Liberal Democrats' Conference: Tax and benefit policy leaves doubts over costs: Patricia Wynn Davies reports on the progressive but uncosted framework agreed following an uneasy debate

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The Independent Online
THE Liberal Democrats may have cut short controversy by junking their most controversial idea, the citizen's income, but the conference gave the go-ahead for a clutch of redistributive tax and benefit proposals with potentially far- reaching cost implications.

Critical details about the level at which tax and benefit rates would have to be pitched and knock-on effects for public borrowing and spending are yet to be given after yesterday's approval of the policy document Opportunity and Independence for All.

An uneasy debate ended with the party avoiding the embarrassment of the paper being torn up or referred back. But the upshot is commitment to a progressive framework reminiscent, in part, of the programme proposed by the late John Smith before Labour lost the 1992 general election.

The Liberal Democrats are unlikely to have shaken off the 'high tax party' image, in spite of the decision at the beginning of the week to back- track from the document's proposed maximum 60 per cent top rate of income tax and suggest that 50p in the pound would be enough. Yesterday's debate showed activists divided on key issues, with some pressing for far more radical moves.

Although Malcolm Bruce, the new treasury spokesman, insisted that the party would produce a detailed, costed programme at a later stage, the policy paper approved by conference yesterday warns 'there is no such thing as a free tax cut'.

An estimated 50,000 of the lowest paid people would stop paying any income tax at all, while Mr Bruce also suggested on Monday that up to 6 million people could be taxed at just 10 per cent.

Urging the dismantling of the current tax and national insurance system, Sir William Goodhart, chairman of the tax and benefits working group, said it currently extracted a marginal tax rate of 35p from people with incomes as low as pounds 6,500.

But the document's commitment to abolishing the upper limit on national insurance contributions and creating an integrated tax could exact a penalty on middle-income groups. The paper promises three higher-rate tax bands to ensure people do not pay 'significantly' more tax.

The paper's aim is to increase incentives to work and save while taking into account individual circumstances, and so supports greater personal allowances, tax relief on savings and the replacement of the 20p tax band with a pounds 150 tax credit.

Family credit would be merged with income support to form a new low-income benefit, 'tapered' to ensure people did not lose benefits pound for pound if they took a part-time job.