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The yawning gap between Lib Dems and Tories

Robert Peston | 13:49 UK time, Wednesday, 14 April 2010

Vince Cable has been the great scourge of how banks hid the risks they've been taking by keeping much of their financial activity off their published balance sheet.

Vince CableSo I had to slightly chuckle at the Lib Dem manifesto's presentation of a Lib Dem government's de facto profit-and-loss account.

Because Cable's plan to levy a tax on banks' profits is classified as a "savings proposal" rather than as a "tax proposal".

Now in fairness to him, the Lib Dems' proposals for the public finances are set out in a more helpful tabular form than is to be found in either the Labour or Tory manifestos.

Unlike Labour and the Tories, the Lib Dems make it incredibly easy to see that (just like Labour and the Tories) they would only make a start in reducing the public-sector deficit - and have promised expenditure cuts only in the generality rather than the detail.

But I think Mr Orwell would have something to say about the classification of a tax as a saving, even when the targets of the tax are institutions as unpopular as the banks.

Also, there is no detail about how any bank's liability to the proposed tax would be calculated. All we're told is that the levy would raise just over £2bn in the current financial year, rising to almost £3bn in 2014-15.

Which sounds like a lot of money, but is actually quite small beer compared with the £5.5bn a year that the Lib Dems would raise by restricting relief on pension contributions to the basic rate of tax.

The Lib Dems would be taking to a logical conclusion the reduction of tax reliefs for those on higher earnings already announced by the government.

On the Lib Dem's plan, anyone earning more than £44,000 a year, and paying into a pension, would see a tax rise - although those paying 40% tax who earn less than £100,000 a year and make fairly modest pension contributions would probably be net beneficiaries from the Lib Dem's flagship tax idea, which is to increase the tax free personal allowance to £10,000 (at a whopping cost of £16.8bn).

As Stephanie has pointed out, like Labour the Lib Dem's would phase out the personal allowance for those earning more than £100,000.

That said, and using terminology that some might regard as archaic, the Lib Dem's manifesto does seem the most "left wing" of the main three parties' - and by quite a margin.

It is more explicitly redistributive than Labour's - and Labour's is the most redistributive of any of its manifestos since 1992.

Also the Lib Dem manifesto is explicit about its distaste for those on higher earnings. Not only is it bashing bankers' bonuses (see my note of yesterday), but it would force all public companies to "declare in full all remunerations of £200,000 per year or more".

Crikey. Some would say that the Lib Dems have journeyed quite a long way from that liberal strand of their origin.

All that said, there are elements of the Lib Dem programme that will be seen as friendlier to business and investors: there are the routine pledges to reduce red tape; and the manifesto echoes the Tory distaste for Labour's planned National Insurance rise, which it too describes as a tax on jobs (although unlike the Tories, the Lib Dems won't commit to any timetable for reversing the rise).

Even so, the thrust of this manifesto would be seen as toxic by many Tories and delicious by traditional Labour supporters. Which raises the question whether it's remotely realistic to think that the Tories and Lib Dem could cohabit in government, in the event that the Conservatives emerged as the largest party but without an overall majority.

Comments

  • Comment number 1.

    Surely the 'tax' is a 'saving' as it is 'saving us from them'.

    However some people seem to be happy living in slavery - so maybe I should stop making points like this and allow the country to voluntarily wrap itself in chains.

    At least the Liberals have the un-challenged record of "not having screwed it up before" - a claim neither the Tories, nor Labour can make.

  • Comment number 2.

    Yawning. You are not wrong there.

  • Comment number 3.

    I have been a big fan of the Lib Dems. On the 3 big issues of the past 10 years their policies and principles have been very much aligned to my own:

    1 - Iraq
    2 - EU
    3 - Credit Crunch

    That being said their proposal re bankers bonuses is a step too far and smacks of populist politics. The challenge the UK has is to have a more balanced economy, and to invest in building up our manufacturing/export base, but I see little advantage in taxing the financial services to the point where no one wants to work here... that would have a seriously catastrophic effect on our economy. Up until they announced their manifesto I was 99% likely to vote for them, now there is no way that will happen - I am deeply disappointed in C&C. The politics of envy will cost them the opportunity to be taken seriously.

  • Comment number 4.

    It's good to see a pledge to raise the state pension in value as well as all these incremental plans to raise the qualifying age. This, of course, is in addition to the restoration of the earnings link which will happen before the end of the next Parliament (up to 2015) anyway unless someone repeals the Pension Act 2007. If they raise it to the level it would have been if Thatcher hadn't broken the link in the first place, then maybe they could scrap the expensive bureaucracy that goes with MIG. Hang on though, aren't the Lib Dems rather keen on means testing? Regards, etc.

  • Comment number 5.

    Calling a tax a "saving" follows the same twisted logic as calling a tax reduction "taking money out of the economy" (as Brown would have it). If only they could just take their hands out of our pockets!

  • Comment number 6.


    [That said, and using terminology that some might regard as archaic, the Lib Dem's manifesto does seem the most "left wing" of the main three parties' - and by quite a margin.]

    Then let's hope the millions of drones out there in the public sector and on benefits vote for them and suck the life out of Labour's election campaign.

    NO MORE REWARD FOR FAILURE - EITHER IN THE BANKING SECTOR OR POLITICS.

  • Comment number 7.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 8.

