Lib Dems consider spending alcohol and tobacco taxes on NHS

DUTY ON alcohol and tobacco should be earmarked for specific National Health Service projects, according to tax reform proposals mooted by a Liberal Democrat working party.

Under suggestions in a working paper, the pounds 12bn a year revenue from smoking and drinking could either be linked directly to the health service in its entirety, or rises in duty dedicated to specific projects such as providing more scanners, or improving NHS dentistry in areas where it has all but died out.

The suggestions are being examined by a Liberal Democrat working group on 'hypothecation' - earmarking - of taxes. Health and education are two of the areas for which revenue could be specifically targeted.

The party struck a chord during the 1992 election with its pledge to spend an extra penny of income tax to fund more education and Paddy Ashdown, the party leader, recently called for full hypothecation of revenues to help overcome public distrust of politicians.

But little serious work has been completed on the practicalities. The group is examining each service area to see whether hypothecation would be workable.

The paper argues for more emphasis on the services people get instead of the amount of tax they pay. Options canvassed include an annual spending statement, delivered to each household. The paper also suggests a local counterpart under which council-tax payers would be told the cost of a one-off capital scheme - a sports complex, for example - and then asked to vote in a local referendum on whether they wished the project to go ahead.