Grannies, quicksand, 40p and fruity language
If I was Sir Nicholas Macpherson, permanent secretary of the treasury, or anyone else at the treasury in a senior position who served in 2009-10, I’m not sure I’d be very comfortable reading the HMRC review of the original planning for the 50p tax introduced in 2010.
The HMRC says it is “difficult to construct a plausible outcome consistent with a yield estimate as high as those original forecasts” – ie the treasury was captured by its political masters pushing out projected yields from la-la land and not doing its job.
We are invited to believe that numbers now being circulated for revenue take on high end taxes are reliable but you can see from the penultimate row in the main score card in the Red Book that there is massive uncertainty about if, when and whether revenues will flow in from top end earners and just what devious ploys their accountants will dream up to minimise payments.
Building revenues on supertaxes seems a bit like building on quicksand. It’s very clear from the Red Book where George Osborne wants to spend the money, less certain (Afghan reserve, wealth taxes, anti-avoidance measures and a granny tax that may not survive unamended) how he’s going to raise it.
Granny tax
George Osborne clothed the granny tax in Gordon Brown’s own brand of patented black paint Stealth technology at yesterday’s budget and didn’t sound entirely convincing on Radio 4 Today programme this morning saying “I told Parliament that it saved money.” He clearly thinks the granny tax will slip off the radar as pensioners rejoice at their inflation rise in the pension (£5 a week) starting next month. We’ll see. I have a suspicion that this will be shortish, nasty storm but one that will pass.
True – pensioners vote more than other voters and they organise and lobby better than ever. But the worst hit are people who haven’t yet retired and there’s a difference in the potency of having extra taxes imposed on you/seeing your monthly payments reduced and being deprived of an additional allowance you may not have known you were going to be entitled to.
Another thing that strikes you is that with yet another lowering of the threshold for the 40p tax level (to squeeze out most of the benefit from the raised allowance). A level of taxation that was once meant for a relatively small minority of the wealthiest members of the working population could be moving towards a state where a huge chunk of the population might find themselves in its grasp in the course of a working lifetime.
Couple of other thoughts. If people who practice “aggresive tax avoidance” like registering residential homes under overseas companies are “morally repugnant” will the Tories refuse to take any donations from individuals who have done that?
George Osborne said on the Today programme that the budget leaked because he is in coalition – quite clear who he is blaming there! I hear Norway has a system where coalition governments dribble out the budget over a couple of weeks in a “my turn, your turn” series of announcements portioned out to each party.
An aside – things got very heated when the 50p rate was being talked about in the Commons. One Labour MP was heard shouting, “you complete s**t” at a Lib Dem MP on the bench in front of him.
And I recommend this blog by Damien McBride which is a very good read – hat tip to the great Philip Cowley for that.
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