Is there Correlation in Coalition?

Can you believe it's almost two months since the Tory Lib Dem Coalition was formed? While the nation is still getting used to the set up, we've had a look at their joint manifesto to see what “Dave and Nick” have in store for us on the financial front.

They've already adopted the Conservative's proposal to create Britain's first free national financial advice service, which will be funded in full from a new social responsibility levy on the financial services sector. They support the National Minimum Wage and the provision of free nursery care for pre-school children. And they plan to create a green investment bank and green financial products too.

All good stuff, but we also thought it would be interesting to look at their core financial pre-election pledges and what their plans are now. You might think you're seeing double, but one plus one doesn't always add up to two.

Income tax

Tories: Keep the new 50p tax rate while public sector employees are on a pay freeze.

Lib Dem: Raise the income tax threshold to £10,000.

Coalition: Use the Budget to announce a substantial increase in the personal allowance from April 2011, with the benefits focused on those with lower and middle incomes. Further increase the personal allowance each year, with a longer term policy objective of it rising to £10,000 in real terms. This change takes priority over other tax cuts.

Inheritance tax

Tories: Increase inheritance tax threshold to £1m.

Coalition: The income tax objectives above now take priority over this.

Capital gains tax

Lib Dem: Align capital gains and income tax rates and reduce the annual capital gains tax exemption from £10,000 to £2,000.

Coalition: Seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities. Clegg recently said that a tapering rule would be considered.

Council tax

Tories: Freeze council tax for 2 years.

Lib Dem: Aim to replace council tax with a local tax based on ability to pay.

Coalition: There's been no direct reference to this in their manifesto.

Tax credits

Tories: Stop tax credits for families with incomes over £50,000.

Lib Dem: Restrict tax credits and improve their administration

Coalition: Reduce spending on tax credits for higher earners, bring forward plans to reduce the couple penalty in the tax credit system and reform the administration to reduce fraud/overpayments.

Child Trust Funds

Tories: Cut spending on Child Trust Funds for all but the poorest families and disabled children.

Lib Dem: End government payments into Child Trust Funds

Coalition: Reduce spending on the Child Trust Fund for higher earners

Home Information Packs (HIPs)

Tories: Aim to abolish HIPs

Lib Dem: Scrap HIPs, retaining the need to have an energy performance certificate

Coalition: Supports the Lib Dem policy above.


Tories: Permanently raise the stamp duty threshold to £250,000 for first-time buyers

Lib Dem: Introduce a levy on properties worth over £2m.

Coalition: Review the effectiveness of the raising of the stamp duty threshold for first-time buyers.

Store cards

Tories: Cap excessive store card interest rates.

Lib Dem: Cap interest rates on credit cards and store cards.

Coalition: Ban excessive interest rates on credit and store cards; and introduce a seven-day cooling-off period for store cards.


Tories: reform Air Passenger Duty to encourage a switch to fuller and cleaner planes.

Lib Dem: Aim to cut rail fares and change air passenger duty to a tax per plane

Coalition: Committed to fair pricing for rail travel and will replace Air Passenger Duty with a per-flight duty

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