    It still seems as clear as mud even after all three manifestos. It is clear that the Tories do not like tax, Labour do not like a rise in the rate of income tax but tax everything else as much as they can and the Lib Dems seem to have come clean that they want to tax more but only to recycle to the lower paid rather than reduce cuts in spending. I am not sure this tells me what the emergency budget will look like in May- so really have to go back to the big picture stuff. The Tories want smaller government and more power to the people- problem with that is that without intervention will inequality be tackled and will there be good governance- and they want us to believe George Osbourne can be an effective chancellor. Labour have presented a pragmatic plan built on expedience rather than values so the voter has to balance a good feeling about the competence of Alastair Darling with a bad feeling about that of Gordon Brown. Lib Dems say some good stuff and it looks well thought through by their chief of staff although not good news for the presently better off or those in private pension schemes (difficult to see how you can only tax pensions at basic rate when those in defined benefit schemes and public sector schemes have often contributed only a fraction of the value they get back) - but of course they will never be in Government. The key has to be more fairness in tax and honesty about cut backs in the public sector and that will mean hundreds of thousands of job reduction and who will come clean about that.Mind you judging by the overflowing car parks of practically all public bodies that I see, there is plenty to be cut back.

  • Comment number 9.

    It all sounds fine until you get to the 'but what if'?

    What if the government figures inherited turn out to be fantasy?

    What if the taxes that no-one else appears to be able to collect are uncollectable?

    As anyone knows projected profit and loss accounts are always fantasy and have to be measured against the actual performance achieved.

    If the starting figures are wrong then the whole thing means nothing.

    This is where the Conservatives are playing it carefully.

    They are obviously aware that what they would inherit is nothing like we've been told.

    Brown has now admitted he made catastrophic mistakes. And about time.

    It seems these mistakes have yet to be brought out into the open and the thought of what is still hidden should totally disqualify him from ever running this country again.



  • Comment number 10.

    "the £5.5bn a year that the Lib Dems would raise by restricting relief on pension contributions to the basic rate of tax"

    I had a bit of a Gordon Brown flashback there! Let's take another giant wodge out of the pensions system - it's not like it's under-provided at all.

    You have to admire a party that can steal money in the future and make a virtue of it in the present.

  • Comment number 11.

    If they can simplify the current taxation system it would be a plus.

    I don't mind paying tax so much, it's getting your hat nailed on for failing to understand the complex rules that annoys me.

    In fact simplification of all the various rules we have to abide by would be a significant plus.

    Ignorance of the law is no excuse they say. However when they create laws that are so complex that the average Joe and Jane simply can’t understand them, there is no justice.

  • Comment number 12.

    #1 WOTW

    During the South Sea Bubble the Whigs were in power. So the Liberals side can't claim they have never screwed it up......

  • Comment number 13.

    > Even so, the thrust of this manifesto would be seen as toxic
    > by many Tories.

    Who cares? They have no choice, and quite rightly.


    > Which raises the question whether it's remotely realistic to think
    > that the Tories and Lib Dem could cohabit in government, in the
    > event that the Conservatives emerged as the largest party but
    > without an overall majority.

    Again, who cares? They have no choice! They must relate to each
    other because that’s what we choose. It they can’t, then they
    should find another line of work.

  • Comment number 14.

    God save us from these irrelevant Choirboys.
    Let them sing their merry songs to oblivion.

  • Comment number 15.

    To their credit they have been clear about the financing of their proposals. But such radical tax reform in the middle of a financial crisis seem unrealistic. This would have been fine five years ago when revenues were flowing in but any such radical proposals in the current climate would certainly unsettle the financial markets. Frankly, they seem to be behaving as a Party that knows they will not be the next Government.

    On a more philosophical point is the £10,000 tax break the right thing to do? All citizens gain huge benefits from the modern welfare state, there is an argument that even those with limited means should at least make a small contribution.

  • Comment number 16.

    You have to give them credit at least for having set out some figures and rather more by way of concrete ideas for saving money than either of the others!

  • Comment number 17.

    Everyone is commenting on how none of the main parties are putting forward a coherent plan to cut Government Expenditure and reduce the debt.

    The current chancellor and those chancellors in hopeful waiting, are likely to have consulted the Bank of England and the Treasury, prior to putting forward their plans (albeit with little detail in them).

    I wonder if they intend to print their way out of the debt trap.

    You couldn’t really put that in a manifesto, but still it would allow ‘cuts’ to be made in an orderly fashion, thereby reducing the level of strike action and general civil commotion (currently being experienced in Greece).

    Not much good if you’re a saver though. Or a fixed income pensioner either.

    Still if Mr King is willing………….

  • Comment number 18.

    Have all the parties placed their ideas into a FA cup style draw at westminster and pulled them out to see what to say?
    I am overall left clueless about what will happen when any one gets in.
    Is this more of Boris Johnston's "aspirational" politics at work? All good ideas until the men in suits in government bring in the books to see....

    More to come out in the next few weeks.....

  • Comment number 19.

    1) Nothing on proportional representation or electoral reform they do disappoint me.Its long over due this first past the post system is a joke.

    2) I see they want to abolish Identity cards like the Tories why? Have there members got something to hide perhaps hiring illegals?
    Its the one thing that could bring fraud under control and also identify how many people are here illegally and working for dodgy employers.

    3) Need some stiff penalities for companies hiring illegals eg jail sentance, to stop the human trafficking of cheap labour into the UK.

