Clegg Plans Tax Rise for U.K.’s Rich, Mental-Health Cash

U.K. Deputy Prime Minister Nick Clegg will propose cutting income tax for most earners, funded by an increase in the capital-gains tax paid by the wealthy.

In a speech today to close his Liberal Democrat party’s conference in Glasgow, Scotland, Clegg will also pledge to improve mental-health care while pumping money into the state-funded National Health Service. The threshold to start paying income tax, currently 10,000 pounds ($16,000), should go up to 11,000 pounds in April 2016, with a goal of getting to 12,500 pounds, he will say.

The threshold increase is an area where the Liberal Democrats’ policy matches that of their Conservative coalition partners, who set out a similar plan at their conference last week. Where they differ is on how it would be funded, and which taxes should be cut after that. Tory Prime Minister David Cameron proposed raising the threshold at which people start paying a marginal rate of 40 percent of their income. Clegg will reject that today.

“There’s no point making unfunded commitments like David Cameron did without spelling out who pays,” Clegg told the BBC yesterday. “We are going to ask wealthy people in society to pay similar tax on their income from stocks and shares and the selling of second homes and so on; you align that more closely to income tax.”

The Liberal Democrats have been using their conference -- the last held by the three main parties this year -- to set out their program for the May 7 general election. With their support down by two-thirds since they went into coalition with the Tories in 2010, they’re seeking to persuade voters they can be a worthy government partner if next year’s vote is again inconclusive.

Tax Details

People who pay the 40 percent rate of income tax currently pay capital-gains tax at 28 percent. The Liberal Democrats propose raising about 500 million pounds a year by increasing that to as much as 40 percent. They would consult on the revenue-maximizing rate.

A further 250 million pounds would be raised by reducing the amount of capital gains people can receive tax-free from 11,000 pounds to 2,500 pounds.

Clegg will also pledge to put mental-health services on the same level as treatment for physical ailments by investing extra cash and bringing in targets for how long patients have to wait for treatment.

Describing mental health as the “Cinderella” of the NHS, Clegg will say patients shouldn’t have to wait more than six weeks to start “talking therapies” such as cognitive behavioral therapy and interpersonal psychotherapy. Providers will face sanctions if 75 percent of patients are not seen within that time, “just as if you are waiting for an operation on your hip,” he will say.

Ending Discrimination

“Liberal Democrats will commit to ending the discrimination against mental health for good,” Clegg will say, according to extracts of the speech released by his office. “While I know not everyone in the party is going to agree, I can tell you now: I want this smack bang on the front page of our next manifesto.”

Half of the 1 billion pounds pledged for the NHS in a motion agreed by the conference on Oct. 5 will be spent on mental health, Clegg’s office said. The money will be raised by increasing share dividend tax for higher-rate tax payers, cutting pensions tax relief for high earners and scrapping the Conservatives’ “shares for rights” program.

“Words in speeches are all well and good –- we all love our NHS,” Clegg will say. “But what it needs is money –- and that’s what the Liberal Democrats will guarantee.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE