Background to the budget


         The last Budget book in March 2011 told us that the Coalition government planned to increase current public spending by 16% over the five years to 2014-15. It forecast  an increase of 11% in total public spending in cash terms, as it has left quite a few of Labour’s cuts in capital spending in place. It estimated it would increase tax revenue by 36%, bringing the deficit down by 70% as a result. If the government enforces tough public pay freezes and improves public sector buying as promised, these cashspending  figures translate into little change in real terms.

          The Autumn Statement cut the forecast revenue increases, as  the government decided to turn more pessimistic about the likely growth rate of the economy.  The March 2011 forecast of total extra borrowing of £485 billion over the five years soared to a forecast £563 billion as a result.

              This 2012 Budget is unlikely to have to report more bad news about less revenue or more involuntary spending. It is likely to worry about growth, as the growth rate in the economy is central to achieving the large forecast increase in tax revenues the strategy rests on.  The government is likely to concentrate on two major areas to promote growth.

              The first si they will seek a private finance route to reinstate the cuts in public capital spending they inherited – or alternative projects to take up the slack in construction. We have seen today the outlines of a scheme to build more roads. Mr Cameron’s speech has also promised decisions on airport, energy  and water capacity. We know they are working on away to tap pension fund money to finance better infrastructure.

                The second is they will seek new ways round the finance blockage caused by the tougher regulation of banks. The banks are struggling to meet much more stringent capital requirements. That means they lend less, or fail to expand their lending, as they seek to improve the ratio of capital to loans.  The government is likely to try to find a way round this regulatory  constriction. They have announced a mortgage loan extension scheme, and are now poised to announce help for lending to small and medium sized enterprises.

                  It might be cheaper and easier simply to relax the capital requirements of the main banks. After all, we are now all meant to believe in counter cyclical regulation. That means allowing lower ratios of capital to loans when the economy is in or recently out of recession, and then demanding higher amounts of capital when the economy is in  danger of overheating.

                    The budget also has to resolve how to tax the rich successfully. The Treasury now forecasts a fall in CGT revenue next year by some  £500 million as the higher rate makes its full impact. Income Tax revenue was poor this January, with self assessment revenue down in cash terms.  The past moves down in the top rate from 83% to 60% and then to 40% all boosted top rate taxpayer revenues massively. Will the Chancellor go for more revenue, or play to  the gallery that likes soak the rich and successful taxes even if they do  bring in less?  To me the art of taxing the rich is to tax them in a way which makes them stay and pay.

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  1. lifelogic
    Posted March 20, 2012 at 6:43 am | Permalink

    As you say “the art of taxing the rich is to tax them in a way which makes them stay and pay”. Indeed one tax payer paying say £1M a year who leave (as several I know have done so) mean the government needs about 1000 new average tax payers to replace him/her. They will certainly not find them with the banks refusing to lend and pulling cash back from most businesses. Government owned RBS, in particular, have new lending rules that mean, in effect, they are only now lending now lending perhaps only 40% of investment property values rather than 75%-80% as before. Development capital is virtually unobtainable from banks. This is pulling cash back from businesses at an absurd rate totally unrelated to risk. With loss of jobs and delayed investments as a result.

    As you say: “It might be cheaper and easier simply to relax the capital requirements of the main banks. After all, we are now all meant to believe in counter cyclical regulation.”
    This is needed desperately.

    Then we need a sense of direction that welcomes the wealthy – turnover taxes like stamp duty should go, as should IHT (or at least to the £1M he promised) and employers NI, also the top tax rate should be no more than 40%. Tax take would actually increase in the long term as a result of more of the wealthy coming in & fewer leaving. With confidence being generated for a change rather than being snuffed out by Cameron and Osbourne.

    I hear we will get a statement showing how it was being spent. I assume it will not give a real breakdown. For example saying what is wasted on the pointless, incubation of terrorism, wars, overpaid civil servants doing nothing useful, the Olympics, the dis-functional NHS, over large pensions for the state sector, or wasted on gifts to the Pigis or the EU ……….

    Will Osbourne have any vision of growth – I think not but we will see.

    • lifelogic
      Posted March 20, 2012 at 7:26 am | Permalink

      It is reported that applications to study law at university are increasing substantially. I cannot think that yet more lawyers is what the country needs. The government should fix the many systems & structures that allows the legal profession to get away with charging so much and delivering so little to the country. The no pay no fee and heads you win tales you win tribunal systems.

      The endless ambiguity, contradictions, absurd contrived complexity and multiple levels of contradictory courts in the system. We need a quick, efficient, understandable, inexpensive legal system with game theory used to ensure that it works fairly. What we have is the complete opposite and it is getting even worse not better. Growth will come from more people doing real work not yet more people arguing over the wealth that has already been created.

      We want or brightest the generate wealth not just argue endlessly often at taxpayers expense.

      • uanime5
        Posted March 20, 2012 at 8:55 pm | Permalink

        No win no fee was introduced because the government didn’t want to have to pay legal aid. As long as the legal aid isn’t available the ‘no win no fee’ will remain the only viable alternative.

