Lib-Dem tax cuts worth £5bn to poor, says Hughes

Simon Hughes told the Evening Standard that about a quarter of the proposed £20billion reduction in public spending would be pumped into lower taxes for poorer households.

Party leader Nick Clegg and Treasury spokesman Vince Cable have shied away from putting a figure on the scale of the tax cuts.

But Mr Hughes said: "Ball-park figures, and there has not been a final decision but I'm assuming we are looking at £15billion other public spending commitments - £5billion tax cuts."

His comments may box in Mr Clegg and Mr Cable but will reassure grassroot Lib-Dems threatening to defy the leadership today when a vote is held on the tax policy.

Mr Cable, though, will tell delegates at the party's annual rally in Bournemouth that it is their "duty" to face up to a new tax-cutting agenda. He will argue that following Labour's public spending boost, savings can be made and should be channelled into tax reductions for people on low and middle incomes, as well as into improving areas such as social and mental health services, and care for the elderly.

"We have not just an opportunity but a duty to confront this problem head on: to become a tax cutting party," he was set to say.

Using language more associated with the Tories, he was due to add: "We have a public sector which is, all too often, bloated, over-centralised, incompetent and unaccountable.

"The message must be that government should do fewer things well, rather than many things badly."

The Liberal Democrats are proposing two lots of savings - both worth £20billion - which risks confusing voters. The first £20 billion would be from cuts in public spending including on ID cards, scrapping the Business Department, a shake-up of NHS IT and ending child tax credits for the better off, and would aim to deliver a net cut in the overall tax burden - of about £5 billion, according to Mr Hughes.

The second £20 billion would slash the equivalent of 4p off the basic rate of tax and would be funded by around £8 billion of green taxes, between £6billion and £7 billion from ending preferential pension relief for higher earners and a series of measures to close "loopholes" benefiting the welloff, big business and savers - worth in total an estimated £5 billion.

They include taxing "golden goodbyes"; stopping businesses, including Tesco, and the very wealthy avoiding stamp duty; scrapping some tax relief on savings; aligning capital gains tax with income tax; a clampdown on non-doms and higher tax on investment income.

In his speech this afternoon, Mr Cable will deny that his tax-cutting plans are stealing the clothes of the Tories to combat the surge in support for David Cameron's party.

Mr Hughes, MP for North Southwark and Bermondsey, said: "The figure at which people will be asked to pay more will be well above the £100,000 limit."