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Lib Dems: Punching above their weight on tax?

Stephanie Flanders | 14:09 UK time, Wednesday, 14 April 2010

The Liberal Democrats may be only the third largest party at Westminster - but when it comes to tax plans, they punch above their weight. Their manifesto has a lot more numbers than either of the other parties. That deserves some credit. Their tax proposals are also by far the most ambitious we've seen this week. Whether they would do what the party says they would do is another matter.

At the heart of these proposals is a plan to raise an extra £17bn in taxes - as much as Labour wants to raise over the next five years. They don't want to spend any of that money on reducing the deficit. They want to do that almost entirely through spending cuts. Instead, they want to give back that £17bn to everyone in Britain who now pays tax, by raising the personal allowance to £10,000.

Their plans raise two big questions. First, can it be done? Second, who wins, and who loses? Both turn out to be fiendishly difficult to answer. But I'm giving it my best shot here.

Comments

Page 1 of 3

  • Comment number 1.

    SF Any mention of VAT /child benefit? Your last piece identified the importance of these tax/benefits at the margin of politics.

  • Comment number 2.

    "The Liberal Democrats may be only the third largest party at Westminster - but when it comes to tax plans, they punch above their weight. Their manifesto has a lot more numbers than either of the other parties."

    Oh dear - the Liberals showing their inexperience here - don't they know that you only get elected by blatantly lying to the public

    You see this is where it all goes wrong - the people call for honesty, but find it hard to face when it's presented - instead they go for Tory or Labour 'fantasy Economics'

    ...not that any of it matters - the markets will decide our fate after the election, not our Government.

    That is the backwards steps we are taking. As humans we can cross rivers we could never cross before, tunnel under the sea, build giant buildings etc.
    ....but we leave our Economic futures in the hands of faceless gamblers.

    The Market is the new God - and it has many worshippers. Lets hope this God does not 'smite' us in a fit of Sovereign debt anger.

  • Comment number 3.

    The main winners from LibDem policy of no income tax on first £10K of earnings will be front line 24/7 and essential for public health workers:

    Paramedics
    Refuse collectors and recycle workers.
    police.
    nurses.
    water safety and water treatment workers.
    junior doctors.
    armed forces personnel.
    firefighters.

    Apologies for any essential workers not mentioned who struggle to meet basic costs to just to and from work on shifts that require high costs of needing a car to get to and from work safely and on time?

  • Comment number 4.

    It is bold and it is different.

    As a starting point for a sustained period of austerity which nobody is talking about yet it is not a bad try.

  • Comment number 5.

    '
    Their manifesto has a lot more numbers than either of the other parties. That deserves some credit
    '
    - Not if the numbers add up to £130bn less than the budget deficit.

    Are they really going to recover this through public spending? That would be 20% off every department (including benefits & pensions). I can't really see that happening from this party

    That leaves two options -
    Pay for it now - just look at your payslip and double the tax deduction part to get an idea of how that would feel
    Or
    Save it up for later.....

  • Comment number 6.

  • Comment number 7.

    Raising the income tax threshold is a good idea

    Doing it in the way suggested proves why they are the third biggest party in Westminster

    Is that succinct enough Stephanie?

  • Comment number 8.

    "...At the heart of these proposals is a plan to raise an extra £17bn in taxes - as much as Labour wants to raise over the next five years. They don't want to spend any of that money on reducing the deficit..."

    It is almost laughable how our politicians seem utterly incapable of grasping how ridiculous this is. The first rule of debt is to pay it off first before you go off on a spending spree. The failure to so just exacerbates the problem.

    They just don't get it. None of them do. We have a lot of indebted credit card junkies who think they can continue their fix and worry about tomorrow, well tomorrow.

    It merely confirms my view that they will suffer the inevitable consequences of the market deciding their - and thus our - fate for them (us).

  • Comment number 9.

    "Instead, they want to give back that £17bn to everyone in Britain who now pays tax, by raising the personal allowance to £10,000."

    This is completely wrong.

    Watch this: http://www.bbc.co.uk/programmes/b00s67vd from 12.30 onwards

  • Comment number 10.

    But what colour are their undies in a hung parliament?

    That is all we need to know and all we do not know.

  • Comment number 11.

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

  • Comment number 12.

    #1 - just searched their manifesto and only two mentions of VAT - one about buildings and the other refunding VAT to mountain rescue teams. Searching for VAT meant I found lots of innovate and innovation. And it must be said the manifesto is highly innovative mentioning things like facts and figures. I guess no mention of VAT means it would be raised by them as an outcome from Vince's review. But why is that a bad thing? Raising VAT means those using a resource are charged accordingly. Does more VAT mean more savings? And think of the lovely bureaucracy should VAT be charged on carbon footprint and potential obesity! It's almost worth doing just for the fun of it! Lots of good things in that manifesto.
    BUT what about the cancellation costs for the Eurofighter?

  • Comment number 13.

    There is no doubt that most of the British people are struggling to cope with their livings; but real test lies with our politicians, how they cope with this recession and finish 3 years of tremendous sufferings. No matter who they are Lib Dem or Labour or any other; we want end result not statistics.

  • Comment number 14.

    No offence, but your point about a 3rd of Adults not paying any income tax whatsoever is flawed. the reason people would not pay any income tax is if they were not working or were working part time or working for less than the Minimum Wage (whish is illegal)

    So basically you are saying because this Tax cut wont help those on benefits its not worth doing?

    Surely the fact so many people dont pay income tax, ergo don't earn even the minimum wage is reason alone to raise the personal allowace, makign work a worthwhile endeavour even at the minimum wage.

  • Comment number 15.

    If we end up with a hung Parliament I would love to see Vince at number 11. At least Vince has facts and figures rather than smoke and mirrors at his disposal.

  • Comment number 16.

    I wish a aprty would come out and say they will drastically simplfy the Tax system. get rid of all these complex credits and bands and allowances and hocus pocus nonsesne that Brown introduced over 12 years.

    HMRC spends £10's of billiosn administering the tax system as it currentl stands. including all the tax credits and benefits. Its all a means of hoodwinking the electorate, its so confusing and difficult to calculate your Tax footprint that whenever a budget comes around you need a chartered accountant to tell you if you apre paying more less or staying the same.

    Give us Ye Olde Day tax systems.

    Scrap NI, scrap the credits and beenfits, just gives us Income tax.

    Increase the Personal Allowance to £12000 p/a
    increase the Minimum Wage to £120000 p/a

    Instantly the poor get to take home a Symbolic £1000 a month NET for any full tiem job. There is you MASSIVE incentive to get off benefits and get a job.

    Raise the basic and higher bands accordingly so people are no better off after losing all the credits and benefits. give the Poor a reason not to become baby factories and live of ever increasing benefits.

    Scrap the interest relief on Buy to Let
    Raise Capital gains tax to 25% across the board
    make all these off shore tax havens illegal vehicles for large companies and rich people living and earning in the UK.

    For example the Guardian Newspaper, who derives much of its recenue from the Government via advertising jobs uses a Cayman's Island tax vehicle to avoid UK taxes.

    there is so much that could be done and if a leyman like myself can think of it I am sure someone as schooled as the Venerable Dr Cable can as well!

    Anyone who proposed such a move would INSTANTLY get my vote.

  • Comment number 17.

    Given that every poll indicates a hung Parliament I think we should be taking this manifesto pretty seriously. If either of the two main parties want to govern after the election, they will need to think carefully about how to elicit the support of the Lib Dems and others.

    The alternative is another election later this year.

  • Comment number 18.

    I actually think that the poor should pay a tiny little bit of tax so that they are not disenfranchised and made to feel that they are marginal members of society.
    And if that means they have to be paid a bit extra to do so ,then so be it, but the idea that EVERYONE becomes a taxpayer is actually a much more attractive prospect than making those ordinary souls who work hard and do well feel they are the only ones in the country who do not matter, other than as dairy cows for constant milking.
    I also think the taxation burden on successful people is increasing to the point that it is not worth earning a penny more as it will all get swallowed up.
    And I am a Labour voter but this business of continually ripping off people who have sacrificed and saved and worked their heads off is getting a tad irritating.
    BUT AT LEAST LABOUR ARE HONEST ABOUT IT.
    It is enough to make you want to bring back Blair....... or maybe not.
    Please let us be spared from these tedious LibDem worthies who hate anyone earning more than their measly college lecturer stipends.