        An inexpensive legal system is only possible if the wealthy cannot employ expensive lawyers who will exploit the legal system in any way they can.

        The brightest graduates won’t generate wealth because their employers pay them very badly so that they can keep more of the wealth for themselves.

        • lifelogic
          Posted March 21, 2012 at 6:11 am | Permalink

          An inexpensive and efficient legal system is perfectly possible. Most cases should never even need to go to court if the likely outcome was clear. Simplicity, consistency, fewer court layers, fewer conflicting laws, a lack of restrictive practises, strong, effective, restrictions on fees that can be claimed back when a case is won and real competition is all that in needed.

          At the moment it is a system constructed to enrich lawyers at the expense of everyone else.

    • lifelogic
      Posted March 20, 2012 at 8:37 am | Permalink

      I see Tim Yeo is having a debate with Nigel Lawson.

      What on earth is Tim Yeo (A History graduate) taking about. Does he have the slightest clue? Does he really believe what he says? It is hard to believe that he does. Why on earth is he chairing “The Energy and Climate Change Committee”. Who is he representing on it, it does not seem to be the public interest those who pay his (main) salary.

      I note that he declares several “green” companies in his list of members interests as is usual with people holding these anti-science views.

    • Disaffected
      Posted March 20, 2012 at 9:38 am | Permalink

      I will keep asking: why does the government think it has an absolute right to take people’s money at whatever arbitrary rate it decides?

      Why does Clegg, Cameron and Cable think it right the Government should have more of your pay than what you earn? The broadest shoulder strap line has worn thin and should stop. The Government could focus its energy on the lazy welfare lifers not people who work. It would definitely help the financial and social mess of the country. Tax is a necessary evil to fund public services and look after those who genuinely cannot work.

      The current shower in government, like the previous socialist one, need to spend less and tax less. The socialist EU thinking of wealth distribution must stop. I am not a wealthy person or earn a vast amount of money, but I believe those who work deserve to have the largest proportion of their income no matter what sum is.

      Why is it right that the socialist Government keeps providing incentives for teenage girls to become single mothers and the rest of us to provide them a home and living for the rest of their lives? These children cannot look after themselves let alone have children, yet the Government provides incentives for them to behave like this and then makes contrasting claims of a feral society or we need a Big Society. We do not. We need politicians who are capable of running a country and able to do the most basic things ie spend less than you earn. Create a society where it pays to work, and those genuinely unable to work be looked after with dignity. Those able bodied people who are unwilling to work to be given an option to work or get nothing.

      Why continually bash those who work or strive to improve their standard of living? Why continually squeeze every penny of tax from ordinary hard working people, as Messrs Cable and Clegg promote, to allow others to have the same homes, same care, same healthcare, same education. Stuff the socialist view of social mobility. It already exists where most of us work to improve our standards of living not demand or get given hand outs. Nor is it right for Messrs Cable and Clegg to think it is right.

      They are creating a society where the undeserving get the top university places, the best homes, good standards of living, Sky TV, Mobile phones while they choose to lounge about their tax funded homes which the rest of us had to pay for and cannot afford ourselves because of the huge amount of taxes we pay- how stupid is that? I would rather spend my money on what I please ie my family rather than wasting it on idle lazy people who choose to do nothing for their self. Government should force them to take responsibility not create incentives to exacerbate the problem and then have the bare faced cheek to whinge to the rest of us what society is like when they created it.

      • lifelogic
        Posted March 20, 2012 at 7:22 pm | Permalink

        You pose the question:- “I will keep asking: why does the government think it has an absolute right to take people’s money at whatever arbitrary rate it decides?”

        Perhaps because they can get away with it. The democratic control is so weak, just one vote every five years on a basket of issues, for one of two or three possible candidates often in safe seats, who probably will not do what they promise anyway. More likely perhaps to be “persuaded” by the offers of a job in government, a quango or the EU or well paid “consultancies” or travel opportunities. He who pays the piper often calls the tune – who cares about the voter very much?

        The voter has virtually no say and many voters are net recipients anyway.

        • Disaffected
          Posted March 21, 2012 at 9:02 am | Permalink

          Vote UKIP, to make them realise we want a change from the LibLabCon pact..

      • barrie
        Posted March 20, 2012 at 8:01 pm | Permalink

        Well said !! but nothing will change.

      • uanime5
        Posted March 20, 2012 at 9:00 pm | Permalink

        “The Government could focus its energy on the lazy welfare lifers not people who work.”

        The only solution for ‘welfare lifers’ is to create enough jobs for everyone. So far the Government is short by 2.7 million.

        “Create a society where it pays to work, and those genuinely unable to work be looked after with dignity.”

        The former won’t happen because businesses don’t want to pay their employees a living wage, the latter won’t happen because of people like you who keep condemning everyone who isn’t working.

        “Those able bodied people who are unwilling to work to be given an option to work or get nothing.”

        And these minimum wage jobs are going to come from where?

        • alan jutson
          Posted March 21, 2012 at 11:09 am | Permalink


          The jobs are going to come from where ?

          Perhaps self employment is part of the answer.

          But governments off all colours, by their actions do not like the self employed, because they have little control over them.