    4) Its got some meat in it which is good not empty promises, loads of action words ! Truth is they have never really held office other than joing forces with the other two parties. Hell give them a try cannot be any worse than the other two parties, Tories look after the rich, Labour look after the poor. So who really looks after the average Joe?

    5)At least they said they would split the investment banking up from the retail banking see if Labour and the Tories promise that! Again you can promise it but will you do it?

    6) Abolish the 65 pension age let people work longer if they want to, note its not enforcing you its up to you now thats a breath of fresh air! Let the individual decide.

    7) Love the right of local residents to vote off the local MP if they think he or she has been lining there own pockets or doing anything shady. Does that apply to councillors too?

  • Comment number 20.

    I distinctly recall Clegg claiming to fight the deficit on 100% Public Spending cuts only a couple of weeks ago. Whilst I admire Mr Cable a lot and value his candour when broaching the subject of the National Debt and Deficit reduction planning, this is a massive contradiction.

    We know that Labour feel a plan of 2/3rds Cuts 1/3rds tax rises, tories favour 4/5ths Cuts 1/5th Tax Rises and Clegg claimed 100% Cuts in dealing with the Deficit Reduction.

    The manifesto seems to blow Clegg's claims out the water.

    Likewise, I cannot see how the Lib Dems can justify a £700 tax cut for those earning above the London Average Salary.

    Their plan to increase the personal allowance to £10000 is admirable but it has to go hand in hadn with an increase in the basic rate of income tax to make it a neutral change to people earning over £35000, else spending £17 billion in this fashion is irresponsible and makes the conservatives plans to Block the majority of the NI rise for 2011 a drop in the ocean by comparison.

    I fear a distinct loss of Credibility on this key manifesto pledge. And they had some promise (barring the mansion tax plans)

  • Comment number 21.

    Tax the rich and drive them away under a cloud of envy and spite.

    I thought Labour were bad enough.

    Still I don't suppose we need rich people or wealth creators.

    What have the romans ever done for us?

  • Comment number 22.

    You may say 'crikey' but it is only the Lib Dems who have grasped the extent of the financial revolution that we need in the UK if we are not to continue to enslave our population to the worlds bankers.

    The deal that the ordinary person gets from the colluding, self-interested, greedy, hubristic closed shop of money-changers that we have in the City of London represents nothing less than a tax on all the other commercial activities that make up a fair and proper productive functioning economy.

    We really do need to move to a more open transparent economy, and arranging for real competition to exist amongst financial intermediaries, and more information about them and the people who work for them to be put into the public domain are good ways to start.

    And one other thing....

    Why does our government continue to use our taxpayers money to subsidise debt financing, when it taxes equity financing quite normally?
    It's almost as if our government is in on the conspiracy with the banks to get us over-borrowed and in hock to the their pretty cartel.

    (.... OK, so it always has been and this is the problem!)

  • Comment number 23.

    YAWN!

  • Comment number 24.

    I would think a serious inquiry into just went on before the collapse would spur the bankers to support the tax as opposed to going to jail. Call it a re-payment. Too bad the major parties are to weak or dependent on bankers funding to protect the interest of the people and reward the bankers for their unethical behaviors and theft of many personal accounts.
    Both major parties fail to realize that the citizens know that they chose the banks over the people and that they have no one looking out for their interest. The government,all involved, betrayed the people and now want to rewrite history and obsolve the bankers of any misdeeds. Disgusting state for what would be called representative government. Oligarchy.

  • Comment number 25.

  • Comment number 26.

    I agree with post 1/11, a bout of real 'fairness' and 'honesty' is probably the best we're going to get right now, from the only party offering to bring 21st century democracy and economics one step closer ...

    They are also the only party truly looking to sort out the banking system (failures created by Gordon Brown) and potentially reduce/replace unfair taxes with a Land Value Tax in the future too ... http://poweromics.blogspot.com

    In my humble opinion no vote is a wasted vote, and a red/blue vote is for more of the 'same' - i.e. more Poweromics and self-interest.

  • Comment number 27.

    9. At 2:50pm on 14 Apr 2010, virtualsilverlady wrote:

    "It all sounds fine until you get to the 'but what if'?"


    ...I would like to add to that list....


    What if the Tories inherit the accounts as stated - but then exaggerate the problems to allow them to make harsher cuts - conveniently blaming "the last guy".

    The Government accounts are probably fantasy, but then that is in line with the accounting rules at the banks, the manifesto pledges from all parties and it seems a sizeable portion of the electorate.

    One day there will be reality - and what does reality do? - it bites.

  • Comment number 28.

    9. At 2:50pm on 14 Apr 2010, virtualsilverlady wrote:
    It all sounds fine until you get to the 'but what if'?

    What if the government figures inherited turn out to be fantasy?

    What if the taxes that no-one else appears to be able to collect are uncollectable?

    On your first point - they probably will which is why they should be sent packing in the first place

    On your second, if do not pay my Poll Tax, sorry community charge, what is it called now? I go to prison, no get out, no mercy. I have crossed the Crown.

    If I am in a position of wealth, political or asset (although political wealth is an asset) I can hire people who have to pay their taxes to use the very loopholes available and made by those with that power to increase my "wealth"

    So even a sense of a Political Party addressing this and other issues to attempt to redistribute the human asset of a fair society will get my vote

    I just wished another 15 people in every hundred would also do it!!



  • Comment number 29.

    12. At 3:40pm on 14 Apr 2010, yam yzf wrote:

    "During the South Sea Bubble the Whigs were in power. So the Liberals side can't claim they have never screwed it up......"