  • Comment number 19.

    Almost everyone outside of banking and government would agree that assuming the debt of private banks by the public was not such a good idea. Bailout of the banks has done nothing to improve the economy and many would suggest that the banks have resricted loans to business as a power play to prevent regulations by government that would curb their excessive behaviors and unethical practices.
    The key to the economy is the middle class and not only did the bankers diminish their retirement accounts the government decided to burden the middle class with future higher taxes to pay for all the damage caused by bankers. Absolutely everything about this process was wrong, except that it really did give the public a better understanding of who runs the country.
    This proposal places more money in the hands of the middle class and that is the only way the economy will recover. About 70% of economic activity is consumer spending.Other measures would also be helpful but at least this one recognizes how the economy works. Governments generally oppose revealing the myths that they create and operate by but banks do not drive the economy, they can restrict it and they can abuse it, but they don't make it run.
    First proposal that has made any sense. Can't possibly pass.

  • Comment number 20.

    From comments made, it seems inconceivable to me that Clegg will work with either Brown or Cameron

  • Comment number 21.

    The Liberal Democrats’ manifesto launch:
    Nick Clegg says his Party is the first to spell out its figures “line by line”
    - 29 savings,
    - 12 spending proposals and
    - 9 tax changes,
    which would result in a £40bn reduction in public sector spending over five years. Hmmmm...
    Is this feasible?
    One of the biggest savings, the LibDems say will come by recouping £4.625bn a year from tax avoiders. If this were so easy, the Labour Government would be doing it now, and the Conservatives would pledging to do it.
    Nick says there will be new powers for HM Revenue and Customs and a law to stamp duty cannot be avoided if located offshore. This begs the question: What new powers? Who will they effect? What will the new law re offshore say?
    Over the last 6 six years, 20,000 positions in HM Revenue and Customs have been made redundant. A further 5,000 are earmarked for redundancy by 2011. This seems problematic since LibDem new Tax laws are coming and scalawags will need chasing down.
    The Public and Commercial Services Union (represents tax inspectors) says that for each tax officer lost, national tax collected goes down 670,000 a year.
    So the Lib Dems will have to rehire experienced tax collectors that have been made redundant if they want to implement their tax reform. There are ample loopholes, including corporate tax avoidance loopholes, but to dig up the loophoole takes a much-trained taxperson - knowledgeable, tough, thorough, dedicated...
    Tax accountants make their living helping clients avoid tax legally; so, the taxhunters have to be topnotch ("Eliot Ness & the Untouchables" comes to mind.)
    Assuming these taxhunters are really good, you may have to pay them accordingly, or all but the most dedicated, will end up privitizing into the ranks of tax accountants.

  • Comment number 22.


    I agree with post 3/4, a bout of "real fairness" (and honesty) is probably the best we can hope for right now, from the only party really offering to bring 21st century democracy/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 23.

    10. At 3:34pm on 14 Apr 2010, onward-ho wrote:

    "But what colour are their undies in a hung parliament?"

    Brown - like everyone else's will be...

  • Comment number 24.

    #8: 'It is almost laughable how our politicians seem utterly incapable of grasping how ridiculous this is'

    Absolutely agree - but they're all holding their eyes tight shut in the hope that no one will notice. The tragedy is that for the most part it's working.

    If tomorrow's headline is 'Vince Cable points to the elephant in the room... and then completely ignores it' I'd be happy to stand corrected but somehow I can't see it happening

  • Comment number 25.

    Yet again not a mention of social responsibility in the 3rd of the big 3 manefestos. The fact that in some of our 'communities' over 70% of children are born out of wedlock and that this heralds the creation of yet another welfare mother and feral hoodie who will create a burden on taxpayers for their entire lives does not feature in any of the manifesto ambitions. Total benefits costs - child/housing/unemployment etc is in the hundreds of billions.

    Also guess who pays for the biggest vehicle fleet in the world - you guessed it - Motability has over 360,000 vehicles (including Jaguars and Mercedes) that are subsidised by the UK taxpayer for those poor folk on disability allowance.

    The burgeoning benefits underclass - many of whom have no desire to contribute to society - represent I think a bigger cost and threat to future properity than any bunch of bankers.

  • Comment number 26.

    Redistribution of wealth - Costed - Fair

    Is the Political elite rattled?

    They will want to cancel the live debates next - whoops, spoke to soon Cameroon is protesting

  • Comment number 27.

    14. At 4:15pm on 14 Apr 2010, Anand wrote:

    "No offence, but your point about a 3rd of Adults not paying any income tax whatsoever is flawed. the reason people would not pay any income tax is if they were not working or were working part time or working for less than the Minimum Wage (whish is illegal)"

    I hate to break it to you - but I sit less than 5 yards from someone who's official earnings are 10k - but in reality they earn about 150k a year.
    Sadly this person would benefit from the Lib. Dem policy - but it's not their fault that tax evasion is rife (and legal) in this country.

    You don't even have to be a non-dom to avoid taxation - just look up the phrase "Tax specialist" on the internet and you will find an abundance of schemes which assist in tax evasion - and all for the princely sum of £7k a year.

    This is the real barrier - only those who can afford this £7k a year can avoid the tax.

    ...and why is this allowed? - well where do politicans go and work after they finish in politics?

  • Comment number 28.

    While walking down the street one day a "Member of Parliament" is tragically hit by a truck and dies.

    His soul arrives in heaven and is met by St. Peter at the entrance.

    'Welcome to heaven,' says St. Peter. 'Before you settle in, it seems there is a problem. We seldom see a high official around these parts, you see, so we're not sure what to do with you.'

    'No problem, just let me in,' says the man.

    'Well, I'd like to, but I have orders from higher up. What we'll do is have you spend one day in hell and one in heaven. Then you can choose where to spend eternity.'

    'Really, I've made up my mind. I want to be in heaven,' says the MP.

    'I'm sorry, but we have our rules.'

    And with that, St. Peter escorts him to the elevator and he goes down, down, down to hell. The doors open and he finds himself in the middle of a green golf course. In the distance is a clubhouse and standing in front of it are all his friends and other politicians who had worked with him.

    Everyone is very happy and in evening dress. They run to greet him, shake his hand, and reminisce about the good times they had while getting rich at the expense of the people.

    They play a friendly game of golf and then dine on lobster, caviar and champagne.

    Also present is the devil, who really is a very friendly & nice guy who has a good time dancing and telling jokes. They are having such a good time that before he realizes it, it is time to go.

    Everyone gives him a hearty farewell and waves while the elevator rises....

    The elevator goes up, up, up and the door reopens on heaven where St. Peter is waiting for him.

    'Now it's time to visit heaven.'

    So, 24 hours pass with the MP joining a group of contented souls moving from cloud to cloud, playing the harp and singing. They have a good time and, before he realizes it, the 24 hours have gone by and St. Peter returns.

    'Well, then, you've spent a day in hell and another in heaven. Now choose your eternity.'

    The MP reflects for a minute, then he answers: 'Well, I would never have said it before, I mean heaven has been delightful, but I think I would be better off in hell.'

    So St. Peter escorts him to the elevator and he goes down, down, down to hell.

    Now the doors of the elevator open and he's in the middle of a barren land covered with waste and garbage.

    He sees all his friends, dressed in rags, picking up the trash and putting it in black bags as more trash falls from above.

    The devil comes over to him and puts his arm around his shoulder. 'I don't understand,' stammers the MP. 'Yesterday I was here and there was a golf course and clubhouse, and we ate lobster and caviar, drank champagne, and danced and had a great time. Now there's just a wasteland full of garbage and my friends look miserable.

    What happened?'

    The devil looks at him, smiles and says, 'Yesterday we were campaigning.. ...

    Today you voted.'

  • Comment number 29.

    Onward Ho
    "BUT AT LEAST LABOUR ARE HONEST ABOUT IT"

    Are you serious? Gordon Brown has not been associated with the phrases "Give with one hand take back with the other" and "Stealth taxes" for the duration of his Chancellorship for no reason.