          Hence we had the barmy IR35, and Personal company fiascos.

          All stupid restrictive government action does, is drive some of them into the alternative economy.

          Its time for governments to support those who wish to try self employment.

          • uanime5
            Posted March 21, 2012 at 7:43 pm | Permalink

            The Government already have an entrepreneur scheme available to the unemployed who want to start their own business. This is mainly because the Government has no clue how to reduce unemployment so they’ll try anything.

        • libertarian
          Posted March 21, 2012 at 11:23 pm | Permalink

          Nope you are wrong as normal. There are more than enough jobs available and if your beloved labour party hadn’t of deliberately imported more than 1 million overseas workers there would be even more jobs available.

          Your stupid assertions are laughable. I employ more than 100 people and the lowest paid person in my organisation earns £14 per hour so once again you are talking tripe.

          uanime5 have you ever been in touch with the real world?

          • sm
            Posted March 22, 2012 at 12:43 pm | Permalink

            Thank-you for not exploiting people, i am sure you have prospective employee’s banging on your door.

      • Susan
        Posted March 21, 2012 at 10:14 am | Permalink


        I don’t know how I missed your post the first time round as it was one of the more interesting and radical posts.

        I am as angry as you are and desperately want to see great changes in how the UK is run by Government. However I have come to realise that the 13 years of a Labour Government turned the UK into a socialist Country. To now turn back the clock to when hard work paid and people acted with responsibility is a very difficult task even if the Coalition had the will to do so, which frankly they do not. You see Politicians can sleep soundly in their beds in the sure knowledge that people like you and me have no voice and will not take action against the Government in the way that Unions would. Therefore they have no incentive to listen to what we have to say. So they continue to flag wave about how wonderful the UK is and interfere all over the World in a desperate attempt to keep some kind of profile in a World that has moved on and left the UK behind.

        In time however, because proper action has not been taken to cut Government spending and tax continues to rise, the debt will force change but of course by then it will be much too late.

      • Bazman
        Posted March 21, 2012 at 8:18 pm | Permalink

        What about the millions who are almost enslaved to employment agencies with few rights, minimum wage, no pension or job security, being farmed out to multi billion pound companies and supermarkets harvesting multi billion pound profits. Substantive living with little pay, childcare and unsocial hours. These are the working poor. The constant bleating by the rich and their apologists like lifelogic about how hard done by the rich are and how the welfare state subsidises the lifestyle of these people and the unemployed is for the birds. I have met rich people and when I tell them I live like they do, but with less money you can see the fear in their eyes. That is what we are dealing with.

        • lifelogic
          Posted March 22, 2012 at 7:40 am | Permalink

          I have never said “how hard done by the rich are” they are clearly better off than the poor. I merely try to make the point that the UK and every most people in the UK (and the poor) will be far better off if the rich are taxed at lower % levels than currently and more tax will actually be raised this way in the long term.

          This as they will not leave and more will come with their money and they will then invest more, employ more & build up businesses.

          • Bazman
            Posted March 22, 2012 at 6:55 pm | Permalink

            What about the millions who are almost enslaved to employment agencies with few rights, minimum wage, no pension or job security? A point clearly lost on you.

          • Bazman
            Posted March 23, 2012 at 9:26 pm | Permalink

            A point clearly lost on fools. What we will have is a society based on Plutocracy and n money which in itself is power leading to a unequal and fractured society with civil unrest. Get Some./Ram it. We are still waiting for your replies. Lifelogic and unless you supply some. Should shut the 78906 up.

    • wab
      Posted March 20, 2012 at 10:34 am | Permalink

      “Indeed one tax payer paying say £1M a year who leave (as several I know have done so) mean the government needs about 1000 new average tax payers to replace him/her.”

      You have a curious idea of how much the average tax payer forks over in income tax. And if the rich bums do not want to pay income tax, good riddance to them.

      • lifelogic
        Posted March 20, 2012 at 5:07 pm | Permalink

        The average tax payer often uses state schools, tax credits and public services so the government make very little “profit” from an average tax payer. On someone paying £1M PA it is nearly all profit for the government to waste.

        • lifelogic
          Posted March 20, 2012 at 5:24 pm | Permalink

          In fact due to the governments total failure to control waste and expenditure they may well even make a loss on the average tax payer. So no amount of them would ever make up for the lost £1M.

          • Disaffected
            Posted March 21, 2012 at 9:03 am | Permalink

            Hear hear, Lifelogic.

        • uanime5
          Posted March 20, 2012 at 9:03 pm | Permalink

          Unless they use tax avoidance in which case the levels of profit are very low.

          Also unless these 1,000 people only earn £1,000 per year you’ll need far less of them to equal someone who earns £1M.

          • lifelogic
            Posted March 21, 2012 at 7:18 am | Permalink

            No the 1000 people earn an average wage, but only contribute about £1000 more in all taxes than they get back in tax credits, family allowance, education, health and other benefits or services – as is typical for an average tax payer. The state only makes a “profit” on them of about £1000. Indeed it is often less than this some figures even suggest a net loss on an average taxpayer as the state is so inefficient.