    Come on - you know they were not the 'liberal party' of today. I mean today's liberal party was formed in 1859 (if you discount the merger of liberal and social democrats) - the south sea bubble was in 1720.

    Even if it was true - their record on frequency of 'screwing it up' would still be far superior to Lab or Con.

    However this does put some loony parties in the frame for award of 'least economic failures'.

  • Comment number 30.

    13. At 3:40pm on 14 Apr 2010, Jacques Cartier wrote:

    " Again, who cares? They have no choice! They must relate to each
    other because that’s what we choose. It they can’t, then they
    should find another line of work."

    Ah but this is tragically where the main parties will put their own self interest above that of the country.

    The Tories are quite clear on this matter - it's absolute power or endless bickering until another election is called.

    You see without domination in parliment - the Government (or largest party) might actually have their policies scrutinised

    ...and they don't like scrutiny - it exposes them for the crooks they are...

  • Comment number 31.

    If the banks had been actively hiding the risks, then what are they trying to hide now?

  • Comment number 32.

    How many politicians does it take to change a light-bulb???
    None. There's nothing wrong with the light-bulb

  • Comment number 33.

    18. At 4:08pm on 14 Apr 2010, barry white wrote:

    "Is this more of Boris Johnston's "aspirational" politics at work? All good ideas until the men in suits in government bring in the books to see...."

    Ah yes the Boris Johnson method of electioneering. Promise anything that is deemed popular, and once you're elected - simply waffle and bluff your way through your term achieving absolute 0.

    If anyone wants to see an insight into the future for a Tory Government - check out Boris's manifesto pledge for the Mayorship where he...

    "stressed the importance of holding an 'emergency' train summit with the TOCs to ensure that Oyster was available at every train station. Within weeks of being elected he promised that the summit with the TOCs would be held before the summer and that Oyster would be rolled out across the whole London rail network by May 2009"

    When did he call it? - over 2 years into his term.

    ...how long did it last? - 10 minutes.

    You see you foolish electorate - they will tell you anything you want to hear to get your vote. That is why they don't get mine - too many people have died so I can have to waste it on a bunch of lying rats.

  • Comment number 34.

    21. At 4:11pm on 14 Apr 2010, sircomespect wrote:

    "Tax the rich and drive them away under a cloud of envy and spite."

    Ah the old "you socialists are soooooo jealous" line - are they not simply surplus to requirements? - it's a market dear boy - and the market for rich layabouts dried right up!

    "Still I don't suppose we need rich people or wealth creators. "

    Oh we need wealth creators - care to explain to the group how the rich 'create wealth'?

    I shall await the answer with baited breath......

    If the rich are truly 'wealth creators' - then why aren't they getting on with it? I mean we could do with a bit of 'wealth' created at the moment.

    The answer is because they don't create anything, they extract it from the productive process - the surplus labour - which is why they cannot produce any now. No production - no extraction.

    ....or do you have an alternative theory to propose how the surplus is derived to produce profit?

  • Comment number 35.

    36. At 7:47pm on 13 Apr 2010, Uphios wrote:
    29. At 5:34pm on 13 Apr 2010, KeithRodgers wrote:

    There comes a point in any society were more is being taken out of it than simply being put in,its like a tree thats got branches that are rotten.At what point do you say enough is enough and rip the tree out of the ground and completly replace it?
    There are so many people fiddling in the uk now that its way out of control examples being :-
    1) Businesses that hire illegal foreign workers (I noticed the Tories would stop Identity cards, I guess to stop them being found out!).
    2) To off shore bank accounts hiding the cash of the wealthy.
    3) Benefit claiments that have two jobs and claim unemployment in different identities all over the UK.
    4) Unemployed Couples that deliberatly live apart so the woman can claim she has been abandoned to get more benefit.
    ......etc....

    A good start on the list but as you know it's worse, far worse than your short list. For example I know of one situation where 3 and 4 are combined except that the woman claims rent from social for the flat and it his her partner, who also claims benifit whilst holding down two jobs, who owns the flat as one of his buy to rent properties.

    I know at least half a dozen people fiddling the benifits system, one of whom inherited £60k recently but had to wait a couple of weeks because he wanted it in cash to put under the floorboards, otherwise he would lose his benifits. Why do I not drop a coin on these people? Because I know they are the tip of the iceburg, there are thousands, tens of thousands fiddling the benifits.

    It's for the government to stop them and they could do it easily. Simply require that to recieve benifit you must turn up every weekday 8am till 5pm and while your here we will provide training. We want a load of you as babysitters so we can remove the excuss from some of the other malingerers. We want some of you as minibus drivers to get other skivers to work. In fact I have a whole list of jobs to keep you occupied. Don't want to do the hours? fine you don't get paid.

    Next I'll deal with the bankers and their stupid bonuses.

  • Comment number 36.

