No, they've not pre-released the final chapter of Harry Potter, but dared to conjure up the lowest income tax since Reginald McKenna's first budget in 1916 just before the Wizard, Lloyd-George, took the premiership.

Now, I don't want to do down the significance of this. Any move towards the eventual abolition of income taxes is surely a good thing. And, whilst the media and other bloggers seem to pick up on Local Income Tax as the preferred replacement for the Council Tax (even if it would put back most of the four pence cut in national Income Tax proposed), to me it is conspicuous by its absence in the actual press release. It merely uses the code "replacing [Council Tax] with a tax based on ability to pay".

So it may be wishful thinking, but the door is surely not closed for those of us who would prefer not to create a twenty grand rise in already unaffordable house prices to argue still for Site Value Rating on housing instead of LIT - even if the Tax Commission II has not fulfilled its remit from last year's conference to work up more concrete policy on Land Value Tax.

I note, however, one or two commentators on the blogs picking up on the continuing problem of high marginal tax rates where the least well off come off benefits, especially Housing Benefit and I wonder what happened to our good idea from last year of maybe taking everyone up to minimum wage levels out of income tax altogether.

In the People's Budget of 1909, it is interesting to look at the levels at which income tax kicked in. At £160 per year earnings it was in fact well over average earnings. On a purely price inflation basis it equates to approximately £11,000 personal allowance today. On a measure of wage inflation, however, it is more like £58,000 per year - which would take 70% of earners out of income tax today, as then. LG's higher rate would have kicked in at an earnings equivalent level today of nearly three quarters of a million pounds a year!

But of course he was proposing other ways making up the balance, by taxing land wealth - a type of wealth that the beneficiary does nothing to create or earn. An idea that today would help address many other pressing issues than just how to pay the government's wage bill - housing costs, regional economic development, non-domiciled tax refugees, the unsustainable levels of private debt, mostly secured on those artificially inflated land values. And if we taxed land values fully, we could solve these marginal tax rates for good, with a universal entitlement to a Citizen's Income instead of most of these income poor benefits together with low or no income taxes at all.

It's also worth noting that the author of that 1916 budget, Reginald McKenna, was to become one of Britain's most important bank managers, as Director of the Midland Bank. He understood what we have largely forgotten about money:

"I am afraid that ordinary citizens will not like to be told that the banks can, and do, create and destroy money. And they who control the credit of the nation direct the policy of governments, and hold in the hollow of their hands the destiny of the people."

If we want to form a twenty-first century Liberal government, we should invoke those greats from our past, and learn from them the sort of policies we need more than ever today to make free trade and economic development the real way of achieving equality of opportunity and equity for all. I only hope this is just the beginning.

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