          • Disaffected
            Posted March 21, 2012 at 9:04 am | Permalink

            The Government need to understand it is their money they are talking about which they have earned. It is not the Government’s to steal what they please. Bring back the Sheriff of Nottingham he was more compassionate.

          • APL
            Posted March 21, 2012 at 10:22 am | Permalink

            uname5: “Unless they use tax avoidance .. ”

            To order your affairs in such a way to legally minimize the amount of tax you pay, is perfectly sensible.

            Tax Evasion is another matter altogether.

            Once again, if Osbourne had taken the chance to radically simplify the tax system. There would be less incentive to order your affairs minimize your tax burden.

            Essentially we still have the last Labour governments extremely complex tax system.

          • uanime5
            Posted March 21, 2012 at 7:44 pm | Permalink

            Reply to APL

            The wealthy will try to minimise their tax burden no matter how simple the tax laws are. The only incentive they need is that it will given them more money.

        • Bazman
          Posted March 22, 2012 at 6:57 pm | Permalink

          Waste being education, roads, and welfare? Tell us Lifelogic do us as the hired help deserve this or should we pay for it ourselves?

        • Bazman
          Posted March 23, 2012 at 9:29 pm | Permalink

          Profit? Such as? A stable and just society allowing the rich to prosper? Again we need a reply from fat, simple, grammar school people. Ram it

      • libertarian
        Posted March 21, 2012 at 11:27 pm | Permalink


        Its wilfully foolish people like you that cause poverty and hardship. The “rich bums” that you are happy to see the back of contribute 58% of ALL TAX REVENUE. So if they took your advice and left YOU would have cut government spending by half. So you are arguing for massive cuts ?

    • lojolondon
      Posted March 20, 2012 at 1:37 pm | Permalink

      Very good point. PLUS, a taxpayer who gives £1m pa will be on private medical, private education, have a massive lump sum so not draw a pension, will not claim the dole when he is between jobs, so the amount he gives is added to by the fact that he takes very little from the system.

      • lifelogic
        Posted March 20, 2012 at 4:57 pm | Permalink

        Indeed not much more than the dust bins, roads, defence and law and order. Cost perhaps £3000 PA why should he pay £1M PA for it?

        • Bob
          Posted March 20, 2012 at 7:23 pm | Permalink

          Roads are more than covered by road fund licence, fuel duty & vat, so a Bentley owner would be a major nett contributor.

          Defence is more or less a fixed cost, so a rich person leaving will not affect the cost.

          Law and order costs would not be affected, unless the person leaving was an habitual criminal.

          The Tories really need to get the message across to the public, and they should set up a rapid rebuttal team to prevent the media from disseminating misinformation on such matters.

        • sm
          Posted March 22, 2012 at 1:44 pm | Permalink

          Because of the benefits of the society. Example being a Limited company.

          The ‘rich’ person has through society made good. They presumably provide goods & services, which are purchased with presumably money. What is money? What is it for? How did arise? What backs it? Its a claim on the future labour. Crush labour and you crush your retirement plan.

          Ultimately imperfect markets produce excess rentier profits, presumably one could view higher taxes as an imperfection attempting to correct imperfections?

          Some argue its imperfections and luck rather than skill or skill in leveraging them. (Possible examples, private sector ability to create money, banking cartels, risk transference, land owners,speculation).

          The rich may take nothing directly from the state directly, but they do benefit from opportunities society or nature provide. Including its laws which tax labour, industry & production, rather than land and capital.

          Look at the real economic substance of the transaction behind the shell games & asset stripping. Look for when bonuses are liberated usually before spectacular losses and liquidations/bailouts via a Limited Liability company?

          In susbstance does anyone really live offshore disconnected from society? I note Robert Gaines Cooper eventually lost his case.

      • Bazman
        Posted March 23, 2012 at 9:31 pm | Permalink

        He is a massive scrounger from the middle class social security system.

    • Susan
      Posted March 20, 2012 at 2:01 pm | Permalink


      You do have a tendency to blame the banks for issues, when sometimes it is the Government which is at fault. The mixed messages to banks from Government is causing massive problems. On the one hand they expect them to hold more capital to meet regulation and on the other they expect them to lend. They cannot meet both demands.

      If I were the banks, in this instance, I would not engage in this new lending scheme to business. Indeed I understand that some have already refused. I am not in favour of propping up toxic businesses just for the sake of saying we have one extra business. This would be just the situation we had before and the tax payer always ends up the loser. From what I gather this would not help new start up businesses anyway.

      There seems to be this perception, in the UK, that anyone can come along to a bank with a poor business model and receive money, or that failing business should be given a helping hand. Lending to business can be very risky and the banks need to be extremely cautious as to who they are lending to.

      • outsider
        Posted March 20, 2012 at 2:35 pm | Permalink

        I cannot help feeling that if only someone – anyone – would lend Mr Lifelogic some money half the country’s problems would suddenly melt away .

        • lifelogic
          Posted March 20, 2012 at 5:15 pm | Permalink

          All offers gratefully received. More chance of borrowing, at sensible rates, from someone at a bus stop than from most banks at the moment.