    Vince Cable is absolutely right. Financial institutions (having the best legal but unregulated minds in the business) keep billions off their published balance sheet. This would be bad enough if they were hiding profits, but what was hidden was debt – debt packaged, tied into derivative bundles and sold to unsuspecting victims against which this same nefarious group would then bet on FAILURE. What a scandalous bunch!
    Cable's plan to levy a tax on banks' profits is indeed a tax proposal and not a savings proposal – unless he meant (and might well have meant) a saving to the poor taxpayer.
    We're told is that the new bank levy would raise just over £2bn in the current financial year, rising to almost £3bn in 2014-15, but as you say, no details are provided. Exactly what Cable is taxing is also unclear, as is methodology. In this day and age you cannot begin to manually audit each company and reassess them acordingly. The system has got to be computerized with whistles and bells that signal nefarious activity. This type of system costs money...unless it is done through the EU for all EU countries at a proportional cost.
    I like the tax free exemption of £10,000, not the cost of £16.8bn, but the relief so long overdue the taxpayer.
    I don’t like the Lib Dem Manifesto distaste for those on higher earnings. Earnings is one thing; cheating, hiding profits, lack of transparency are another. So the LibDems will force all public companies to "declare in full all remunerations of £200,000 per year or more". But it’s not public compoanies that we are worried about; so, this seems a wasted exercise.
    We are worried about financial institutions. Does Nick intend to declare all banks “public companies”.
    The Manifesto overall seems to announce a possible coalition between Labour & LibDems vs. Conservatives, and personally, I like the sound of that.

  • Comment number 37.

    "This in not a promise, its a plan" - how refreshing

    Lets hope its not the same as

    "our plan was, but ...." how very politi(c)ommunication

    The choice is ours - well thats what we are led to believe!

  • Comment number 38.

    But isn't that the problem with the Lib Dems? All seems plausible, even rosy and then they get carried away with themselves. The banker tax seemed OK at first (but a £2.5k cash limit? - that's a mickey take and all it will do is push up base salaries even more). Then there's the £10,000 personal allowance - seems Ok at first until you realise that a household with 2 earners on £9,000 each gets no extra benefit but a household with 2 earners each on £90,000 is £1400 p.a. better off. OK that's not considering the restriction of higher rate tax relief (which I agree with) but the point still stands.

    But I'm afraid Clegg has form on this front. It's his fondness for the Charlie Kennedy mode of presentation that does him in. He was trying to justify his policy of unlimited migration into areas of the UK with 'skills shortages' to boost local economies. He was asked that if this was the case and one of the 'unlimited' immigrants was admitted to a skill-short area, and that person lost their job, would they be allowed to move to find a new one? The answer, was 'NO', definitely not. So the questioner asked whether the tax payer would have to provide unemployment benefit etc - again the answer seemed to be 'NO'(remember this could apply to, literally countless numbers of people) . So the questioner asked what what the poor person was supposed to do. Nick said that they (and presumably their family) then lost the right to stay in the UK. By now I think you can see where this is going.....so, the questioner asked whether this person and their family would be Deported. At the mention of the 'D' word Mr Clegg begged for a change of topic as his colour moved far to the left of yellow.

    Its not so easy for the opposition parties, is it? the Tory manifesto seemed to be an invitation to do it yourself (hmmm) whilst Gordon Brown is rather effectively saying what expenditure he will protect.

    I think we have many economic policy turns and hat-borne rabbits to see. Gonna be fascinating..

  • Comment number 39.

    # 21. At 4:11pm on 14 Apr 2010, sircomespect wrote:

    > Tax the rich and drive them away under a cloud of envy and spite.

    If they are rich, and don't work, then we wouldn't notice if
    they go.

    > Still I don't suppose we need rich people or wealth creators.

    I need jobs doing on my house, not rich lazy people people.
    I can't pay millionaires, thank you very much, and I don't care
    how much tax they pay, as long as it's a lot more than me.

    PS: what's this nonsense about "wealth creation" anyway. You
    have to work to create anything.

  • Comment number 40.

    Once again when it comes to private pensions the political party show a complete lack of understanding unless of course their aim is to destroy all private pensions and make all pensioners rely on the govt.

    Gordon Brown destroyed final salary schemes and now it looks like a combination of Darling and the Liberals want to destroy money purchase schemes.

    Lets assume as you are a reasonably high earner (say £75,000 a year) who on retirement would like a pension of £30,000 a year (before tax). You can only put in £20,000 (gross) a year into the pension scheme thanks to Darling. Assuming an average return of 2-3% after allowing for inflation and fees (which means a non-adjusted annual return of around 5%) it will take you roughly 20 years to build up a pension pot big enough to retire on £30,000 (annuity rates being around 5% for men).

    The problem is that to put £20,000 a year into a pension fund that will cost you roughly £13,000 (plus tax rebate at top rate tax). The chances of most people on £75,000 pa being able to do that in their 20s and 30s is pretty slim because of costs of mortgages and children. So it is probably only by their late 40s (once mortgage paid off) that they can contemplate this, which is of course about the same time that their children go to university and so need extra funding !

    By reducing the pension relief to basic rate only you increase the cash amount that a person needs to make the same post tax contribution to his pension scheme. So under the Liberal rules a person wanting to make a £20,000 contribution would need to make a cash payment of £16,000 per year into his pension scheme.

    The net result is to render it highly unlikely that someone on £75,000 can retire with a £30,000 a year pension and in will probably be looking at a pension of £20,000 a year maybe slightly more. If that person instead of earning £75,000 was only earning £50,000 per year than it is unlikely that their pension would be much in excess of £15,000 per year.

    Basically the Liberal idea makes it virtually worthless for anyone earning less than £50,000 to bother saving for a private pension, the correct financial advice would be to live the high life, spend all your money and then sponge off the state in your old age (if you have no savings then the state will have to pay for your care in your old age).

    What we should be doing is encouraging everyone earning more than the average household wage to save for their own pension to allow govt to concentrate resources on those people earning less than that who will never be able to afford a pension.