    If not raising the Basic or Higehr rates of Income tax but implementing a doozy of a tactic as Fiscal Drag (Raising Tax Band thresholds at a lower rate than inflation so gradually more people get dragged over it) or raising all manner of taxes OTHER than Incomee Tax as a means of raising the revenue that he wanted to spend.

    the only up front and transparent tax rises are Income Tax, VAT and Capital gains tax., the three things Labour eitehr held flat or cut over the last 13 years. They raised nearly EVERY OTEHR TAX at their disposal.

  • Comment number 30.

    This is a load of take with one hand give back some of it with the other nonesense.

    To paraphrase James Carville.... "its the deficit, stupid"

  • Comment number 31.

    Winch Cables is confuse us here in Russia. Yuri my assistant in butcher’s shop and me is watch Libs Dem manifestations launch. We is not see any elephant in room. We saw Eric Pickles at Tory launch, so maybe this is what he mean.

  • Comment number 32.

    I have posted on Robin's blog about how stupid the ideas on pensions are. Just an attempt to destroy private schemes for anyone earning less than about £60,000 pa.

    What politicians simply refuse to accept is that there is a limit to how much tax people will pay. When tax rates are above 50% people do not pay them and find ways to avoid tax or simply leave. We discovered that in the 1970s.

    The idea that you can magic £5bn or so from closing tax avoidance is amusing - all parties say that and never achieve it.

    I am all in favour of simplifying tax, so lets start by merging NI and income tax so that people can see the real rate they are paying. Whilst I personally would go for a flat tax (£10,000 tax free then 35% of everything above that with virtually no tax reliefs) that may be a bit too radical for some, so how about £10,000 tax free, 30% of next £30,000 and 40% above that with no tax reliefs at all except for (a) charities, (b) pension contibutions (uncapped). Then simplify CGT so exactly the same as income tax (ie any captial gains uses up the same £10,000 tax free band) but there is the old taper relief for long term assets.

  • Comment number 33.

    #23
    "Brown - like everyone else's will be..."

    ====================================================================

    :)

  • Comment number 34.

    Brown apologies for misleading the Commons and fibs in the process - "in one or two years" defence spending was reduced, when the audit office reported the figure was three - "saving 500,000 jobs" when the actual statement should have read "benefiting 168,000". We all have friends who exaggerate - "cooked it myself", with the M&S packet in the bin - we all know the type. It's embarrassing to point out the real facts. Yet - the Govt's handling of the the banks prevented what could have been a huge crisis. Many people might have lost savings as banks shut their doors, markets obliterated, jobs lost left right and centre. Would Osborne have done as well as darling has done? Doubtful. Or Cable? Unlikely, as neither would have the resolve to churn out quite so much money, do so much to bolster spending when banks stopped lending. So who is the best person to mop up the mess? Methinks it could be the Brown/Darling combo - despite the PM's inability to avoid gilding lilies.

  • Comment number 35.

    Do you feel the same way about life in the modern organisation, that it is often grossly suboptimal, difficult to change, and bogged down by fiefdoms, poor management and staid thinking? If so, you'll agree with me that in the long term, the solution to this crisis is to let it continue.

    We can't have a return to the false gods of consumerism and borrowing. These emphasise growth, but growth without strength. These encourage rapid growth in the organisation, a focus on sales, without investment into operational excellence, workplace meaningfulness or happiness.

    It was like plant growth hormone. A rapid expansion that resulted in a weak and fragile tangle.

    Now we need to wait for the incentives of conservation to optimise and improve. These will shift the emphasis back to innovation, creativity, and reward for true value.

    No election or policy now will have a dramatic effect. The problems are systemic. We need to let the weeds and the strangling creepers starve in the drought, and wait for cleverer growths to emerge.



  • Comment number 36.

    writingsonthewall
    "I hate to break it to you - but I sit less than 5 yards from someone who's official earnings are 10k - but in reality they earn about 150k a year."

    Yes however these people are freelancers or small business owners who pay Corporation tax instead.

    And this is not Tax Evasion, get your terms right, its Tax Avoidance, which is defines as legally minimizing your tax footprint, which is a sensible idea. I very much doubt these are the people Stephanie is referring to but unless she replies we will never know.

    You are implyng that someone with turnover of £150K through their small business/limited company - a perfectly legal operating structure - is evading tax and more, not paying any tax, what utter nonsense.

    Your colleague or whoever it is is more than likely set up as a Ltd, is a director of his company and has arranged his tax affairs via his accountant (which costs no more than £60 a month) to operate as efficiently as possible.

    Go and read the legal obligation of a company director, it is to do everything to best position the company with regards to all things financial. it would be a dereliction of duty to pay more thax than you are required, and I bet you would do the same if you were running a small company.

    Do you even know how small business owners pay their taxes? ever heard of the Small Business Rate? Its currently 21% and payable on all Company Dividends.

  • Comment number 37.

    I have just scanned through the Lib Dem Manifesto, and for a party who always mentions that their plans are fully costed, I found it very hard to find any solid factual data, in particular regarding their approach to reducing the deficit. All of the Lib Dem spokesmen, including Vince Cable, mention savings to be made by abandoning plans for Trident.Can someone please explain to them the fundamental difference between reducing expenditure, and not spending what you planned to spend in the future. Deciding not to spend on Trident does absolutely nothing to reduce the deficit, it merely stops it getting larger.If I was a Lib Dem supporter I would probably claim that I was going to save £85000 by not buying the Rolls Royce I could have if I had the money. If this is the level of understanding these people have of factors affecting the deficit, how can anybody take them seriously?

  • Comment number 38.

    The Lib Dems are in the same position as the Conservatives - stitched up by the informational turmoil which has beeen deliberately caused by the Labour government postponing its own comprehensive spending review until after the next general election.

    Total abdication of responsibility - chimpanzee government accounting!

  • Comment number 39.

    The removal of higher rate tax relief under the Lib Dems would mean that big employers can offer a non contributory pension scheme in exchange for a salary reduction to employees, thereby getting tax relief at Corporation tax of 30%.

    Corporation tax relief is higher than basic rate personal tax relief and the employer can afford to share some of the extra tax relief with the employee in the arrangement. Some big companies have already done this. The Lib Dem proposals would give an extra incentive to do it.

  • Comment number 40.

    Restricting income tax relief to basic rate on pension contributions is utter madness.

    Firstly, this ignores the fact that pensions themselves are taxable. So higher rate tax payers will effectively be taxed twice: once at 20% when they make their contributions and a second time when they receive the pension. If the pension itself is taxed at higher rate (and many pensioners will be taxed at higher rate unless the tax thresholds are incremented in line with earnings), then the effective tax rate is nearly 60%. Consequently most higher rate tax payers would be mad to continue making pension contributions. And if they don't invest in pensions, they will invest in property; which will both give us the next property bubble and reduce investment in industry via pension funds.

    Secondly, I am unclear how this will affect defined benefit pension schemes, particularly in the public sector. Consider your average MP on £65k a year with a gold plated pension. If he or she were buying his own pension, he would need to be making contributions of ~30% of salary to afford such a pension. So will MPs be paying an extra £4k in tax to reflect the restriction of tax relief on the employer's pension contribution to basic rate? And all other public sector workers paying higehr rate tax? Or is this a measure targeted to increase the pension inequality between public and private sector?

  • Comment number 41.

    If the lib dems really wanted to do something radical about tax, they could abolish NI and merge it with income tax. To employees, NI is simply another form of income tax. But what many do not realise is that there is a whole swathe of the economy for which NI is a purely voluntary tax.

    If you are self-employed, eg an IT contractor, sportsman, TV presenter, newspaper columnist, etc, all you need to do is set up your own private company. You contract out your services via your company. Then instead of taking a salary, you pay yourself a dividend out of company profits. Hey presto. No employer's NI; no employee's NI. Just plain old income tax.

    None of the major parties are proposing this. Why? Well, you don't think politicians pay NI on their consultancy fees, do you?

  • Comment number 42.

    Poverty in Work / the working poor.

    It used to be that parish or lately state benefits were required by the poor when they were out of work to prevent absolute destitution. More recently we have moved to where very many families in work rely on benefits to survive.

