The 2010 manifesto also proposed giving tax relief on pensions only at the basic rate, so that everyone gets the same tax relief on their pension contributions. Higher earners typically benefit from relief at 40% or 45% on pension contributions. The majority benefit from a tax-free lump sum withdrawal from their pension fund and pay only basic rate tax of 20% on their pension annuity income.

Gift aid works by grossing up the amount of your charitable contribution by the basic rate of tax. If you make a charitable donation of £100, then the charity can claim an additional £25 back from HMRC, making your total contribution £125. The effect is the same as if you had made a gross donation of £125 and claimed tax relief yourself at the basic rate of tax of 20%. The charity would have received £125 and your net contribution would still be £100.

If you are a higher rate tax payer making the same donation, the charity receives the same amount, but you are able to claim back a tax refund equivalent to the higher rate you pay - less the amount of basic rate tax HMRC pays to the charity. In the above example a higher rate taxpayer could directly reduce his tax bill by £25 to £31.25.

Tax relief on personal pension contributions operate in a similar manner. Your contributions to a personal pension fund are supplemented by an amount equivalent to basic tax relief. Higher rate taxpayers can claim additional relief as a reduction against their tax bill.

The tax relief is the reason why personal pension fund contributions and charitable donations are favoured by higher rate taxpayers.

What if everyone got the same relief for charitable or pension contributions at 32% i.e. the rate that would apply, if basic rate income tax and national insurance were combined?

Firstly, the income of charities is less likely to decline and may increase, as all of the tax relief for both basic rate and higher rate taxpayers goes directly to the charity. The exchequer would be paying more to charities for donations from basic rate taxpayers, while paying out less for donations from higher rate taxpayers - a broadly neutral position.

Similarly, the level of savings in pension funds is unlikely to decline for the same reason. As a consequence, all taxpayers would get the same level of relief that they ultimately pay on their pension income.

* Joe Bourke is an accountant, former parliamentary candidate and Treasurer of Hounslow Liberal Democrats