    R

  • Comment number 41.

    27. At 5:09pm on 14 Apr 2010, writingsonthewall wrote:

    9. At 2:50pm on 14 Apr 2010, virtualsilverlady wrote:

    "It all sounds fine until you get to the 'but what if'?"


    ...I would like to add to that list....


    What if the Tories inherit the accounts as stated - but then exaggerate the problems to allow them to make harsher cuts - conveniently blaming "the last guy".

    The Tories do that..God forbid..I mean its not like anything like that has happened before...Oh hang on

    FWIW I stood for local council for Labour in 97 as a 10 year party member, all my family true red but I'm done , never ever again will I vote for a party that pretends to be the party I grew up supporting. Its a toss of a coin for me me between a spoilt paper and the Lib Dems.

  • Comment number 42.

    The money we earn for doing our particular job is not earned in isolation. There is no law of the Universe that says that is what we should be paid for what we do. We earn that money within the prevailing conditions of our own country. So if we are a violin player and violin players receive a lot of money in this country, we should be grateful and happy to pay a proportionate amount of tax into the central pot to keep the conditions the same. If I benefit a lot from the system, then I should pay a lot into the system. The government is not putting its hand into my pocket but, rather, I am paying my just dues. In my case, I am very happy to do that. Who are the well paid violin players and why am I happy to pay my just dues? The well paid violin players are those earning above the average wage. I am happy to pay my just dues because I earn more than the average wage and I do not live on my own island but in a community, a society. A lot of my fellow citizens work as hard as I do but don't earn as much. I will be happy to pay that tax until the unjust conditions of our society are corrected and all hard workers are paid the same

  • Comment number 43.

    Wall to wall election coverage.

    And yet the real world is still functioning.
    Nothing has actually been put on hold. And why? Well you don't actually think that a few MPs actually mean anything.
    The movers and shakers are not elected.
    They might modify their actions a fraction of a tad depending upon whether red or blue are nominally in power. Manoeurve to take best advantage.
    They will still aim to maximise their take.

  • Comment number 44.

    Robert, Isn't it time that we adopted a completely new tax system which doesn't discriminate between normal income and capital gains from any source. Surely the time has come to adopt a system similar in principle to the German tax system, where payment is based upon the straight line "y=mx+c". If we simplify the system then opportunities to avoid tax will be reduced, arguments between different payment levels avoided, and tax recovery simplified requiring fewer public servants. Naive I know, but......how about initiating the discussion?

  • Comment number 45.

    35. At 5:33pm on 14 Apr 2010, KeithRodgers

    I have to respectfully disagree here.


    There but for the grace of god go I.

  • Comment number 46.

    http://news.bbc.co.uk/1/hi/business/8620432.stm


    THe perspective is tax dodgers - wonder how much tax will be claimed back? Now, what political party will clamp down on the real dodgers who balk at paying their fair share (thousands, millions, who know how much) while criminilising the young mum caught working for a tenner?

    The Lib Dems are making the effort - when did they last destroy our economy, jobs and future? Have they ever?

  • Comment number 47.

    Re Comments on Wealth Creation

    Of course genealising that we need rich people to create wealth is rubbish but some people are rich for a reason so don't tell me that Bill Gates did not create wealth when he wrote the Windows operating system
    Even a short examination of the worldwide consequences of him doing that makes the point.

    So by all means, deal with corrupt politicians and bankers but don't let envy blind you to what is good for society and what moves us forward.
    The former highlight the flaws in our human nature and that is why I don't see any kind of socialist utopia becoming reality in the near future.

  • Comment number 48.

    Let me say at the beginning, that I write with respect. I read and write these blogs to be persuaded and to persuade. If I am wrong, I would prefer to find out sooner rather than later so that I waste less of my life being wrong. When I mention people or classes of people, I do not intend slagging them off personally. They are shorthand in making my point. I don’t blame people for being rich. I just think the system that makes them so rich is wrong.
    As regards the wealth creators, I do not envy them and to call what I say the ‘Politics of Envy’ as some people do, is to use a put down to avoid discussion. I might say that the people which such wealth or not wanting to pay their fair share of tax are following the ‘Politics of Greed’. I think we need a ‘Politics of Fairness’.
    Using Bill Gates as a general term to describe the failings of our present economic model, I would make a number of points. He may have come up with his idea one minute before anyone else and our present system gives him all the benefit and stops anyone else coming up with the same idea. (One minute is to make the argument simple). Secondly, we have then gone in one direction from there. Another direction may have been better. Thirdly, ‘he’ then went on to suppress other ideas. Fourthly, he got his idea because of all the people he had previously met in life.
    We tend to move in one direction until after a long time we find that we have moved too far in that direction. I think that is the case with the idea that individuals must look after themselves first and foremost. I believe we are part of the human race and are intended to act for the future good of the human race to ensure that it survives.

  • Comment number 49.

    Call that a balance sheet?

    Not enough information to run a school, let alone a country.

    Time to reward not penalise success. Envy is unpleasant in individuals, unacceptable in government.

  • Comment number 50.

    # 49. At 08:15am on 15 Apr 2010, Megan wrote:

    > Time to reward not penalise success.

    No. Time to reward successful _work_, not the lazy rich.

    > Envy is unpleasant …

    Try to look at the big picture. The reason why these rich people hoard so much money is often because of their envy. They are very unpleasant.


  • Comment number 51.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 52.