    The economic effect of this is the employers are being subsidised by the state. (So that they can pay wages lower than is required for minimum subsistence.) Now what will raising the tax threshold to 10,000 GBP do for this situation? My guess is that employers will lower wages by 700 GBP a year. What is to stop them? Nothing, unless the minimum wage is commensurately increased.

    And while we are about it is it really the state's role to subsidise the pay of employees?

  • Comment number 43.

    Am I dreaming.

    A growth stimulus from tax cutting that benefits all.
    Real banking reform.
    A pragmatic approach to reducing public spending without destroying those who have given their careers to serve us.

    I'm not interested in voting for coalition govt.

    After this election the Milliband's and the Gove's and the Brown's and Cameron's and the Clarke's and the Mandelson's are going to put us on the dole, make us lose our homes, while they pander to the few people whose vote they think will keep them in power.

    Lets wake them up. Join me and just this once vote liberal.

  • Comment number 44.

    Politicians of all stripes love to make big promises with lots of 'freebies' thrown in. However, what the British people need to understand is that there is NO FREE LUNCH!
    If voting actually changed anything, they'd make it illegal!

  • Comment number 45.

    The LibDems proposal to introduce tax on pension contributions has lost them my vote. And I live in a LibDem/Tory marginal, so my vote will thankfully count for something.

    I will not support the destruction of the principle that pension contributions should not be subject to tax. The pension itself, when it is paid, is subject to tax - so to tax the contributions is double taxation, pure and simple. It is about as unfair as it gets - and the LibDems have the gall to dub this policy "fair taxes" - it's a sad joke.

    Worse, this nasty policy follows 13 years of the destruction of pensions under Labour - it's not as if the pensions that we are going to receive now are particularly generous, thanks to Gordon Brown. Now the LibDems expect to help themselves to £5.5Bn extra out of our pensions every year. Which planet are these people from??

  • Comment number 46.

    If they want to raise the tax money only to give it back to the wage earners... How about not raising taxes in the first place? No that would leave the money it the taxpayers hands to do with as they want instead of the typical socialist plan of shifting the wealth to others....

  • Comment number 47.

    34. At 7:53pm on 14 Apr 2010, Mike Donovan wrote:

    "Yet - the Govt's handling of the the banks prevented what could have been a huge crisis."

    You say 'prevented'. I say 'delayed and aggravated'.

    "Many people might have lost savings as banks shut their doors, markets obliterated, jobs lost left right and centre."

    Who would have lost? The FSCS would have paid up for those individuals who lost savings. That would have been a better use of taxpayers money than stuffing it into banks in order to pretend that there wasn't really a problem. The result of the government's actions are:

    1. The wholesale lenders to the banks, who made a killing on bad loans, got all their money back.

    2. The bosses of the banks who were making bad loans got away with the money they'd been paid over the last few years, and with big pensions. Their only punishment was to have to go to the treasury select committee to be lightly insulted and to say that they felt sorry for all the taxpayers who will be paying for the mess.

    3. The banks have been given time to work their way out of insolvency. The only ways to do this are (i) to charge their customers more, or (ii) to borrow oodles of cash from the (nationalised) Bank of England at 0.5% and speculate with it (noticed the price of shares and petrol recently?), or lend it to the government for 10 years at 4% i.e. free money to the banks from future taxpayers. Of course, these easy profits given to them on a plate have led to massive bonuses, so the banks aren't actually recapitalising.

    4. Given that the IMF estimate that only half of the banks' losses have been recognised so far, I'd guess that the banks (which the government 'invested' future taxpayers' money in) are still insolvent, which would mean that future taxes have already been spent for nothing in return. I wonder how many of the banks could survive a run.

    If the government had just let the banks go under, it might have taken a week or so of crisis in which the debts were written off (the shareholders and wholesale lenders who had benefited from the bad loans would have suffered the most), and the banks could have resumed under new ownership, but with clean balance sheets. Then they could have started lending to those good businesses out there who would put that money to good use. And the good banks who lent prudently could have benefited by gaining new customers, instead of being forced to pay for the mistakes of the bad banks.


    "Would Osborne have done as well as darling has done? Doubtful. Or Cable? Unlikely, as neither would have the resolve to churn out quite so much money, do so much to bolster spending when banks stopped lending."

    I don't consider throwing money into a black hole with wild abandon in a vain attempt to hide the fact that there's an enormous problem to be doing well. In fact, I'd say it was doing quite badly.

    This nation needs to (and eventually will) understand that, absent theft or someone's altruism, in the long run any individual person or group of individuals can only consume as much stuff as they produce. They can consume more than they produce in the short term by borrowing, but they have to produce a greater amount (the interest) more than they consume in future to pay it back. Any proposed 'solution' to excess consumption over production which does not involve producing more than is consumed is no solution at all - but that is exactly what all these games with printing money are avoiding. At some stage we need to rearrange things so that where people are consuming more than they produce without the consent of those in our society who are supplying their excess consumption, they have to make changes such as being paid less, getting fewer benefits, or finding a completely new occupation. Note that I'm not specifically discussing the public sector here - I'd include many overpaid people in business, sport, the media, etc. too. By the way, this is called a recession, and while it is painful for those who go through change, it is guaranteed to happen at some point if consumption remains higher than production. The sooner you go through it, the less painful it is.

    As to the current "recovery", which we apparently must not endanger, while GDP may be higher, it's all done by debt-funded spending. We'll have to pay for it in the future. (The government debt, which we'll have to pay for, is increasing by £10 per person per day). It's nothing more than the equivalent of someone borrowing against their house's increased price to go on holiday, losing their job, then going out and paying for a round-the-world cruise on credit and saying that they must be doing better because they're spending so much more now. The only real solution is to go out and get another job, and start paying off the debt so as not to get into the same trouble again.

  • Comment number 48.

    27. At 5:37pm on 14 Apr 2010, writingsonthewall wrote:
    14. At 4:15pm on 14 Apr 2010, Anand wrote:

    Sadly this person would benefit from the Lib. Dem policy - but it's not their fault that tax evasion is rife (and legal) in this country.
    ===========

    Tax Evasion is illegal in this country, Tax avoidance is not. Tax Advisers do NOT, if they wish to remain out of jail, advise their clients on how to evade tax, they do advise them on how to avoid it.
    If Gordon hadn't overcomplicated the whole system, there wouldn't be so many tax advisers needed.

    I have a simple tax avoidance scheme, I simply no longer work as many hours, my company earns less and it pays less tax, and I get to have a less stressed life, although as Gordon is also responsible for my company having less work, he's guilty of aiding and abetting me to avoid tax. Sometimes I love Gordon, he is just so amusing, then I remember my pension, and he's not so funny. I almost bumped into him today , I think, he was up T'North, I saw the Labour Bus, no one on it mind you, sounds normal.

  • Comment number 49.

    # 46 Bob Lamar

    How about No taxes at all! It is property looted from net tax payers under threat of punishment and given to net tax consumers with, of course, a fairly large slice siphoned off to pay for 'administrative costs', i.e. bureaucracy!

  • Comment number 50.

    Unfortunately, we are not going to know the real situation post May the 7th now. If we did it would be easy.

    Sometimes i wish we could fast forward and put in the different part
    ies and checkout how they handle it all.

    Will be interesting to watch the debates all i know is the sooner this may 6th is over the better it will hopefully be a clear mandate

  • Comment number 51.

    At last, one party is BRAVE enough to try and put real detail into the public domain - its refreshing to see some people not succumbing to the sheep mentality and blinkered beliefs and illusionary strategies of the blue and red corners.

    I read this blog regularly and have some feedback for all of you posters and readers alike. Its time to stop thinking so short term in your strategies, concepts and general thinking and actually to be honest with yourselves about the social realities confronting the vast majority of people today in this country and across the whole world. If you really believe any political party will actually bring about the positive changes they offer between this election and the the next election then you are dilluding your selves.

    We have a second banking crisis speeding towards us in 2012 as RBS and Lloyds groups respectively attempt to re-finance some £168bn each? Nationalisation beckons for Lloyds for sure, and once again the humble tax payer will foot the bill. The banks have been criminally negligent in their activities and are set to get away with it and do it again, unless some are brave enough to stand up to them and stop this theft of a generation.

