A prisoner of his own tax con
Peter Hoskin 9:01am
Oh dear. It looks as though Alistair Darling's 10p tax con is going to come back to haunt him – and in a major way. As the IFS points out this morning, the fact that he's only increased personal tax allowances for a year – a short-term fix to compensate for the abolition of the 10p tax rate – means that he's “not only created millions of winners this year: he has created millions of potential losers next year”. That's some 18 million potential losers next year – hardly the electorate that the Government wants, with a general election on the horizon.
So, is there any way the Treasury can avoid this? Well, yes. It could keep the tax breaks in place. But, to do that, it would have to find an extra £3 billion a year, at a time when the public finances are already taxed and borrowed to the hilt.
It puts Darling between a rock and a hard place – which will he choose? My guess is that he'll rack up even more debt in order to placate the potential tax losers. After all, this is a government which blew £2.7 billion to attract the votes of constituents in Crewe and Nantwich. I don't think they're beyond playing politics with the public finances again. Besides – as Fraser's pointed out – it would all fit neatly into a programme of scorched-earth policy; leaving things even worse for an incoming Tory government.
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Comments
Water
May 21st, 2008 9:43am"My guess is that he'll rack up even more debt in order to placate the potential tax losers." Seems like a safe bet.
Lance Diatessaron
May 21st, 2008 9:56amPeter/anyone: Is there a precedent for an incoming government ordering an independent audit of the national finances? Or does this happen anyway? I assume it doesn't, or such a 'scorched earth' policy would not be an option.
matt
May 21st, 2008 10:04amprograMME for heaven's sake. Do you not have subs these days?
GeoffH
May 21st, 2008 10:33amIndependent audit? And what are you gong to do? Have a political show trial of Darling and Brown?
I know Blair did something like this with his BSE, Bloody Sunday etc inquiries but Tories don't do that sort of thing.
Pete Hoskin
May 21st, 2008 10:35ammatt: thanks for spotting that. Corrected now.
Perry
May 21st, 2008 10:50amNow be fair guys. He can’t help but run on the rails his old boss set him on. And he will fiddle and faddle in just the same way within the next-to-nil-freedom he’s allowed.
Mind you, in seeking any short term benefits or relief to himself, he will be following the great moral compass the Beloved Leader has corruptly – and adroitly - foisted on the country.
Aidan
May 21st, 2008 11:06amPace GeoffH - there is a precedent for Labour politicians being punished for buying votes. In 1973, 11 Labour councillors in Clay Cross were surcharged, barred from public office, and eventually bankrupted, for failing to increase council house rents, and later increasing the pay of council workers without approval from the Pay Board.
James Gladstone
May 21st, 2008 11:30amWhat is a tax con? Or just incompetence?
James Gladstone
May 21st, 2008 11:51amThat should be "Was it a tax con?" (Not "What is...")
Lance Diatessaron
May 21st, 2008 12:03pmGeoffH: No, I wasn't thinking of show trials - but interesting that that was your inference!
My point was rather to help the next government clarify the nature of the economic situation it inherits. Brown, Darling et al are routinely accused (here in CH) of cooking the books, off-balance-sheet accounting etc. An independent scrutiny would clarify that. Conversely, it could vindicate the previous administration's policies. Either way, it might help stop the tedious to and fro of 'after eighteen years of Tory under-investment' or 'after x years of Labour waste'. That might make life harder for MPs and lazy political hacks, but it might allow the poor voters, who aren't economists, to make sense of future economic policy.
John
May 21st, 2008 1:24pmNow hang on: the abolition of the 10% band generated X pounds per annum for the Treasury. Just what is there to prevent Darling using exactly that amount to make up for the losses of those who did lose out?
I know that simple arithmetic is beyond the ken of McBean and Glove Puppet, but surely not beyond that of bloggers here - and at least one or two government advisers?
Ian C
May 21st, 2008 1:32pmHe could always reverse the cut in the Basic Rate to pay for the 10p!!! After all that was the source of his problem - well that and the man who announced it!
Catherine
May 21st, 2008 3:48pmJohn - the 22p tax was lowered to 20p, paid for by the scrapping of the 10p rate.
HJ
May 21st, 2008 3:51pmJohn,
The revenue generated by the abolition (or rather the doubling) of the 10p rate was used to reduce the 22p rate to 20p. Overall, these changes were pretty much fiscally neutral. So he has to borrow the money if he is going to compensate the losers, unless he is prepared to put the standard rate back up to 22p
Of course, the correct thing to do all along would have been to raise allowances rather than having a 10p rate - this would help the lowest paid more. But then allowances don't get headlines, and headlines and spin is what this government is about.