TAX AND THE
People will be able to tick a box to decide whether about 1 per cent of their tax bill, worth pounds 1bn, will go to hospitals, schools or other policy areas.
Capital gains tax will be reformed with loopholes closed to pay for investment in the police and public transport.
Taxation will be removed for the lowest paid with the 10p tax rate eventually cut to zero so that no tax will be paid on earnings up to pounds 6,500.
But high earners will pay a top-rate tax of 50 per cent on their income above pounds 100,000 a year, to pay for improvements in the NHS. A penny will be put on the basic rate of income tax to help to fund education improvements.
Each household would be sent an annual Citizen's Tax Contract showing in simple terms what their taxes are being spent on. Each budget would include an assessment of its impact on the environment.
Analysis: Most of the extra tax revenues the party would raise would come from the two high-profile income tax increases, amounting to pounds 6.5bn a year. Civil servants would describe the proposals as "brave": honest about raising taxes but opting for the most obvious and painful method. It would certainly not be vulnerable to "stealth tax" accusations. The Liberal Democrats sugar the pill a little by offering taxpayers the chance to earmark part of their tax payment for specific services. However, economists believe this kind of earmarking is gimmicky: nobody would ever opt to ring-fence their taxes for unglamorous but essential public spending such as prisons or road cleaning.
What's more, even a planned increase of pounds 8bn over two years would not amount to a huge rise in spending when public expenditure on health and education will top pounds 100bn this year.
Diane Coyle Economics Editor
Health gets top priority with plans to stem the loss of nurses, lab technicians and doctors from the NHS with average salary increases of pounds 1,000 a year for the lowest-paid staff.
The Liberal Democrats will spend more than pounds 500m a year on increased NHS pay and an expert commission will examine pay and conditions throughout the health service. An extra 27,500 nurses, 4,600 doctors and 10,250 health professionals will be recruited to help cut waiting times. The extra funding will provide an extra 10,000 hospital beds over five years.
Patients will be guaranteed that appointments for surgery and with consultants will not be cancelled. Doctors will get guidelines on priorities for treatment. A pounds 500m investment will guarantee access for all and free check-ups at an NHS dentist. Eye tests will also be free.
The Liberal Democrats will double investment in the latest equipment to help the early detection of diseases such as cancer. To stop multimillion- pound lawsuits for medical negligence, a no- fault compensation system will be introduced.
Analysis: Health service pay is one of the thorniest issues, with the NHS often cited as Europe's biggest employer. Extra money to recruit and keep nurses and ancillary staff with "golden handcuffs" is one solution but would not come cheap.
Equally, the NHS has many priorities apart from pay. Patients are likely to be more concerned with waiting times than staff pay. A return to free NHS dental check-ups and eye tests is a crowd- pleaser but guarantees for surgery and hospital appointments need more than just money. As disaffected GPs said yesterday, it could take significant investment spent wisely and, if necessary, with reform of the NHS. It is a familiar prescription.
The Liberal Democrats will abolish university tuition fees and restore grants for poor students. An extra 1p on the basic rate of income tax will help to fund a cut in class sizes to an average of 25 for all pupils aged five to 11. …