Liberal Democrat Conference: Taxation - Joining the euro `will force tax up'

A BIG hike in taxation will be needed by Gordon Brown, the Chancellor, as the price for Britain's entry into the single European currency to meet convergence on interest rates, it was claimed last night by senior Liberal Democrats.

The party yesterday proposed substantial tax increases targeted at middle class home owners and second pension holders. Stamp duty would be increased on house sales, and mortgage tax relief would be scrapped under the Liberal Democrat plans over the next five years. Compulsory second pension contributions would also be used to impose a tight economic squeeze on the middle classes.

The Liberal Democrat conference in Brighton endorsed plans to reduce the tax burden of the poorest 10 per cent of people by increasing taxes on the richest 10 per cent, an amendment backed by Simon Hughes. But raising taxes to pay for Britain to enter the euro could provide explosive ammunition for the Tories who will fight the next election on a commitment to keep the pound.

Treasury sources were furious at the claims that taxes would have to rise, which they strongly denied, insisting that Britain could reduce the level of interest by other means, before entry took place. "I don't know whether they have a real understanding of economics. They clearly haven't. One of the reasons we haven't entered the euro is precisely because our economic cycle is not in line with interest rates of the `ins'," said a source close to the Chancellor.

The Liberal Democrats, who are committed to Britain's entry to the euro, said Bank of England officials had disclosed in private talks this year they had been expecting a tax raising package, if the Government went ahead with entry to the euro.

"When we went to the Bank earlier this year, they said they had been expecting any government serious about joining the euro to do it," said a key adviser to the Liberal Democrat treasury spokesman, Malcolm Bruce.

The source said taxes will have to be raised to bring down interest rates by more than 50 per cent from 7.5 per cent to around 3.5 per cent to achieve convergence on rates in the euro among the `ins', the countries who are joining the first wave.

Attacking tax breaks for the rich given by the Government, Mr Bruce said: "Preparing for the single currency will require aligning British interest rates more closely with Europe, another reason why use of fiscal policy is essential. In a single currency area, there will be a single interest rate. This will make even more of a nonsense of his refusal to use taxes or savings to stabilise the economy.''

The Liberal Democrat leadership was rebuffed when party members overwhelmingly backed calls for the National Minimum Wage to apply to all workers aged 16 and over. Delegates ignored a plea by the treasury team to give the Low Pay Commission powers to institute a lower "development rate" if evidence suggested the full rate would damage job prospects for young people. Ed Davey, the party's economics spokesman, warned that rigid rules for the labour market might result in a growth in youth unemployment. "We cannot ignore the practical real life effects. With the withering impact of unemployment on the young, we must be cautious."

But Lembit Opik, the party's spokesman on Wales, said that the exclusion of young people was against the party's principles. "Equal work should get equal pay ... it is as simple as that. I accept there could be an impact on unemployment and we would have to be cautious. But that does not overcome the fundamental matter of principle and conviction that we are debating here."

Simon Eddy, 14, a member from Truro and St Austell, condemned the proposals as a "policy of poverty pay". He said to rapturous applause: "I don't eat less than the 18-year-old. When I am 16, will my food or heating cost less? Is there a discount card for 16-year-olds I can apply for? No one should be forced into work for money they can barely live on. The principle is simple: equal pay for equal work!"

The leadership is braced for a conference defeat today over its plan to shift power over schools to parents from councillors, many of whom are Liberal Democrats.

Letters, Review, page 2

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: 3rd Line Virtualisation, Windows & Server Engineer

£40000 - £47000 per annum: Recruitment Genius: A 3rd Line Virtualisation / Sto...

Recruitment Genius: Refrigeration and Air Conditioning Service Engineer

£26000 - £35000 per annum: Recruitment Genius: A successful national service f...

Recruitment Genius: Business Development Executive / Sales - OTE £25,000

£15000 - £25000 per annum: Recruitment Genius: This is an opportunity to join ...

Recruitment Genius: Sales Administrator - Fixed Term Contract

£17500 - £20000 per annum: Recruitment Genius: We currently require an experie...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
Fifa corruption: Strip Qatar of the World Cup? Not likely

Strip Qatar of the World Cup? Not likely

But if a real smoking gun is found, that might change things, says Tom Peck
Twenty two years later Jurassic Park series faces questions over accuracy of the fictional dinosaurs in it

Tyrannosaurus wrecked?

Twenty two years on, Jurassic Park faces questions over accuracy
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
Genes greatly influence when and how many babies a woman will have, study finds

Mother’s genes play key role in decision to start a family

Study's findings suggest that human fertility is still evolving
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Rafa Benitez Real Madrid unveiling: New manager full of emotion at Bernabeu homecoming

Benitez full of emotion at Bernabeu homecoming

There were tears in the former Liverpool manager’s eyes as he was unveiled as Real Madrid coach. But the Spaniard knows he must make tough decisions if he is to succeed
England can win the Ashes – and Elvis Presley will present the urn

England can win the Ashes – and Elvis will present the urn

In their last five Test, they have lost two and drawn two and defeated an India side last summer who thought that turning up was competing, says Stephen Brenkley
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)