Lib Dems make old Labour policy grab with tax and duty pledges

Charles Kennedy yesterday outlined the Liberal Democrats' "alternative budget" in terms designed to appeal to old Labour voters.

He promised that he would "not shy away from" talking about redistribution, reaffirming his party's commitment to a top tax rate of 50p in the pound.

Mr Kennedy added: "It is important that the tax burden does not fall disproportionately on the poor and vulnerable."

But the Liberal Democrats' Treasury spokesman, Vince Cable, sought to emphasise the party's business-friendly credentials by promising: "Our commitment to fairness is reinforced by a firm commitment to liberal economic policies: economic freedom.

"Without wealth creation there is no wealth to spread."

He promised not to introduce windfall taxes and to help half a million shopkeepers and other small business people by raising the rates threshold.

Property with a rateable value of £25,000 or less would be exempt.

Mr Cable also underlined financial policies likely to appeal to young professionals. They include raising the threshold for stamp duty on house purchases from £60,000 to £100,000 and the abolition of tuition and top-up fees.

About 400,000 people would be exempted from stamp duty under the Liberal Democrats' plans. The proportion of first-time buyers paying the duty has increased from less than a fifth in 1993 to three-quarters because the duty threshold has not risen.

The Liberal Democrats argue that up to half the population would be better off under the party's budget and a fifth no worse off.

Mr Kennedy said: "We have a reputation for being straightforward on tax. That will not change."

He claimed: "The difference between the parties on tax take is minimal. The real issue will be one of principle and of priority." At the heart of the party's commitment to "fairness" lies its pledge to replace council tax with a local income tax.

The Liberal Democrats point out that at the moment, the poorest fifth of the population pay a higher percentage of their gross income in tax (37.9%) than the wealthiest fifth (35.1%).

Other proposals include the introduction of revenue-neutral "green taxes", free personal care for the elderly and a "citizen's pension".

Under the latter policy, over-75s would be guaranteed a basic pension of at least £105.45 a week for a single person. Pensions would also be based on long-term residence rather than on national insurance contributions to assist women who have taken time out of paid work to bring up a family.

The Liberal Democrats also promised to fund 10,000 more police officers, reduce class sizes to 20 for five- to seven-year-olds and to guarantee working mothers £170 a week for the 26 weeks of statutory maternity leave.

This weekend Labour called a "prebuttal" press conference at short notice to attack yesterday's policy launch from the Liberal Democrats.

Alistair Darling argued that a couple on "average earnings" of £41,000 would be £208 worse off each year under the Liberal Democrat plans.

But those figures are based on a dual-income household in which a man and a woman both earn the average wage. The Liberal Democrats say a family on the median household income - just £21,700 - would gain £461 a year.

Labour's sums may be of less significance than the fact that they, like the Conservatives, feels impelled to attack the third party.

The Tories have extra ammunition as Liberal Democrat plans are based on government figures. Oliver Letwin, the shadow chancellor, accused the party of sharing Labour's "black hole" in finances.

The Liberal Democrats and Tories also turned on Labour after a new study by the Chartered Institute of Public Finance and Accountancy predicted council tax bills in England would rise by 4% this year, warning that further increases would be seen in a third Labour term.