Lib Dem tax rises would be 'moderate'

The Liberal Democrats are seeking to head off Labour and Tory attacks at the general election by stressing they favour only "moderate" tax rises.

Outlining their economic strategy yesterday, the Liberal Democrats said the level of taxation was "broadly right". They argued that their plans for a 50p top rate of tax on earnings above £100,000 would barely alter it, affecting only 1 per cent of taxpayers, and promised it would be the only rise under their "fair tax" policy.

Charles Kennedy, the Liberal Democrats' leader, said the differences between the three main parties on the overall tax take was "minimal".

"The real issue here is not the broad levels of taxation and spending. It is one of principle and priority," he said. "The principle is ensuring that the tax burden does not fall disproportionately on the poor and vulnerable. Our priority is high-quality public services - not the false choices being offered by the other two parties."

However, Mr Kennedy put some light between his party and Labour by saying he did not "shy away" from a commitment to redistributing wealth. A Liberal Democrat commission would draw up proposals for a progressive tax system after the election.

"Under Tony Blair, because of the complex credit regime, four in 10 pensioners are paying a 50 per cent marginal rate of tax on the money they earn, and almost two million poor families are paying a 60 per cent marginal rate. How on earth can it make sense that the poorest in our society pay more of their income in tax than the richest? This is voodoo economics."

But the party's attempt to avoid a "high tax" label failed to halt criticism. Oliver Letwin, the shadow Chancellor, challenged the Liberal Democrats to say which other taxes they would raise to fill an estimated £11bn black hole in the finances.