Kiran Stacey Clegg’s bold plan for higher taxes

Yesterday’s pledge by David Cameron to “roll back green levies”, made in the heat of PMQs, apparently caught his coalition partners by surprise. While the government had been discussing reducing certain levies, the Lib Dems had not agreed to anything specific and did not expect it to be made public.

This morning, Clegg decided to seize the initiative. Clearly irritated by the prime minister’s decision to float policies without checking them, he decided to float his own idea, as anathema to the Tories as reducing green measures is to the Lib Dems – raising taxes.

He told the Today programme:

Of course we are examining whether these policies… can be delivered in a more cost-effective way. Of course, he and I both agree, where we can do that, and that’s what we’ll do in the coming weeks, we should.

But I’ll give you an example. We could in theory if we wanted to, pay that £135 to the 2m lowest income households which they are going to be given this winter to cut their fuel bills, which comes out of something called the Warm Homes Discount, which is one of these levies. We could if we wanted to just pay that out of government expenditure. It needs to be paid one way or the other.

This is a controversial idea wrapped in moderate words. Paying something “out of government expenditure” means swapping the costs from bill payers to taxpayers: in other words, raising new taxes. This is something George Osborne has ruled out under a post-2015 Tory government, but is theoretically possible under the coalition.

Not only is this a bold plan in itself, it is a reversal of years of government policy, which under New Labour and since then, has been focused on taking costs away from the taxpayer and putting them onto those who use a service. This is the reason, for example, that train fares have gone up so much in the last few years.

Labour has quickly seized on it, calling it a “panicked wheeze rather than a real freeze”.

Clegg could have a good case for switching green levies from bill payers to taxpayers. It is likely to be a much more progressive measure, allowing ministers to make sure that the people who pay the most are those who have the most money, rather than those who use the most energy.

But given the Conservative hatred of tax rises, especially if they are tied to green measures, this looks more like a good way to give the Tories a bloody nose than a policy that is likely to happen.