        • Bazman
          Posted March 23, 2012 at 9:32 pm | Permalink

          Perfect Tort nonsense. would you not agree Mr Redwood? LOL!

      • JimF
        Posted March 20, 2012 at 3:53 pm | Permalink

        I agree.
        Surely the point is to get our commerce into a state where it is a viable lending proposition, via deregulation, and instead of little local schemes like Enterprise Zones, make the whole Country an EZ without bleeding comapnies through business rates, taxes on employment, employees propped up to the detriment of the self-employed/entrepreneur through all sorts of schemes for paying them for having babies, being sick on holiday, i.e. not working, and so on. Yes, until then you can’t blame the banks, except that they were actually lending to lifelogic on the back of 75% of his property empire in the first place, and they have done the dirty on the poor chap (and others).

        • lifelogic
          Posted March 20, 2012 at 5:34 pm | Permalink

          Do not work too much about me. But if one minute the bank lend 75% of value at .8% over base with a .5% fee one minute then want over half of it back the next – it is hardy a big surprise if building projects are delayed and builders laid off, building materials not ordered etc. ..

          And I am far better places than most to cope. It is not a matter of risk it is a real lack of supply. Due to tighter capital rules.

          • lifelogic
            Posted March 20, 2012 at 5:43 pm | Permalink

            “worry too much”

          • Bazman
            Posted March 23, 2012 at 9:34 pm | Permalink

            The work bit was right.

      • Mike Stallard
        Posted March 20, 2012 at 4:34 pm | Permalink

        “On 20 July 2011, the Commission adopted a legislative package to strengthen the regulation of the banking sector.”

      • lifelogic
        Posted March 20, 2012 at 5:11 pm | Permalink

        I do not really blame the banks I blame the the regulation of thebanks this has flipped from too relaxed to too tight. The are being forced not to lend. It has little to do with risk they are not lending even where there is no real risk at all and very good security. Many of the customers they are not lending too are a better risk than the banks themselves by some margin.

    • Barry
      Posted March 20, 2012 at 4:24 pm | Permalink

      According to the HMRC total receipts in 2010-11 were £447,159,000,000. Removing 9% for corporation tax (all other items including VAT are paid by the average tax payer) gives £406,914,690,000. If as you state the average tax payment is £1000 then we have 406,914,690 average tax payers in this country. Given that figure is for taxpayers our then out total population must now by approaching that of China. Now that’s growth (unless Mr Average is contributing somewhat more than £1000 ) !

      • lifelogic
        Posted March 20, 2012 at 5:36 pm | Permalink

        You have to look at the “profit” they make on the average tax payer which can even be negative after schooling, tax credits and the like are taken into account.

        • Barry
          Posted March 20, 2012 at 8:07 pm | Permalink

          I know of many who pay far less than the £1m tax but pay much more than £1000 tax. They send their children to private schools use private health care and are not eligible for any tax credits.

          What is the evidence to support the AVERAGE £1000 figure? The working population of the UK is around 37 million. Given the HMRC figures that would indicate an AVERAGE tax contribution of around £11000.

          How many people in the UK ACTUALLY pay £1m tax or more? If this were known it would be possible to establish the overall contribution they make to the State. The last Sunday Times would suggest that the seriously rich exercise measures to avoid such payments. Recent press has indicated that there is a common practice of the “rich” using tax loop holes and cited several well known who pay less than 2% tax.

          Given the complexity of our tax system, it could be that HMRC will always be incapable of properly taxing the rich. Experience has demonstrated that the “rich” appear to be smarter than and have little to fear from the HMRC. The easier HMRC pickings from the AVERAGE taxpayer means that they are the only important financial supporters of the State.

          Reply: We do know that the top 1% of Income Tax payers pay 27% of the total Income Tax, twice the proportion of the income they earn.

          • Barry
            Posted March 21, 2012 at 10:32 am | Permalink

            Quite possibly. However, I was trying to track down the evidence for the value to the nation of those rarities who ACTUALLY pay more than £1m tax and the idea that average tax payer only pays £1000 .

        • Bazman
          Posted March 23, 2012 at 9:35 pm | Permalink

          We are not the hired help you passive fool.

  2. Mike Stallard
    Posted March 20, 2012 at 6:48 am | Permalink

    Thank you for a very succinct and thorough summary of the budget prospects.

    Underneath all the coveting and all the posturing and all the sheer incompetence, it is nice to see someone has the vision to understand what is and – more important – what ought to be going on.

  3. Alan Radford
    Posted March 20, 2012 at 7:31 am | Permalink

    The government appears to be frightened of stimulating growth too much, in case in gets out hand. Don’t worry George, it won’t – not with you lot at the helm.

    • lifelogic
      Posted March 20, 2012 at 8:41 am | Permalink

      They do not need to stimulate growth just stop the state sector from suffocating and killing it with over taxation, over regulation, lack of banking, hugely over expensive energy and an anti-business government vision from Cameron.

  4. Bob
    Posted March 20, 2012 at 8:15 am | Permalink

    Are we still expected to believe that the Bank of England has independence in setting interest rates?

