Are the Lib Dems completely nuts?

It seems like the Liberal Democrats are trying to resurrect themselves by apologising for changing their election manifesto pledge on tuition fees and by promoting policies that should appeal to what would have been their base. The problem, from my perspective, is that most of what they’re now saying seems completely crazy.

Apologising for backing down on their “no increase in tuition fees” pledge is moderately decent, but they’re still sticking with the view that it was necessary to increase tuition fees because we couldn’t afford not to increase tuition fees. Do they think that by changing to the new fee system, the british economy now has more money and can suddenly afford to pay for Higher Education while it wouldn’t have been able to do so if we have stuck with a largely publicly funded HE system. Nonsense, all they’ve done is change how we pay for Higher Education. We’re still paying £10-12 billion per year for universities, we’re just doing it in a different way to what we used to do. What we need is an argument as to why this is a better way to pay for HE, not soundbites about “we couldn’t afford to continue paying for it through taxation”.

The Lib Dems are now also talking about a wealth tax. Again, I think this is ludicrous. I think we do have too much of a wealth divide in the UK and it is something we have to resolve. However, taxing wealth is extremely difficult and potentially very damaging. I don’t actually see how one can sensibly implement a wealth tax. How do you accurately determine someone’s wealth? Also, imagine setting a wealth tax of 10%; you would reduce someone’s wealth substantially in a decade. How is that reasonable? We want people to save for their future, not penalise people who have been sensible with their money. Having said that I would be happy to see a change in council tax so that those who live in very expensive properties do pay more than they do today. We should just stop calling it a wealth tax. The real problem, in my view, is that we haven’t been taxing income properly and we have allowed those earning high salaries to take an ever increasing fraction of the wealth. We need to have an overhaul of the tax system so that high earners pay more tax on their income (be it salaried income, capital gains, or dividends). I also think we should be comfortable with inheritance tax. I don’t see why I should (if I ever did have any significant wealth) be paying tax on my wealth (rather than on the income it generates) but I don’t really see why my descendants shouldn’t pay tax on any of my wealth that they might inherit.

The most ludicrous idea from the Lib Dems is their suggestion that parents can use some fraction of their pension pot as collateral on their childrens’ houses, so as to allow their children onto the housing ladder. So the financial crisis was caused by lending money to people who couldn’t ultimately afford to pay back the loan. The solution to the housing crisis is to now lend money to people who are a risk (i.e., the banks are clearly nervous about lending to these people) and to use part of their parent’s pension as collateral. Firstly, a house buyer having a deposit says something about their financial situation (i.e., they’ve been able to save and so their incomings exceed their outgoings). Secondly, it means that negative equity is less likely. Even if house prices drop, it’s less likely that the buyer will owe more than the house is worth. The current suggestion essentially satisfies the latter concern, but doesn’t influence the first. Now, when someone defaults, the bank can recover some of the shortfall from the parent’s pension but the taxpayer may have to bail out the parents when their pension no longer covers their living expenses. Doesn’t really solve anything as far as I can tell. The real solutions are either to accept that many people in the UK will just have to rent (nothing fundamentally wrong with this – common in many other similar countries), or house prices should drop, or some combination of the two.

As far as I can tell, the Lib Dems are either just completely nuts and have no real idea of how to solve the problems we are now facing, or they’re just making policy statements that don’t make any real sense so as to appeal to some voters who may think they’re a good idea. Neither of these seems acceptable for a party that is currently sharing power in government.

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One thought on “Are the Lib Dems completely nuts?

  1. Pingback: Ninth Level Ireland » Blog Archive » Are the Lib Dems completely nuts?

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