Lib Dems promise a big change on credit cards

by Ed Bowsher on 14 April 2010  |  9 comments
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The Lib Dems published their manifesto today. Ed Bowsher really likes their proposal on credit and store cards but he's not sure they've got it right when it comes to pensions.

Ok, so we all know the Lib Dems aren’t going to win the next election! But it’s possible the party could end up in a coalition government so I think it’s worth looking at some of their financial promises.

Good points

-          the Lib Dems would impose maximum interest rates on credit and store cards. (After a consultation). I think this is an excellent idea. In fact, I first called for an interest rate cap in our credit card charter last year. I’m especially pleased that the Lib Dems are going to impose limits on both types of card whereas the Tories said yesterday they would only put a cap on store cards.  As for Labour, I’m rather disappointed. Recent press reports said that Labour would announce an interest rate clampdown in their manifesto, but there was nothing in the actual document. So three cheers for the Lib Dems!

-          Higher taxes on air travel – the next government will have to put up taxes as the deficit is way too high. I think green taxes are an excellent way to raise extra revenue and they will also boost the UK tourist industry as fewer people go abroad.

-          Mansion tax – I’m a fan of a tax on valuable homes. I explained why in this blog post.

-          Spending cuts – The Lib Dems acknowledge that big spending cuts are inevitable. But they also know that it makes no sense to choke off an early stage recovery by cutting spending too soon. Doing that will only increase the government’s debt in the medium term. Here’s the money quote from the Lib Dem manifesto:

“If spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political dogma. Our working assumption is that the economy will be in a stable enough condition to bear cuts from the beginning of 2011-12.”

Hear! Hear! Of course, George Osborne and the Tories don’t agree. They want to start cutting spending immediately. Sadly, our most likely future Chancellor appears not to understand basic economics. Sigh.....

Not so sure

-          The Lib Dems plan to restore the link between the state pension and earnings. That’s an attractive proposal in some ways, but can we really afford it?

-          Increasing income tax threshold to £10,000 – If you’re going to cut taxes, this is one of the better options as it will help people on relatively low incomes (although it will help many affluent people too.) But again, given the state of our finances, should we be doing any tax cuts at all?

-          Tax relief on pensions only at basic rate – the Lib Dems want to raise cash by restricting tax relief on pensions to no more than 20%. Given my keenness to cut the deficit, you might think that I’d support this measure, but I think it would probably be a mistake. It’s absolutely crucial that we save more for our retirement. And I don’t think it’s so bad if someone earning, say, £60,000 is encouraged to save as much as possible by some higher rate tax relief.

So that’s my take on the Lib Dem manifesto. The next big event is the first TV debate tomorrow night.....