    And as for this countries debts well I challenge any reader to consider the bond rates of say 5 years time? and how the UK will meet this? added to peak oil, water shortages, global population numbers and the simple fact that resources are depleting whilst politicians and business men the world over use their wealth and power to steal from the poorest nations and people - so you can buy your bagged salad in your local supermarket, or whatever must have it is this week.

    The only way out of this mess we have created for ourselves since the end of the second world war (yes, that long) is for total and complete.... financial/banking reform and total political reform. Anything less and the citizens of this country are being betrayed and misrepresented.

    There's only one person I want as Chancellor from May onwards and thats Vince Cable.

    Now can someone please be brave enough to scrap Trident and get £97 billion back to pay off our debts.

    Im sure you will all shoot me down in academic stats.... well so be it but ask yourself first if you really believe all your stats, or is it too frightening to consider they maybe a smoke screen to enable you to get up and join the daily rat race each day.


  • Comment number 52.

    34

    Rather than the Government's actions preventing financial catastrophe, they have caused it

    By artificially keeping Northern Rock alive, purely because it is in Labourland, it has given banks a kind of financial immunity

    I fail to understand how keeping a proven liar in power is a good idea

    The Lib Dems have admirable policy goals in many instances, although they don't have a clue about how to achieve them

    In my view, the basic rate of tax needs to go up to 30%, higher rate to 50%

    At the same time, the level at which tax is paid should be increased to £12,000

    The level at which Higher Rate Tax is paid, £60,000

    Abolish NI

    Administratively, you would save billions

    NI is nothing but a tax anyway, and in my view all taxation should be simpler and fairer

    The LIb Dems CGT policy is rather like their mansion tax, just stupid and ill conceived

  • Comment number 53.

    Did anyone watch newsnight last night?

    Why did Peter Hain and the Lord Rennard actually go on. They made themselves totally ridiculous.

    On the one hand labour are asking the Lib Dems to tactically vote while they are not prepared to ask their supports to reciprocate the favour and the Lib Dem are asking the same of Labour.

    Paxman did well to keep a straight face. Hain actually said Labour are the only viable option, that's bound to get the Lib Dems rite behind him, surly that is what the election is for. With the polls so close why are they stooping to this so early in the campaign?

    Both appear to have lost a lot of credibility over this, funny enough if the Lib Dems had done it it would have been expected and accepted however with them both doing it it gave the impression of desperation. Do they fear that they will not have the support of their core voters.

    What a sad spectacle but it was amusing in a cringing type of way....

    So if we get a hung parliament this is what we can expect, perhaps good for the journalists but not for us or the country!

  • Comment number 54.

    So according to your report on news at ten, the poorer get these mystical benefits on earnings raising their income to just over six thousand a year, absolutley a massive wage! I would like to see any here or for that matter any BBC reporter live not for a day or a week, but try living on those wages for a year, not to forget the applying for these fantastic benefits! Before the brigade of anti scroungers get in, your report did say these poor had earnings of just over four thousand a year which to me suggests they are actually employed, I hope you are prepared to work for around four thousand a year!

    These Stephanie are your figures, and we all know that there are people out there who do not want to work, who live on benefits, however there are a huge number of hard working low paid people, who in reality pay more of their income on tax than those on very high incomes, your report does not for instance compare the effect of paying VAT from a low income to those on high earnings as a proportion of income, any increase on VAT hits those on low incomes much more than those on high incomes. You could also point out the number of very wealthy members of business who actually pay less tax than the cleaners in their office on minimum pay, due to their ability to avoid income tax almost all together!

    I would also suggest that those on very low incomes do not get the same opportunity to break from the poverty cycle, it is a overpowering cycle of gloom, very difficult to break from, especially with the brigade of get of your backside and work crowd.

    You could also point out the dodgy businesses that are paying off there British employees, then taking on gangmasters with foriegn workers paying them even lower wages than minimum pay because of the terms of their employment some dodging the tax system all together, some of these companies are even employing illegal immigrants working for private companies in the public sector, these are not small fly by night companies!

    The Lib Dems may not be totally right, however they make a valid point of the huge differential in earnings in this ill divided country.

  • Comment number 55.

    54

    Please can you tell me how VAT hurts those on smaller incomes more, when food and children's clothes are exempt

    I accept the 5% VAT on fuel will

    To make your point correctly, you need to take into account the free school dinners, free prescriptions, council tax subsidy etc etc etc

    The truth is not as simple as you imply

    As usual, those that get hurt the most are those in the middle

    Too much income to receive any help, too little to be rich, yet hammered

    Hammered every time

  • Comment number 56.

    53

    It was mad

    Did you see the one with Paxman, Prescott, Hune and Pickles

    That was just crazy too

  • Comment number 57.

    51# Peter
    Well said, another person who thinks Britain requires radical reform.
    Vince Cable is a modern day Cromwell, thankfully comments on blogs not deadly swords fights are the battleground, lets hope it stays that way.

    53#
    I did and share your view, they were both pathetic.

  • Comment number 58.

    I am not in favour of drastic early Tory-style cuts to government spending especially if they lead to massive job cuts (Reform has recommended at least a million job cuts will be needed) at least not until we have evidence that there is sustained growth in the rest of the economy capable of absorbing those made redundant (and, thus, limiting the effect on the welfare state).

    However, the supposedly sober and rational Vince Cable seems to have lost the plot completely. This is the time to be hunkering down and making do with whatever we have got. The idea that we can start a big giveaway is ludicrous. If Cable's source of funding for all of these candy-covered pledges really exists then it should be targetted at deficit reduction. All of it. Now. The people who benefit this year from the hike in the threshold will pay double for it next year in lost services or other tax increases. The price may well be their job - which will take them out of the tax system completely. Ohhhhh!!! Now I get it!!!

  • Comment number 59.

    The Lib Dems secret weapon, Vince Cable appeared to blow up in their faces last night. As an ex banker he was able to speak with authority on the banking crisis, however he now appears to be floundering. I am not sure who advised him that this £10k threshold was a good idea. But last night when challenged he just feel apart, so much so that it appeared that Paxman eased off. The figures just do not add up especially when he saying that it will be paid for by efficiency savings. The savings he has said the Tories and Labour can not deliver.

  • Comment number 60.

    I do not think it matters what the personal tax threshold is and I do not think any politicians either understand or are willing to discuss the issues.

    A single non working person between 25 and 60 years old with a rent of £400 per month and a council tax bill of £1200 pa receives £9377 per year in cash to finance their idle ways if their savings are less than £6000.

    So the same person gets a job (above the minimum wage) at £16,000 per year and will now take home £13,055, which sum is £3,678 per year more than the non working case. This £3,678 net represents the equivalent of a flat tax of 77% on this persons earnings. If one factors in the absurd concept of the so called tax free personal allowance of presently about £6500 per year then the tax rate on the taxed £9,500 of the salary is then taxed at 129%.

    So what do politicians who can fiddle £10,000 per month tax free on their expense accounts understand about this absurd "Alice Through the Looking Glass" world, even if they call themselves liberals or whatever?

  • Comment number 61.

    #59 CL

    Yes good comment about Vince 'the not so vendetta' person. I also watched Clegg fall apart under Paxman questioning two nights ago. It was pretty cringeworthy - I think his wife would be better.......

    Anybody wanting to put their vote in that box should really watch the two interviews again - not so much 'lightweight' as 'light-fly weight'.

    However point of today's snippet on tax - did anybody catch the reported HMRC figures yesterday?

    Around 2.93 million taxpayers claimed/are claiming tax rebates last year which is about a third of all self-assessments.

    Those who may remember my comments soem time ago about taxation regarding the surreptitious change in self assessment to advance payments which caused a lot of problems for many self-employed (ask my other half) re their cashflows. Paying tax based on future earnings is asking for a trouble.

    It's another one of Gordon Brown's schemes that's come apart at the seams as its basically another underhand way to pull future tax revenues forward. However, its backfired big time. It also shows the real underlying state of the economy.

    Another day, another disgrace for Labourites........

  • Comment number 62.

    A number of bloggers have suggested that NI payments should be included within a general income tax ammount. Having worked abroad for many years I believe that the independant NI payment should be retained. Firstly, the health payment should be a separate % , the advatages being that people will be able to see the cost in their paypacket, and monitor any increase. Secondly, the notional fund would allow later private provision. The use of one big bucket of money for our government means that all areas, transport etc are constantly alteredby interfering politicians.

