Leading article: A bid for the higher ground

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Liberal Democrat policy chiefs seem to have identified two major areas where their party has an image problem: crime and tax. Their response to the crime issue has so far been disappointing. Sir Menzies Campbell's recent call for longer sentences was a text book lurch to the right that lacked credibility coming from a party that has, rightly, eschewed such populism in the past.

However, yesterday's brief proposals on tax, drawn up by their economic spokesman Vincent Cable, are much more impressive. The abandonment of the long-standing commitment to a 50 per cent top rate of income tax was overdue. This was never the vote winner many in the party believed.

And the Liberal Democrats have now gone a step further by hinting at a cut in the basic rate of income tax and moves to take a considerable number of people at the lower-earning end of the scale out of the system altogether. This is clever timing. The chaos in the administration of the Chancellor's tax credits system - which has resulted in significant levels of fraud and overpayment - has become apparent in recent weeks. The Liberal Democrats have a point when they claim the problem largely stems from the Byzantine nature of the tax system. The higher environmental taxes proposed are also sensible and clearly thought out. The idea that the polluter should pay - whether an air traveller or the driver of a fuel-inefficient car - is entirely consistent with liberal economic theory.

True, there is a question mark over whether these proposals would add up. Details are still hazy of another important strand of the Liberal Democrat fiscal package announced yesterday: a review of capital gains tax. It is hard to see a future Liberal Democrat government wringing several billion pounds more out of this. And, obviously, the more successful the environmental taxes are at curbing pollution, the less revenue they would raise. But are these proposals as a whole really much less credible than the claims of the other two parties at the time of the last election that "cutting bureaucracy" would make their own sums add up?

These latest suggestions are also politically shrewd. They pose a challenge to Labour and the Chancellor over the complexity of the taxation system he has built up since 1997. They also challenge the new Conservative leader over his commitment to the environment. It will be difficult for David Cameron to criticise the Liberal Democrats' new green taxes without opening himself to the accusation that, though he claims to care about the environment, he is not prepared to take unpopular measures to safeguard it.

The Liberal Democrats have made an audacious bid for the high ground on tax policy. Their leader may continue to flounder, but the party is showing some healthy signs of life.

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