    • lifelogic
      Posted March 20, 2012 at 1:14 pm | Permalink

      No does anyone? Released today:-

      Consumer Prices Index (CPI) inflation fell to 3.4% in February, down from 3.6% in January. Retail Prices Index (RPI) inflation – including mortgage interest payments – fell to 3.7% from 3.9%. inflation.

      Interest on bank deposits circa 2% less 50% income tax!

  5. REPay
    Posted March 20, 2012 at 8:17 am | Permalink

    “The gallery that likes to soak the rich and successful taxes even if they do bring in less”…It seems a shame that the government never attacks the complacent “if only we spent more mindset” that seems in eradicable in our country. A really good forensic analysis of where all the Brown money went would be revealing and politically useful. What new infrastructure did we get except for some badly financed shiny schools and hospitals that will be unpaid for until generations? The money seemed to go on wages and unfunded pensions for the Labour Party voter base – i.e. the public sector and state dependents. Having read an article I took the British Citizenship test Labour introduced to see if it was really mainly about state benefits entitlement, equality legislation and it was…The message needs to be loud and clear that untramelled public spending and borrowing is robbing Britain of its future. Rather than playing to the Labour mindset, the government should use the language of sustainability regarding public finances. You are one of the few people that refer to the red book – why? We are in danger of the Labour period being cast as a Golden Era…much as the 80’s are now cast as a period of deprivation and strife when they were mainly about restructuring. The narrative is running away from the Tories despite having a PR professional at the helm.

    • Bob
      Posted March 20, 2012 at 12:18 pm | Permalink

      “The narrative is running away from the Tories despite having a PR professional at the helm.”

      Very good point, Labour run rings around the Tories when it comes to setting the narrative.

    • uanime5
      Posted March 20, 2012 at 9:11 pm | Permalink

      “We are in danger of the Labour period being cast as a Golden Era…much as the 80′s are now cast as a period of deprivation and strife when they were mainly about restructuring. ”

      For most people they were about deprivation and strife as unemployment and homelessness massively increased. The same is occurring with the current Conservative government.

      It is the average person who decided what the decade was about, not Government. If the Government’s actions do not benefit the people then they shouldn’t be surprised if the people condemn the Government.

      • Disaffected
        Posted March 21, 2012 at 9:07 am | Permalink

        The IMF were going to take over because of the financial mess from the last Labour Government. Debt had to be paid back than as it does now. Socialist babble once more.

        • uanime5
          Posted March 21, 2012 at 7:40 pm | Permalink

          If debt needs to be paid back then why is the Coalition borrowing more money than Labour?

  6. Richard1
    Posted March 20, 2012 at 8:24 am | Permalink

    A few suggestions: he should announce the top rate of tax to go to 45%, then 40% then 35% in 3 years, conditional on confirmation from the OBR / HMRC that the moves will raise more tax. He should up the tax-free allowance to £10,000 on the same timetable, also the Inheritance Tax allowance to £1m. He could limit tax relief on pensions to 20% and limit CGT exemption on 1st homes to £1m. Corp Tax and CGT need to come down. Announcing it in steps should shoot Labour’s fox (to use a metaphor they’d appreciate).

    One question: I don’t see its a good idea to ease up on capital adequacy requirements for banks until we have a proper resolution regime for insolvent banks. As long as the taxpayer is on the hook for another Brown-style bailout we need to force them to be as strongly capitalised as possible don’t we?

    Reply: Banks do now have to file living wills. As you know, I am against taxpayer share bailouts of banks.

    • lifelogic
      Posted March 20, 2012 at 12:23 pm | Permalink

      Indeed he should set out some tax reductions in advance to give a positive vision and actually stick to them for once. Also his £1M IHT promise was that cast iron?

      But to do this he need to cut spending and waste. You cannot go on wasting about 50% of what the country earns often on totally pointless (or worse actually destructive) government expenditure and still expect the private sector to grow very much. They simply cannot compete with this burden on them especially when added to the huge over regulation and silly expensive energy policies.

    • Mark
      Posted March 20, 2012 at 1:07 pm | Permalink

      So the British owner of a property that has become worth £1m due to the property bubble gets to pay CGT, while the foreign purchaser will pay nothing? At the top end of the property market, buyers are predominantly foreign.

      • alan jutson
        Posted March 20, 2012 at 4:57 pm | Permalink


        Forget CGT on a first home, its simply not sensible.

        No one will ever trade down out of choice, as there would be no point in paying CGT on a gain of say a home of 30 years, and then pay stamp duty to purchase a smaller home.

        Capital would be decimated twice.

        Then again on death. !!!!!!

        Thats after paying tax on earnings to purchase a home in the first place.

        • Caterpillar
          Posted March 20, 2012 at 9:58 pm | Permalink

          alan jutson

          I don’t understand the insensibility of CGT on 1st home.

          (i) If it acts to dampen bubbles, then that presumably indicates resources have been invested elsewhere.
          (ii) Can’t capital losses be carried forward to future years? (The potential of smoothing out the effect of negative equity).
          (iii) Some other countries use tapered relief, so CGT could taper to zero in your 30 year example.
          (iv) Hopefully stamp duty could be dumped.