  • Comment number 63.

    33
    :

  • Comment number 64.

    It would be good to get back to the economy and economics although I do like a little canter through the political landscape now and then. Just do not want to get bogged down there!

  • Comment number 65.

    #59
    Vince Cable an ex banker? I thought he was an economist with Shell?

    At least people are realising how shallow his supposed expertise actually is.

    I'm absolutley fed up with all parties blaming the banking fraternity for every woe in the world as a convenient smokescreen simply because it will elicit an emotive response in their favour from the public. Without excusing any of the bankers' antics, the fact is that;- 1. not all banks screwed up so why should they all be taxed, especially as they earn revenue for UK plc in the absence of manufacturing industry, 2. UK taxpayers have not actually lost out on the bank bailouts - as GB and AD have said the money invested in RBS et al will be repaid with interest and where money has gone down a black hole (Bradford & Bingley, Icesave etc) the government has passed all the costs onto the remaining banks and Building Societies who had the good sense to avoid getting into trouble via the Financial Services Compensation Scheme, though they freely ignore this and claim otherwise. Building Socities in particular have had to shoulder unwarranted and disproportionate shares of this burden

    Needless to say however all of this is ignored as blame for all economic mismanagment is laid at the Banks' door(s). Mr Brown must be so grateful that Bank leaders were stupid enough to give him the best get out of jail card ever.

  • Comment number 66.

    To 55 kevinb

    Not for one moment do I consider the problems of low wages to be a simple problem, nor do I believe the issue of taxation to be simple.

    You ask why vat hurts those on low incomes more than the higher paid other than on fuel, I take it that you think those on low earnings should not be allowed a washing machine, perhaps they do not need crockery or furniture even televisions and radio not forgetting the tv licence is a tax, those living in rural areas where public transport is non existant trying to move without a car would be impossible, there are many low paid workers struggling to get to and from work in old bangers. Some of our politicians believe that vat should be applied to food and clothing, the first to start this process would probably be books.

    I would agree that those in the middle are probably hit the most in taxation, I probably fall into this catagory, this does not preclude me from being concerned for my fellow human beings less fortunate than my self. It is called being part of a society. I do not mind paying my taxes as long as they are fair, they have never been fair to low paid workers.

    Would you be able to pay full council tax on six or seven thousand a year?

    At least the Lib Dems have shown that those on low incomes must be considered, unlike both the Tories and Labour, historically Labour have talked a fair policy, now completely shown to be false and disreputable, the Tories at least make no pretence to be compassionate to the low paid, they hate the low paid and would drive them lower. I remember the days of Ted Heath a fair days work for a fair days pay. Could some one tell me some almost forty years later still asking what is a fair days work, and what is a fair days pay? Perhaps we could have Gordon telling us that labour were to make poverty a thing of the past, or maybe Mrs. thatcher that unemployment was a price worth paying, yes but not paid for by the tories, but by the unemployed!

  • Comment number 67.

    Its a brave new world out there. And it's getting cold.
    Unleashing Vince, at this time, has turned the bulldog into a poodle. I think Nick will thank his fortune that the other pair might just ignore him.

  • Comment number 68.

    It seems to me that whilst there are many articulate and sensible comments made on this blog most of us are missing the point entirely. Much of the debate rages about various "tweaks" to our tax laws so that we can or maybe not reduce the current budget deficit. Why is this so complex? If I were to run either my household accounts or business in the same income to spending ratios as the current administration have been doing for the past 12 years I would be in serious financial difficulty...oh surprise look where we are!

    My solutions

    1.We need to spend less...alot less.

    2. We need to earn more...alot more.

    Everything else is a side issue and clouds the debate.

    Why are we not discussing how we get more people producing and less people taking. We have very bright minds in the Uk but they are too busy running successful organistions outside of government to be bothered with the twaddle that politics has become hence we get the present choices. I wouldnt employ many of current poloticians in my business so we give them the reins of power instead...you couldnt make it up!!

    We face stark choices over the next 10-20 years as a nation and we desperately need a change of direction and emphasis, but to where? More of the same is quite frankly not good enough.

    I am working class. In other words every morning I get and go to work like many others for long hours, because to pay my way in a fair society I have to. It is time as a nation I was in the majority and not the minority. We can no longer afford pseudo the working class welfare state to continue we must all contribute in some way however small. Working class means just that.

    Sadly I fear as a nation we do not have the stomach or bravery for the tough but fair decisions that need to be made and hence neither will our elected or unelected-as is the case for some-politicians. We get what we deserve and in reality little will change and the trade deficit will continue grow unchecked and in real terms our wealth will decline. Has anyone noticed the value of the pound/euro over the past 10-12 years? great if you make anything that anyone wants to buy but not so good if you import too much. Work it out more of the same is not going to work luvvies!

  • Comment number 69.

    62

    Unfortunately, NI is simply a notional fund, recently turned by Labour into a stealth notional fund

    By combining the two, no future government could claim to be keeping basic rate income tax unaltered, whilst raising NI

    I can see no reason at all for keeping it

    It has become outdated and the original concept has been lost, in the sea of troubles that is Brown's economic legacy

  • Comment number 70.

    #62 nhoj

    NI is a tax - pure and simple. It's just semantics otherwise.

    I find it odd that NHS is funded from the tax received allocation but is not collected as part of the income tax collection.

    You could argue that all parties are guilty in not having corrected this but Labour have had 14 years to do something about it.

    Another sad disgraceful day for Labourites........

  • Comment number 71.

    A more intelligent way to to look at the social democratic welfare tangle into which the Social Democrats would like to engage with their proposals is this.

    We live in a world in which working for wages is a crime, even working for the government in essential services is a crime. The crime of working is punished harshly if one is poor, if one is rich the crime is considered irrelevant. The crime of working (while being poor) is punished by a fine of up to 129% of earned income. The lenient punishment of only a fine of up to 129% of earnings only applies if the the convict freely confessed their crime. (See explanation of 129% figure in my post #60 here above.)

    If a person (while being poor) commits the crime of working and conceals the fact that work was being paid for then the punishment is a fine of up to 129% of earnings and a jail sentence of up to five years.

  • Comment number 72.

    Well at least there is somone willing to address the massive disincentives to work at low incomes. Some years ago my son came to live with me permanently. I therefore reduced my hours to devote some time to looking after him. After much frustration in trying to find a level of paid hours that worked I sat down with a friend who was a benefits adviser and created a spreadsheet which calculated for each level of income the tax and benefits levels and the nett effect. I (and my friend) was amazed to find that the answer was about £140-£150 whatever the question. From around £70 p.w. to almost £200 per week the effective tax rate was about 90% with a couple of pinch points where it was over 100%. When rich people moan about 50% marginal tax rates they have no idea. If the tax system was simplified so that this effective marginal tax rate was explicit then at least something would be done about this unsustainable position. It is not difficult to see the amount of social problems caused by this crushing burden on people trying to bring up children on low incomes.

    some

  • Comment number 73.

    My son has just asked in the event of a hung Parliament where can we go to see them hang,this maybe the subconscious thinking making the polls so close!

  • Comment number 74.

    On BB1 tonight - DIY SOS, Have I Got News for You and Outnumbered and to those on ITV at the same time.
    1. We will have to sort all this mess out ourselves. By working harder, earning less and paying more tax. Our second holidays are at risk.
    2. The News we have for you is that voting only enourages you so it will be a really low turnout which you will no doubt blame on the American banks and those recent MPs who were all bad people.
    3. Outnumbered is clearly of more import and should be required viewing for anyone, married or not, thinking of having children.
    Hurrah for VAT! It's the best of taxes because if you don't waste money buying things it doesn't cost you a penny.

  • Comment number 75.

    I understand that economy is the heart of the problem/issue of the election.

    But what exactly do the parties say about education? Primary, secondary and university?

  • Comment number 76.

    66

    I don't recall saying any of the things you have said

    If you work out the 2.50% difference on the items you mention, it doesn't add up to much

    The main issue on petrol is fuel duty, and you don't pay VAT on a second hand car, so I can't see why you are being so emotional

    To say the Conservatives hate the poor, is just ridiculous

    Nobody on £6,000 or £7,000 has to pay full council tax. So what is your point?