    # 47. At 05:35am on 15 Apr 2010, DevilsintheDetail wrote:

    > so don't tell me that Bill Gates did not create wealth
    > when he wrote the Windows operating system

    Actually, you will find that David Cutler wrote the OS. And created wealth through work.

    > deal with corrupt politicians and bankers but don't let
    > envy blind you to what is good for society and what
    > moves us forward.

    So far, only the cash-slobs have mentioned envy at all. They seem to be obsessed with it! No-one else is talking about envy … maybe envy drives greed?

  • Comment number 53.

    To me the Lib-Dem manifesto is just the starter for something a whole lot tougher. The sub-plot is what is to happen after the election such as a bonfire of public sector vanities.

    It is important that this bonfire be directed with a sense of fairness and realism. I think on balance this is the message the Lib-Dems are actually delivering. This is fair enough so they get an `H' for honesty!

    I have said before that this election is not a case as to how the money stacks up. It won't, as there is none. The country is broke. The banks broke it whilst the government cheered them on. So now nobody wants to talk about it in case the taxpayers get upset. It is all so very British, so utterly hypocritical.

    However, it will have to be a very big carpet to hide a fiscal deficit of GBP 163 billion, a government debt of GBP 766 billion and a programme to halve the deficit to GBP 74 billion over five years so that the government debt grows to GBP 1.4 trillion.

    This is what Mr. Cable chose yesterday to call the elephant. He at least recognises it although prevailing political and cultural attitudes prevent him from articulating it more fully. At least reality is in someone's mind.

  • Comment number 54.

    I watched Stephanie's reality check last night and was horrifed to see how she was using percentages to show that in fact the poorest would be percentage-wise better off than someone on £72000! not once did she mention indirect taxation which is a large factor in the burden borne by those earning less than £10.000. She talked of what the poorest would get after tax and benefits, but how many businesses pay minimum wages, gripe about increased NICs and sit back while the taxpayer subsidises their low wages? Something has got to happen to make taxation fairer. At least the Lib Dems are setting out SOMEthing!

  • Comment number 55.

    #31 puzzling: "If the banks had been actively hiding the risks, then what are they trying to hide now?"

    They are hiding plenty and there's little doubt the politicians and the mainstream media are assisting them. Mr Peston can't have failed to notice a massive, but as yet non-mainstream, story building over the last couple of weeks. Like all his colleagues in the mainstream, for *some* reason he hasn't seen fit to mention it even in passing. Rather odd considering he is a senior business figure in what is supposed to be our national broadcasting company, we do pay the bills after all.

    On the off chance Mr Peston's radar is down for maintenance I refer him, as others have done in the past, to the following: The Silence is Deafening

    If Mr Maguire is correct (and there is a well documented record in official hands to suggest he is) then all this talk from politicians about penalising the banks is rather academic. In reality they are far more likely to be coming back to us (the taxpayers) for another hand-out which will more than offset any minor inconveniences the bankers may suffer in re-arranging their financial affairs to avoid taxation.

    As for "Yawning gaps" between Conservative and "Liberal" policies I suppose the idea is worth something in terms of comedy. Before the Lib Dems press on any further they might want to urgently review what the words liberal and liberty actually mean. The Conservatives are half a yard down the road of liberalism (by accident I suspect) with the Lib Dems 200 miles behind and running faster in the opposite direction. Liberalism is entirely incompatible with fat government gorging itself on the private earnings of individuals. Mr Peston appears to be a fan of Orwell but perhaps he's not fully understanding what Orwell was warning us of.

    Still, it's just a game, we are all aware that no agenda will be harmed as a result of this election regardless of who gets a turn at the big table. Even if the media could take one pace back towards its original purpose, informing the public, it would be genuine progress. Until then, the "Yawning gap" will continue to disadvantage us.

  • Comment number 56.

    I get frustrated by the "never mind the contents, just look at the wrapper" attitude of the politicians, but then perhaps most of the population is taken in by the sales talk otherwise they wouldn't succeed; or perhaps no one else offers anything different.

    The "face to face" discussion tonight may be good for the media but will it show which of them will make a good leader? Doubtful, and even if one of them were to make a complete hash of it does that mean he's incapable of running the country. Probably, but that goes for the other two as well. What a super choice we have.

  • Comment number 57.

    #42 Fairsfair

    That's an interesting philosophy. It implies personal responsibility of individuals. Across the board. And discounts the years of practice or "expertise" of your hypothetical violin player. It also discounts the idea the general public might prefer listening to the violin player in concert as opposed to watching a road-sweeper go through his repertoire. Another possibility for fairness is the notion individuals are entitled by God or nature (or whatever force drives the universe) to exercise liberty in any manner that pleases them provided they do not infringe on the liberty of others. Again, personal responsibility is an essential ingredient.

  • Comment number 58.

    Having heard all three main party manifesto's I find all parties looking to reduce "the deficit" by some amount or other.

    But none seem to have anything that credible. I'm left feeling none really want to take "the deficit" too seriously and as for "the debt," none really even want to talk about that. When you need votes, mentioning things like "the deficit" and "the debt," would be too much for some people who think just a deficit is bad enough, "and now what, you're telling me there's "debt" too and this is not the same as "the deficit?!"

    I think many people are hoping for a strong sense of change, (ideally for the better.) So far the only thing that's clear is they're not going to get it, not for the better, and it's all been about how best to gloss over this.

