Clegg insists on no tax rises

Nick Clegg has promised fiscally "responsible" Liberal Democrat policies with no overall tax increases.

The Lib Dem leader used a major speech on the economy on Friday to say that his party would not seek to raise spending at the next election but would shift the burden of tax onto pollution.

Backing the economic policy path pursued by his Treasury spokesman Vince Cable in the past few years, Clegg said while the public finances "mess" created by Labour would leave little room for manoeuvre, he would pledge to tax middle and lower-income families less.

"The Liberal Democrat approach to the economy, and to public spending, will always be responsible," he said in speech to the CentreForum think-tank.

"First and foremost, we need to accept that our fiscal position is in such a mess that we must be extremely firm on public spending.

"There isn't much scope in fiscal or monetary terms for a stimulus package. But we can restructure our tax system to give tax breaks to low and middle-income families, to support consumer spending.

"Overall, the tax burden should not rise. But it's also vital that we shift the burden of taxation away from hard work and onto pollution. The Liberal Democrats would cut national income tax by four pence."

The Lib Dems are committed to taking more of the poorest workers out of income tax altogether and to reducing the basic rate to 16 per cent, although the government is itself set to cut the rate from 20 per cent to 18 this April.

The third party also want to raise more taxes from green levies on aviation and high-polluting cars, and would cut tax credits for many middle-income earners
 
As new figures showed that home repossessions are at their highest rate since 1999, Clegg also argued that the problem must "not become an epidemic".

"If we don't, fire sales will turn a housing market slowdown in to a full-on slump, with potentially dire consequences," he said.

"We must take steps to ensure that repossession is only ever a last resort – by making financial advice compulsory at the point repossession claims are issued.

"Leading banks should agree practices to prevent large-scale repossessions – like allowing those in arrears because of circumstances beyond their control to move to shared ownership arrangements."

Meanwhile in an earlier interview with Friday's Financial Times, the Lib Dem leader appeared to indicate that he would consider backing a minority Conservative government after the next election.

"I don't care who produces a more liberal document for government. If it is more liberal then, of course, I would be interested to look at it," he said.