    Please enlighten me

    The VAT argument is a hollow one, and you do not seem to have addressed the points I made about the benefits give to the least well off

    Nobody is poor in this country anymore, and it is about time we stopped using that emotive word

  • Comment number 77.

    Well done BBC. I have been listening to the BBC, both radio and television news for the past five years but in the last 18 months it is very clear you really don't want the Conservatives to win this election. Your bias is very covert. For example why have you been discussing Margaret Thatcher's time as primeminister when we hear very little of Tony Blair, you know, the last elected primeminister. Watch Gordon Brown at Primeminister's Question Time, always thumping the table. 'Bible thumping'. So BBC, since I initially couldn't decide who to vote for, you have made up my mind - Conservative. Here we go again, listening to Radio 4 again, its the Conservative policies being pulled apart. Has everyone forgotten that Gordon Brown has brought us to the brink of ruin during his chancellorship. Global my foot.

  • Comment number 78.

    I have an interesting site, which has a political and design blog, I'm finding the election facinating, but we don't live in a three party democracy. You can visit me at www.burnred.co.uk/blog

  • Comment number 79.

    Full marks to the Lib Dems for not bowing to the pressure from business and City "experts" to give reducing the public deficit top priority.

    Redistribution from rich to poor will not only improve social cohesion, but will help the recovery as well, because poorer people will spend the money, not hoard it as richer people tend to do.

    It it is a pity that they are not brave enough to go further, particularly by reducing poverty, made much worse by the recession, by further benefit increases.

  • Comment number 80.

    look folks, doesn't matter who wins the election, we are all going to pay. We can exclude those who know how to cloak their income of course. I have lived through two depressions so know what is coming. Public sector cuts, interest rate and vat tax rises. Booze, fags, fuel and anything that the public buys in significant quantities will all go up in price. So folks tighten your belts now cos its going to hurt and if you can get rid of your loans, credit cards and the like, go for it.

  • Comment number 81.

    Sorry, michael_1950 I don't get your 129% or 77% figures. I suspect you may not appreciate the earnings limits for NI or how Tax is calculated (or maybe I missed something). But I appreciate the point you try and make (along with Co-operateordie) that there is a balance point between taking benefits and working for a living. But what do you suggest, no tax free earnings, or simply no benefits for everyone?

    Even with my fairly good salary (less than 50k though!) with the cost of childcare taken into consideration (3 under 7) there is no point in my wife trying to work as the cost and hassle of finding affordable and reliable childcare makes it almost impossible for her to work.

    Ultimately someone, somewhere will lose out, and it's usually at the lower end of the bracket. This makes all these millionaires hiding their income away from the IR slightly difficult to take!

  • Comment number 82.

    #68: the Tories at least make no pretence to be compassionate to the low paid, they hate the low paid and would drive them lower.

    I wonder who "the Tories" are: the about 40% of the electorate who are going to vote Conservative? The people they would be voting for?

    I think you are confusing some bits of market liberalism ideology with what makes Conservatives conservative. It is about time thought was given to that. My opinion is that "conservative" way of thought is a realistic way of thought, i.e. one that understands scarcity. There is not enough good health or education for everyone, so it must be rationed. Obviously no Conservative politician will ever say that.

    Now, if it has to be rationed. there must be some criteria for rationing. Forget the twaddle that rationing is on the basis of the size of your wallet. In education it is or should be on the basis of ability and avidity for education, and the government-assisted places scheme is an excellent example of how this works under a conservative government. In health there is a problem, and I do not see how to solve it, as need is harder to define. Obviously rationing on the basis of age, which is what NHS is doing day in day out (ask anyone who's worked in NHS or anyone who's had a elderly relative use its services) is abhorrent.

    Of course wallet enters into the equation in an interesting way: if you can afford it, you should not rely on the state, also a conservative idea. So tax relief for BUPA is a conservative move.

    What any of this pragmatism has to do with lack of compassion or with "hating the low paid" (for doing or not doing exactly WHAT? some kind of genetic hate, as of many Romanians for Romanies?) I really fail to see.

  • Comment number 83.

    77. caspio wrote:
    "Your bias is very covert. For example why have you been discussing Margaret Thatcher's time as primeminister when we hear very little of Tony Blair, you know, the last elected primeminister. Watch Gordon Brown at Primeminister's Question Time, always thumping the table. 'Bible thumping'."

    So a reference to Margaret Thatcher is evidence of bias against the Tories? Extraordinary case of paranoia you have there. Many Tories worship her and argue we should have more Thatcher, and even bring her back into government, but clearly you see her as a liability and a vote loser.

  • Comment number 84.

    36. At 8:21pm on 14 Apr 2010, Anand wrote:

    "Yes however these people are freelancers or small business owners who pay Corporation tax instead."

    ...again, sorry to dissapoint you but you're thinking of honest contractors operating a LTD company model.
    Trust law used by contractors to evade tax is an entirely different matter - and no, there is no corporation tax to pay with companies based off shore - i.e Isle of man, Guernsey etc.

    You are correct that it's tax avoidance (and not evasion) - but is there a difference really?

    "You are implyng that someone with turnover of £150K through their small business/limited company - a perfectly legal operating structure - is evading tax and more, not paying any tax, what utter nonsense."

    It's not a limited company - but that is exactly what I am saying - it's not nonsense. It avoids MSC, Corporation tax, most income tax and most capital gains - it's not hard to find - companies offering a 10% tax rate on £150k per annum.

    I would post a link to one such company, but the moderators will remove it.

    "Your colleague or whoever it is is more than likely set up as a Ltd, is a director of his company and has arranged his tax affairs via his accountant (which costs no more than £60 a month) to operate as efficiently as possible."

    No, the company is set up offshore, the contractor is an employee of that company (on a very low salary - around the 10% liability) - and the rest of the money is divested through a trust - on which there is only a 0.5% liability (because it's a never collected loan)

    The IR know all about it - but it's not popular to close this loophole down the loophole. A certain 'wealth manager' for a major bank utilises this for it's clients.....and major banks have more say than the tax payer.

    "Do you even know how small business owners pay their taxes? ever heard of the Small Business Rate? Its currently 21% and payable on all Company Dividends."

    No dividends, no small business rates - that was the 'old' loophole which was closed by IR35.

    ...and yes, I know exactly what I am talking about. If journalists did their homework they could tell you. We worked out that one such 'tax specialist' alone is blowing a £150 Million hole in the IR tax collection amount.

    ...and you wonder why stories are all around the wrong targets - the overspend of the public sector, not the massive tax avoidance which the City incorporates in it's workings.

  • Comment number 85.

    Unfortunately all this debate is largely futile. All the manifestos are based on false premises that "overnight" efficiency savings can be made, "loopholes" can be closed and all services deemed "important" (ie politically!) will be coninued or invested in.
    In reality it won't happen to anything like the level the "figures" suggest.
    "Efficiency savings" will lose jobs. The only reason that Labour's spending seems to have led to less job losses is because people have cut hours, gone part-time or been ineligible to claim benefits, not because the huge spending has worked.
    Whichever party or parties get in, as soon as possible, huge cuts will have to be made even to the sacrosanct services. There's plenty of waste but jobs will go. Disbanding NHS Direct would save £millions without any real threat to the nation's health so there is one place to start.

  • Comment number 86.

    46. At 11:59pm on 14 Apr 2010, Bob Lamar wrote:

    "If they want to raise the tax money only to give it back to the wage earners... How about not raising taxes in the first place? No that would leave the money it the taxpayers hands to do with as they want instead of the typical socialist plan of shifting the wealth to others...."

    ....yeah, lets stick to the capitalist plan of pretending everyone is getting richer by producing paper money to create a paradigm or a 'new reality' where growth is endless.....until we realise this is total nonsense and wealth is rapidly redistributed upwards to a smaller and smaller number of people.

    yeah - private sector dictatorships are much better than those old socialists trying to make things fair.

  • Comment number 87.

    52# Kevin B

    Interesting idea scrapping NI in favour of adjusted income tax system. Something the Liberal Democrats have looked at before. Never made it to policy though.

