Campbell defeats rebel bid for 50p tax rate

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The Liberal Democrat leader Sir Menzies Campbell avoided a damaging defeat today when activists backed his tax plans.

Party members at their annual conference in Brighton voted to scrap the party's commitment to a 50p tax rate on the highest earners.

They approved moves - strongly backed by Sir Menzies - to pay for income tax cuts for low and middle earners with a massive hike in green taxes.

A bid by rebel MP Dr Evan Harris to retain the 50p tax rate on top of that was overwhelmingly rejected in the conference hall.

The vote will be a huge relief to Sir Menzies - and comes just hours before predecessor Charles Kennedy makes his return to the spotlight.

Mr Kennedy - forced to quit by colleagues in January after admitting a drink problem -- is expected to receive a rousing reception that could overshadow the new leader's own address.

Despite Sir Menzies' insistence that the vote was not a "High Noon", senior colleagues had warned any defeat would be damaging.

Sir Menzies welcomed the vote, saying: "We are going into the next election with bold and credible tax policies.

"They demonstrate our commitment to tackling inequality and environmental damage whilst maintaining financial discipline."

And Treasury spokesman Vince Cable, who led the debate, added: "I welcome conference's endorsement of these radical tax policies, which will see two million low paid workers taken out of income tax altogether.

"They put us on a strong footing as we move towards the next election.

"Green taxes will produce the behavioural changes needed to safeguard our environment without increasing the overall tax burden."

Under the green tax switch proposals, the most polluting new cars would be slapped with £2,000 road tax bills, fuel duty raised in line with inflation and flights, not passengers, taxed.

The £8 billion raised would help pay to stop more of the lowest paid people paying income tax at all as well as cutting the bills of middle earners.

Some relief on capital gains tax and pension contributions would also be scrapped to raise more revenue in a package claimed to financially benefit all but the top 10%.

Critics such as Dr Harris backed the policy but urged party members not to abandon the 50p top rate on salaries over £150,000.

It had proved very popular on the doorsteps and was far easier to explain than the new measures, they argued.

But environment spokesman Chris Huhne said any increases in income tax would undermine the message that the party was taxing "pollution not people".

A separate challenge - to the fact that the tax plans will raise no extra cash for public spending - was also defeated.

Mr Huhne had warned the party would have risked being seen as a "tax for the hell of it party."

Dr Harris said: "I am disappointed because we were hoping to win the amendment.

"My preference was to continue to have that simple message but now we will campaign on the package which does take from the rich taxpayers to give back to middle and poorer taxpayers.

"I supported Menzies before the vote and and I support him after the vote. The only difference is he has his preferred policy and some of us don't have ours.

"We will still unite behind our very fair, our very green and very simplifying tax proposals."

Mr Cable said that people had to accept "policies that hurt" if there were to prove themselves serious about tackling climate change.

But the overall package was three times better for the less well off than the party's previous policy - with 90% of the country paying less tax overall.

Policy chiefs rejected claims that if the measures succeed in changing people's behaviour away from polluting activity, they would get less tax and create a "black hole".

Such factors had been included in their calculations, they insisted.

Sir Menzies has sought to play down any comparisons between the reception Mr Kennedy may receive this afternoon and that for his own keynote speech, closing the gathering on Thursday.

Many activists were upset about the treatment of the former leader just months after he led them to a record general election result.

And a recent poll suggestion twice as many voters would like to see him still in charge rather than Sir Menzies.

Sir Menzies insisted he was looking forward to the speech.

"I'm sure he will make his usually extremely accomplished and witty speech," he told the BBC.

"It'll be a highlight of the conference."

Mr Cable said in the hall later: "I think we had a very good and very lively debate.

"We have now got a very good radical tax package, tax cutting for millions of people, a great commitment to a green switching tax, taxing the very wealthy.

"I think there is a recognition that we had to move on from high taxes. I think the attraction of being able to cut taxes for millions of people on middle and low incomes and being able to finance it in a responsible way helped members to decide."

The debate had brought out the party at its "very best", he added.

Mr Huhne added: "I am very proud and elated. It didn't look close but the great thing about conference is that it is a sovereign conference and it determines what our policy is. What you see here is genuinely what you get."

He added: "I am delighted that they backed the package and brought themselves into line as a whole party with the judgment of the leader, the shadow cabinet, the Federal Policy Committee and the Tax Commission."

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