          • alan jutson
            Posted March 21, 2012 at 11:27 am | Permalink


            But we do not have tapering relief at the moment !.

            I built my own home 30 years ago at a cost of about £65,000, it is the only home we own, we have raised a family in it, and it is now worth many hundreds of thousands.

            Under the suggested position of taxing the first home with CGT, I would not have enough left to purchase a three bedroom semi in my present location, if I had to pay tax on the gain over 30 years.

            Then of course I would have to pay solicitors, estate agents, and stamp duty on the new purchase as well.

            Unlike many, we purchased/built our home for use as a home, not as a means of earning tax free capital by constantly doing up and moving every year.

            We have only ever owned two properties in our lives, one when we first got married 40 years ago, the second we still live in.

            Why should this government or any other, have a share of our home ?

            They do not help maintain it, improve it, indeed I pay taxes already to do exactly that, as well as Council Tax based on its value, not on my use of public services.

          • Caterpillar
            Posted March 22, 2012 at 9:51 pm | Permalink

            alan jutson

            The point about tapering is that if we did have CGT on first homes it could be tapered. (The alternative to a taper would be a Vincent Cable-esque tax). I do think stamp duty should go.

            I agree totally with the point, why should government take a share of anything through taxation, and think the size and responsibilities of government is no longer substantially debated by the 3 main parties. Nonetheless if one decides on some role for govt whatever its size, then if one believes in taxing not creating money, tax needs to be raised. Both consumption and wealth taxes raise revenue well, contribute to integrity of the tax system and could be (if one believes in it) more targeted in countercycle demand ‘control’.

  7. Andy Man
    Posted March 20, 2012 at 8:24 am | Permalink

    This is an appalling list of socialist policies dressed up as Conservative policy. The way to cut a deficit is spend less. The government should restrict it’s spending on absolute essentials and leave the productive private sector to fill the gaps which would happen. Instead we get an endless flow of interfering, ineffective and massively expensive policies that have the opposite effect to that desired. As long as we carry on like this economic growth will be illusionary.

    • waramess
      Posted March 20, 2012 at 10:15 am | Permalink

      Andy Man. Hits the nail firmly on the head. After taxing the private sector more than fifty percent of their product still the politicians of all colours seek to tax further in order to fulfill their spending plans. The great wonder of it all is they still see this as entirely reasonable.

      Even John Redwood continues to look at ways in which tax revenues might be increased when it must be clear by now that any increase in revenues, however obtained will seriously inhibit growth prospects.

      These politicians no longer seem capable of confronting the continued growth of the overblown state sector nor to understand the great harm this causes, and so long as the situation continues, we will continue to see the economy stagnate.

    • Adam5x5
      Posted March 20, 2012 at 1:28 pm | Permalink


      The government should only be spending to fulfil the duties that only a state can provide (defence, law & order, FCO, taxation to support such). All the others can be, should be, and would be better being provided privately.

  8. Electro-Kevin
    Posted March 20, 2012 at 8:26 am | Permalink

    “To me the art of taxing the rich is to tax them in a way which makes them stay and pay”

    Being a Conservative by instinct I agree entirely.

    However, if we are to remain an economy of uncontrolled immigration, displacing our own workers with low skilled labour, then we are going to have to remain a high tax one too.

    Unless, of course, the plan is to drive the working class into ever declining standards of living.

    If this is the case ought the policy not be declared in election manifestos ?

    We are forever being told that such immigration is a boon for wealth creators and that this is why we are doing it.

    Therefore isn’t that a good reason why they should pay ?

    • A Different Simon
      Posted March 20, 2012 at 9:38 am | Permalink

      “Unless, of course, the plan is to drive the working class into ever declining standards of living.”

      For this Saturday’s elections in Queensland , Campbell Newman has as his main policy measures to bring down the cost of living .

      This is what politicians in the UK need to do .

      How about some laws that prioritise housing for British Citizens over immigrants and foreign buyers ?

      House prices and rental rates are far too high .

      Why is the Govt favouring land owners and house owners over those with housing difficulties ?

      Wouldn’t it be in everyones LONG TERM interests to try and reduce housing to half it’s current price ?

      • Electro-Kevin
        Posted March 20, 2012 at 4:54 pm | Permalink

        House prices coming down = banks screwed

        • waramess
          Posted March 20, 2012 at 5:11 pm | Permalink

          House prices going up = tax payers and savers screwed

          • uanime5
            Posted March 20, 2012 at 9:17 pm | Permalink

            House prices going up = housing benefits go up

        • Caterpillar
          Posted March 20, 2012 at 10:16 pm | Permalink

          house prices down => mark to market / model may be procyclical

    • Susan
      Posted March 20, 2012 at 11:29 am | Permalink


      I agree that immigration is too high, however is it right to blame immigrants who are prepared to work when many British people will not, for the problems in the UK. If we were speaking of those who arrive in this Country and do not intend to work that would be another matter.

      Many employers take on immigrant workers because they are more skilled, enthusiastic, good time keepers and are actually prepared to take work. This is different to the attitude of many British people due to years of poor education and welfare dependency.