    Your numbers are a bit of a problem though. Lets take someone earning exactly £60k with your recommended system of a £12k point before any income tax is paid then 30% until £60k of earnings is reached then 50%.

    Currently they pay:

    Income tax. National Insurance

    £6,475 @ 0% £ 5,045 @ 0%
    £37,400 @ 20% = £14,960 £38,800 @ 11% = £4,268
    £16,125 @ 40% = £6,450 £16,155 @ 1% = £161.55
    ------- ------- -------- --------
    £60,000 £21,410 £60,000 £4,429.55

    Total currently paid £21,410+£4,429.55 = £25,839.55
    or put another way a marginal rate of tax of 43%

    Your system produces:

    £12,000 @ 0%
    £48,000 @30% = £14,400

    or 24% marginal rate of tax.
    Even people on £100k would still pay less tax as the additional 10% on the £40k between £60k and £100k would only raise an extra £4,000 for the same loss of £11,439 on the first £60k.

    My question is do you really think that cutting tax for middle earning people by between 25% and nearly 50% is somewhat difficult at the best of times let alone now with our huge deficit and national debt.

    But i do like the idea and saving on the administration of the national insurance scheme.

  • Comment number 88.

    47. At 00:36am on 15 Apr 2010, striped-pad3 wrote:

    "Who would have lost? The FSCS would have paid up for those individuals who lost savings. "

    ...only up to £25k (or now £50k) - imagine you were 3 weeks from retirement with your 'pension money' transferred into your Northern Rock account when it goes belly up and you lose everything over £25k.

    Could you live from 60 until death on 25k?

    ...and don't dribble on about 'spreading the risk' and 'sound financial management' - these are pensioners we're talking about, they are still getting over decimalisation - let alone the new models of complication employed by the banks to con us out of our money.

    ...and how can you even tell if a bank is stable? - weren't they lying about their financial position?

    Your whole anaylsis relies on the old fiction that people in business are generally honest - which the recession is proving is plainly not the case.

  • Comment number 89.

    #59 Chris London;

    "The Lib Dems secret weapon, Vince Cable appeared to blow up in their faces last night. As an ex banker..."

    Vince Cable was Chief Economist at Shell. He wasn't a banker.

  • Comment number 90.

    49. At 01:16am on 15 Apr 2010, LibertarianKurt wrote:

    "How about No taxes at all! It is property looted from net tax payers under threat of punishment and given to net tax consumers with, of course, a fairly large slice siphoned off to pay for 'administrative costs', i.e. bureaucracy!"

    Excellent - and how many schools and hospitals will the private sector be building?
    I mean it's main criteria is a workforce who can complete mundane and repetitive tasks - so health and education go out the window (they just need people to be well enough to complete their work without dying)

    I shall buy a top hat and go for a ride in my hackney carriage.

  • Comment number 91.

    UK Government debt in 1998 was 353 Bn GBP and is now 777Bn GBP. We are now borrowing one pound for every pound we spend, i.e. around 170 Bn GBP. We borrow 35 Bn GBP every year just to pay the interest we owe.

    However, this also ignores the liabilities we also owe – public sector pensions for Civil Servants and MP’s and Private Finance Initiatives for already built new hospitals and schools but for which the bills have been deferred. Then add in the liabilities to the banks and we reach a staggering debt of more than one and a quarter trillion GBP – four times that of 1998.

    The politicians in this election all talk about reducing the deficit but what they mean is reducing the 170 Bn GBP we borrow every year.

    I have found nobody who does not think that the politicians are talking about reducing the one and a quarter trillion GBP but the politicians are merely talking about how much they intend to reduce the rate of increase of the national debt.

    I wish Stephanie Flanders could make this clear in a broadcast, because the implications for succeeding generations are very frightening.

  • Comment number 92.

    ...Oh dear - the Liberals showing their inexperience here - don't they know that you only get elected by blatantly lying to the public...

    said, by writingsonthewall, mes2... wiseman.

    Obviously LibDem people do not feel they are risking getting elected on top so they feel free to propose...

  • Comment number 93.

    28. At 5:43pm on 14 Apr 2010, Jim Smitheman wrote:

    An excellent blog.

  • Comment number 94.

    Paying Council tax on £7000 per year:


    A single fit person under age 60 on £7000 per year and with savings of less than £6000 will pay ((7000/52) - 65)x0.20 x 52 or about £724 per year towards their council tax. Were the same person getting £6000 per year but have £18,000 in savings earning them a princely 0.5% (approx -5% real rate) then that poor soul would pay their full council tax. Even though their income is £6000 less a £900 per year inflationary loss on their savings capital.

    In fact in this "Alice in Wonderland" world of hedonistic adjustments to price indexes the more cash you are foolish enough to have saved the poorer you are. Inflation is really running at about 7%, average last decade and real interest rates (after tax to higher rate tax payers) have averaged about -4% in the last decade. This inflation is what financed the unsupportable phantom prosperity of the whole of the Brown term of office at any senior level. The hope that we can get back to bubble era levels of debt accumulation would be rather amusing but it smacks of desperation.

    Are tax payers generally made aware that the retirement capital poverty trap is about £500,000 for a fit non smoking 60 year old retiring today. Why is there not more fuss about this? In effect all pension contributions which do not take the future pensioner out of the capital poverty trap at retirement are taxed or benefit negated away at about 100%. If anyone wants the figures I can supply that, but it is complex.

  • Comment number 95.

    When it comes to politics the British are largely politically thick, and the media run the country based on what they want to let through on the British stage, and it's all carefully controlled by our media pundits who are "establishment men".

    "writingsonthewall" is spot on re- his/her deliberations about the British not really wanting honest politicians.

    But ill'e give you honesty.

    New Labour are fundamentally Thatcherite. Which is why Cameron has nowhere to go.





  • Comment number 96.

    82. At 2:16pm on 15 Apr 2010, trylypuzzled wrote:

    "I think you are confusing some bits of market liberalism ideology with what makes Conservatives conservative. It is about time thought was given to that. My opinion is that "conservative" way of thought is a realistic way of thought, i.e. one that understands scarcity. There is not enough good health or education for everyone, so it must be rationed."

    The reason there isn't enough good healt or education is because the bourgoisie continue to extract value from the country and sit on it (or use it to extract even more)

    Bankers in Porsches is why there is not enough good education and health - nothing to do with scarcity - it's about who is deciding where resources are allocated.

    Conservative ideology is one of small Government (unless they have changed their fundamental principles for this election) - it's not one of fair distribution of scarce resources - on account smaller Government means less protection for minorities and a greater allocation to those who already have an abundance.

    It's not about hating the low paid - it's about expecting them to be 'happy with their lot' - as if they are sub-standard people because their forefathers weren't thieves (or bankers, who are thieves)

  • Comment number 97.

    "Sorry, michael_1950 I don't get your 129% or 77% figures. I suspect you may not appreciate the earnings limits for NI or how Tax is calculated (or maybe I missed something)."

    You missed something.

    Tax on income is generally 20% Income Tax, 11% class 1 NI and 39% tax credit clawback on gross pay. If you include the Employer's NI as a reduction in your salary then for every £112.80 of cash cost to the employer, you get £30 in your pocket and the chancellor gets £82.80. That's a marginal rate of 73.4% on the cash cost of employment. Labour is planning on raising that to 74.5%

  • Comment number 98.

    "In health there is a problem, and I do not see how to solve it, as need is harder to define"

    Need has to be clinical need, and that has to be defined by a doctor. You have to trust the professionals here. The biggest problem is that there is a fixed budget for the NHS and the means the variable to absorb demand is time - hence why we traditionally had waiting lists. The only other way around this is to have excess capacity that sits idle occasionally.

  • Comment number 99.

    85. At 2:40pm on 15 Apr 2010, doctorjustjohn

    Perfect.

  • Comment number 100.

    #94 michael_1950 wrote:

    ' Are tax payers generally made aware that the retirement capital poverty trap is about £500,000 for a fit non smoking 60 year old retiring today.'

    If I work for 40 years then at todays money I would have to save the equivalent of £12,500 per year.

    That is not a lot more than my current annual take home salary, it would appear to be capital poverty trap for me then. (and I have only just climbed out of the working mans poverty trap, out of the frying pan...)



 

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