Our sums add up, insist Lib Dems as they unveil tax rise for the rich

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The Liberal Democrats attempted to quash accusations that their "sums don't add up" yesterday as they unveiled "fully costed" spending plans to raise the top rate of tax to 50 per cent for the highest earners.

The Liberal Democrats tried to quash accusations that their "sums don't add up" yesterday as they unveiled "fully costed" spending plans to raise the top rate of tax to 50 per cent for the highest earners.

Vincent Cable, the Liberal Democrat treasury spokesman, argued that "economic discipline and credibility" were essential if the party was serious about government. But he came under pressure to iron out ambiguities in his proposals in the run-up to the next general election.

The former chief economist at Shell published detailed plans to make £25bn of savings from "slimming down Whitehall", including the scrapping of the Department for Trade and Industry, which currently employs 10,200 staff. Not all of them would lose their jobs under the Liberal Democrat plans as some would be transferred to other departments.

A party spokesman had said it was not yet certain how many DTI jobs they would cut to pay for a £25-a-week pension increase for those aged over 75. But Mr Cable said those cuts would come on top of those already earmarked by the current Treasury. He said: "It is inevitable that if you cut back some government department activities that some people will lose their jobs. We have never sought to hide that.

"I don't pretend to you that the Liberal Democrats are into giving public service jobs for life and there would be painful consequences for some of these contractors. We have not done a head count. But there would be... very substantial manpower change."

Baroness Williams of Crosby, the outgoing leader of the Liberal Democrats in the Lords, said it was "right to ask the best-off in our country to contribute to a little more tax, so that less well-off people can send their children to university and ensure proper care for their older relatives".

But the Tories attacked the Liberal Democrat spending plans as a "spending spree" and claimed the Liberal Democrats would raise more than 40 taxes, including a plastic-bag tax and those on water bills. They claimed plans for local income tax would cost "a typical working family in England £630 extra a year".

The party has promised to raise tax to 50 per cent for those earning more than £100,000 and to abolish the council tax and replace it with a local income tax that would lead to savings for most pensioners and low-income households. The party says seven out of 10 people would benefit from the change to council tax, and that the new top rate of tax would not be applied to the local charges.

Mr Cable said the proposal to lift taxes to 50 per cent on earnings over £100,000 was not a "soft option" but would mean that the burden of taxation would be fairer. The party says the new top rate would affect just 1 per cent of the population. He also said that a Liberal Democrat government would not need to raise national insurance contributions and pledged not to lower the threshold on the top rate of tax. A party spokesman said: "Nationally the new rate of income tax would be the only new tax. There would be no overall rise in taxation. Any other changes would be revenue neutral. There would be no other tax increases to pay for these [policies]."

Mr Cable faced close questioning about his spending plans, which appeared to contain several ambiguities, including whether plans to freeze the budget of the Department of Culture, Media and Sport (DCMS) would mean scrapping London's 2012 Olympic bid. He appeared unclear about whether his party would match the £15m pledged by the Government to prepare for the bid.

He said it would be up to the Liberal Democrats' culture team to decide if they could find the money. He told the conference: "It would be up to the quangos to decide who gets what. But the [DCMS] budget is not going to rise as rapidly as before. We would not single the Olympic bid out above any other arts or sporting event."

He also faced questions about his decision to include in his costings the budget for the establishment of ID cards ­ which have not yet been introduced. The party says it would scrap ID cards, saving £3bn over 10 years.

But there were fresh questions about whether subsidies for scientific research would be axed after Mr Cable declared that the party did not agree with "government plans for large increases in science subsidies to the private sector".

The party has not yet spelt out how its promise to increase spending for scientific research, announced last week, would be funded.

Mr Cable also unveiled plans to cut government support for defence projects, including the Eurofighter. The party wants to end the preference for buying British and would cut £1.35bn from the defence budget, including subsidies for British companies. Several Liberal Democrat MPs have constituencies, such as Cheltenham, that rely on defence industry jobs. But under Mr Cable's plans they would have to compete with state-supported foreign companies for contracts.

Other Liberal Democrat savings would come from scrapping "baby bonds", cutting the use of agency staff in the NHS, slimming down the Department of Health and cutting centralised targets and controls. They would also abolish the Office of the Deputy Prime Minister and sell the Royal Mint.

Mr Cable said it was possible to have a liberal economy without "widening inequality and a free-for-all where the vulnerable are trampled underfoot".

"I believe we can have both a liberal and fair economy, better public services and tax cuts for the less well-off, strong growth with tough financial discipline. Our Britain, a Lib Dem Britain, would be a country which embraces economic freedom and social justice."

KEY POINTS

* Raise income tax to 50 per cent for those earning more than £100,000 a year

* Replace council tax with a local income tax

* Close down the Department for Trade and Industry and scrap many industrial subsidies

* Freeze the budgets of the Department for Culture, Media and Sport and the Department for the Environment, Food and Rural Affairs

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