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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