden should not in time be lightened. We are not afraid to propose tax rises when they are needed, as they are now, but we are not a party that favours higher taxes for the sake of it."

Calculations by the Commons library, based on "reasonable" assumptions, show that the overall surplus available for possible tax cuts, or increased spending on health and education - could go from pounds 9bn in 1999/2000 to pounds 34bn in 2003/04. Those figures include an annual 0.75 per cent real-terms increase in spending on health and education.

But Mr Bruce told the Conference: "We must be able to ensure that extra money yields extra concrete results. Throwing money at problems isn't the answer. When Labour ministers talk today about higher standards, you know it is because they want to delay till tomorrow thinking about increased resources. But I want to see a new settlement for key public services in which higher resources and higher standards go hand in hand."

Mr Bruce proposed a new Public Finances Act, imposing a duty on departments to set out detailed targets, performance criteria and operating objectives for the public. He said that was the sort of information that people paying for a private service would expect, and such a service delivery agreement could be policed by parliament.

Mr Bruce said that all government employees should be accountable for the delivery of higher standards and pay should be used as a weapon to reward and punish good and bad performance.

"And politicians should be more accountable, too ... If standards and promises aren't delivered, failing ministers should take pay cuts too. That would concentrate minds at the Department of Health."

Earlier, Mr Bruce delivered a strong attack on Labour's initial record. He said: "People know that Gordon Brown's `something for nothing' economics just doesn't add up. And we are seeing the results already. Hospital waiting lists rising to record levels. Nurses and teachers told to take real pay cuts ...

"Tony Blair says it's all just the Tory legacy. But now it's Labour's responsibility."