    Still at least there is entertainment to be had elsewhere watching some occasional individuals, with plenty of hubris, trotting headlong into oblivion. (Private investors with massive cash balances...he suspects?)

    http://www.telegraph.co.uk/finance/personalfinance/investing/shares/7590342/Diary-of-a-private-investor-stock-market-rally-is-simply-reinvested-cash.html

  • Comment number 59.

    I've some ideas for fairer taxation....

    1. Everyone in the civil service who will get a better pension than everyone else should pay say 25% more tax for the priviledge.

    2. Everyone that starts a company shouldn't be taxed at all for say 5 years.

    3. MPs should pay tax at 70%.

    4. Bankers and others in the financial services sector should pay tax on a sliding scale according to how well they contribute to rebalancing the economy. So those that invest in new manufacturing start-ups will pay less than those that don't. Bonuses will be treated in a similar manner so if companies don't contribute then they get taxed much more heavily.

    5. Footballers should be on a basic rate of 95%

    6. Fuel tax should be based on the density of population. So a litre of petrol in London should be £5 whereas in Caithness (that's in the N of Scotland) it should only be 10p.

    7. Nurses shouldn't pay any income tax at all.

    8. Hedge funds and Private Equity companies should pay corporation tax at 75% and capital gains at 90%.

    9. Land sales for property development should be taxed at 80%

    Anyone got any other ideas?

  • Comment number 60.

    Of the three parties the Lib-Dems seem to be the ones who are addressing the issues and going on a mandate of reform.It was nice to see that all their proposals were costed out which seems to be a flaw of both the Labour and the Conservative parties which both have plans to introduce measures unlikely to be popular with the electorate but after the election.

    New Labour are out of ideas and the Conservatives do seem too much in favour of protecting the rich.I thought Nick Clegg & Vince Cable came over quite well at the Lib-Dem launch.

    It will be very interesting to see how things go in the debate tonight.

  • Comment number 61.

    "But I think Mr Orwell would have something to say about the classification of a tax as a saving, even when the targets of the tax are institutions as unpopular as the banks."

    Fair enough, but how does Gordon categorise 'tax-credits'? I bet they appear as a reduction in tax rather than as a benefit expense.

  • Comment number 62.

    59. At 11:28am on 15 Apr 2010, Wee-Scamp wrote:
    I've some ideas for fairer taxation....


    Ever heard of the Laffer curve ?

  • Comment number 63.

    Crikey, what Robert Peston forgets is that he was part of the journalistic team that broke the story of banking collapse that Vince Cable (LibDem) warned about? And yet, Mr Peston you 'chuckle' at Lib Dems' 'profit and loss account'?

    Expect this post, benignly challenging a senior BBC editor, to be 'removed' as usual?

  • Comment number 64.

    Why would Robert Peston 'chuckle' at LibDem 'profit and loss'?

    Robert Peston and journalistic teams 'broke' the story that Vince Cable was warning about? Never mind. The main issue is that our front-line workers will benefit from LibDem no income tax on first £10,000 of earned income. This LibDem policy will benefit:

    1) low and middle rank soldiers.
    2) nurses.
    3) paramedics.
    4) police constables.
    5) firefighters.

    And every other 24/7 front-line workers who are obliged to provide 24/7 shifts to protect and serve the British population.

  • Comment number 65.

    The most disappointing aspects of all paid senior political/financial Editors is that they never, ever mention the importance of the electorate/voters actually using their vote and how important that 5 minutes of their time TO ACTUALLY VOTE?

    Of course this is not a criticism of well-known 'on staff' Editors, but a critique that they might do more for 'democracy'?

    It's not enough that Editors write blog on their 'opinion' of political parties - but they are failing us all by not emphasising the importance of actually voting?

  • Comment number 66.

    Our whole family (the females) so love you, and your opinions Mr Peston, as you are so good-looking?

  • Comment number 67.

    This 'left wing' manifesto, if so, also suggests that Clegg's good performance in the first PM debate should have Labour rather more worried than the Tories.

  • Comment number 68.

    Let's be generous and say whoever is in power it will take at least 6 years to balance Government spending. Our debt will probably top out at some £1.5 trillion (say). So if we decide to pay it all back, after debt servicing we have to find £50 billion a year to reduce the debt to zero over 30 years (I'll be long gone by then and my son will be a pauper).

    Haven't we done well. I seem to recall our overall debt was £300 billion not long ago. Well done Gordon, you have sealed your place in history!

  • Comment number 69.

    Isn't it gratifying to see the helplessness of the country now that there is an eruption of a vulcano in Iceland. Apart from all this there is nobody they blame, but there is always God they can swear at.

  • Comment number 70.

    The Lib-Dems live in cloud cuckoo land and it always amazes me how dissatisfied Conservatives choose to vote for them, when even a cursory look at their loony policies, shows that they are further to the left on nearly everything, than Labour. I have always been a Conservative, But frankly, Cameron & George Osborne don't inspire confidence in me and I think on balance, Labour have done a good job of steering the country through the recession and should be given the chance to complete the job, but please, please, don't put Nick Clegg & Co. anywhere near the levers of power!

  • Comment number 71.

    In view of his total lack of experience in Government perhaps Mr. Cable does not quite understand the difference between savings and expenditure!
    This failing also applies to Clegg and every other LibDem so heaven help us if these people gain ANY SORT of power in the forthcoming election.

  • Comment number 72.

    "Lib -dems care about rubbish and bags"

 

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