Lib Dems ponder taxes on higher earners to attract Labour voters

The Liberal Democrats could woo Labour supporters with changes to their tax policies which would benefit low-income households at the expense of higher earners.

Senior Liberal Democrats are considering the proposals, which include raising the tax threshold to the minimum wage level - at £8,615, almost double its current level - or axing the 10p rate band, days before the party's autumn conference in Blackpool begins on Sunday.

That would require raising more cash in other ways, for instance by scrapping the upper earnings limit on national insurance contributions. Critics have suggested that the Lib Dems' redistributive policies damaged the party's electoral appeal to middle class families at the general election.

That led to a tax commission examining key policies such as its 50p top rate of tax for those earning more than £100,000 and the replacement of council tax with a local income tax.

But policies outlined in a consultation paper from the group would increase the redistributive impact of its proposed tax regime. That might improve the party's appeal in urban seats - where it gained against Labour at the general election - but could alienate wavering Tories. The party lost two seats to the Conservatives despite gaining votes.

The paper also suggests that the higher rate threshold could be raised to aid middle-income groups, which could otherwise face high marginal rates under a local income tax.

Yesterday Lord Razzall, the party's chairman of campaigns and communications, said the conference would have "an air of celebration", following the election of its highest number of MPs since 1923.

But in an article in Political Quarterly, the party's former director of policy, Richard Grayson, warned it had become too focused on policies and had not given people a sense of its basic values.