Liberal Democrats and Tax Credits - the truth exposed

Gordon Brown has been following David Cameron's example of how to deal with his party's inability to engage the public in his campaign - when in doubt, scare people. Yesterday it was tax credits. He painted the Lib Dems as nasty people who would take money away from poor children, an assertion that has zero credibility given that Vince Cable's tax plans do more to help people on the lowest incomes than anything Labour has ever done. Our plan for fair taxes will take 4 million of the lowest earners out of paying tax altogether and will give £700 a year back to every other working adult in the household.

Ok, let's have a look at exactly what the Lib Dems will do as regards tax credits. Basically what happens now is that you get quite a lot of help with tax credits and child care costs up until your household income is around £16000, which isn't really that much. Then, from £16000 until around £50,000 and in some cases up to £75000, you get a minimum award of around £545 per year. What will happen under Lib Dem plans is that the highest earning 20% of claimants will no longer get this minimum award. They will, however, benefit from the £700 every taxpayer would get from the raising of the tax threshold. That would give them either a net gain of £155 or £855 depending on how many taxpayers are in the household.

We get this minimum award on an income signifcantly higher than £16000. If I really think about it, we don't really need it. It's nice to have, but it's not essential. We are not rich by any stretch of the imagination, but when public finances are stretched, I don't see why we and those who earn a lot more than we do should get this extra tax credit, especially as we will also benefit from the £700 from taking the tax threshold to £10,000. Actually, under the Lib Dems we would still be £155 better off.

4 out of 5 people who currently qualify for tax credits would continue to get them and they would also benefit from the raising of the tax threshold and be a whole £700 better off per taxpayer who earns more than £10,000 and anyone who earns less than that won't pay any tax at all.

That to me seems like a good deal. I am better off and it also means that the most vulnerable people get more help - and they will. Liberal Democrats will give the Winter Fuel Allowance to disabled people, something Labour has failed to find the will or a way to do. If you're disabled and can't move around much, it's much more difficult to keep warm and you really need the extra help.

Don't for a moment think that Labour's tax credit system is actually perfect - as I blogged recently, they are taking thousands of the poorest families to court to recover overpayments that a lot of the time were the result of official error.

Now for the next bit of scaremongering put about by our opponents - that we are going to restrict Child Benefit. No. It's just not true. It's not going to happen. End of story. We will not touch Child Benefit. Have I made myself clear?

What we are going to get rid of is the Child Trust Fund - the baby bonds introduced by Labour in 2002. Any money we've put into them already will be safe, but for the future, we just can't afford them. The current system puts in £250 at birth and another £250 at age 7. At current prices, when the child is 18, that would barely pay for a month's rent in halls of residence. We'll put the money from that into cutting class sizes and making sure that the poorest children are not disadvantaged in education by their postcode. We can't afford them and we can do a lot more good with the money they cost us.

I personally think that Labour have a darned cheek having a go at us when we are doing more to help the people they have let down the most - working families on low incomes. They've created a situation where the poorest children come from those families where someone is working because they don't qualify for the full range of benefits like free prescriptions, grants for school uniforms, free school meals and so on. That's an absolute disgrace. Labour should just shut up and stop trying to scare people into voting for them.