      Britain is a declining nation which needs to compete in a Global economy, it will therefore be necessary for the British people to accept a lower standard of living in future years, so I would suggest we need to get used to that idea right now.

      I cannot think of a single reason why any business would operate out of Britian or for wealth creators to come here in the first place. With its high taxation, unskilled work force, poor education and services, heavy regulation and the ever present anti business attitude of the British, it does not seem a very attractive proposition. As we have very little to encourage investment in the UK, I would suggest lower taxation for high earners would at least be a good place to start.

      • Electro-Kevin
        Posted March 20, 2012 at 4:19 pm | Permalink

        I don’t blame law-abiding immigrants for anything at all.

        If we’re not going to get our own people up to scratch then we have to import people who are.

        This takes a lot of tax.

        What’s to disagree with in my statement ?

        (I am neither a xenophobe nor a racist but understand that I could be taken as such. I speak in defence of all Britains regardless of colour who were here pre Maastricht)

        • Electro-Kevin
          Posted March 20, 2012 at 4:21 pm | Permalink

          PS, We also import a lot of people who are not up to scratch too as it happens.

          Why not a proper points system ?

        • Susan
          Posted March 20, 2012 at 8:22 pm | Permalink


          It never entered my head that you were a xenophobe nor a racist, I do not make such judgements.

          Immingration is a problem in the UK of that there is no doubt. It certainly puts pressure on all the services and housing as the population increases. That is why the only green issue worth anything is finding a way to curtail the population boom. The growth in the UK population has probably ensured that we will never see full employment again.

          However, the people to blame are not the immigrants nor the employers who take on those immigrants who are prepared to work. The Labour party are entirely to blame for allowing immigrants to come in during the boom years instead of forcing those already on benefits to work. This was done for purely political reasons to keep people living on the state voting for them. This ensured that should there be a recession and people came out of work, there would be more people added to those already taking benefits and thus more cost for the state. It is also true to say that some British people do not have the skills or the will to take on the jobs that some immigrants come here to do as I have already mentioned.

          As to those immigrants who enter the Country with no intention of working, this could be solved in no time if our over generous benefits system were addressed. There would be no reason for them to come to Britain to live off the state.

          I have no objection to a robust points system, but no recent Government in the UK seems able to implement it properly.

      • Graham
        Posted March 20, 2012 at 5:03 pm | Permalink

        We need to take into account the full cost of any immigrant. The employer may be fine with a lower wage cost but the social costs of housing, congestion, water shortage etc are all borne by the rest of us – whether we like it or not.

        It equalise the decision making a levy should be paid by employers who employ predominantly immigrants since at the moment the employer is not paying the full economic cost.

      • uanime5
        Posted March 20, 2012 at 9:17 pm | Permalink

        “Many employers take on immigrant workers because they are more skilled, enthusiastic, good time keepers and are actually prepared to take work.”

        British workers will never be able to get any of these skills if no one hires them. An employer should be prepared to train their staff, not expect them to be fully trained. Until this attitude changes expect generations of people to remain on welfare.

        • Susan
          Posted March 21, 2012 at 11:00 am | Permalink


          Employers are running a business not a school. It is the job of state education to make pupils prepared for work. Even the basic skill of reading and writing to reasonable level would be appreciated. This is not the case at the moment. How on earth do you think young people of past generations were prepared for work?

          Education should be tailored to meet the needs of the economy. Instead we get this plethora of useless degrees that are of no use to anyone let alone an employer, who is left wondering how they reached this standard when they cannot even write a decent letter of introduction.

          Another question you should ask yourself is even in the boom years how come immigrants always took jobs yet British people still remained on benefits. Simple answer they did not want to work.

          In the UK some highly paid jobs in large companies are left unfilled until someone with the necessary skills can be recruited from another Country. This is the end result of years of poor education in this Country.

          Stop blaming others, such as immigrants and employers, put the blame where it belongs on poor parenting, low educations standards and the benefits culture.

          Gosh no one takes responsibility for anything in this Country anymore it is always someone elses fault.

        • Mark
          Posted March 21, 2012 at 10:32 pm | Permalink

          You never had to be on time throughout your school years? That’s the attitude that needs changing, otherwise you’ll find that there isn’t the revenue to pay the welfare (which is where we really are already).

      • sm
        Posted March 20, 2012 at 9:25 pm | Permalink

        Immigration – 1) tends to keep wages down 2) increases demand for housing 3) increases GDP. 4) increases demand for other tax funded services. 5) i doubt most immigrants pay enough tax to fund 4).

        Too large immigration just swamps the existing infrastructure built up over many years, which cant expand quick enough even if the money appeared.

    • Electro-Kevin
      Posted March 20, 2012 at 11:39 am | Permalink

      33% of tax take goes on welfare. This figure includes state pensions. Only those pensions for which appropriate NI contributions have been made are correctly called ‘pensions’ in my view – those who have not contributed to NI should still be classified as benefits recipients, even in old age.

      In fact some of those NI contributors who were paid entirely from the State pot working in the welfare system might be hard to classify too if definitions were to be pushed hard enough.

      • A Different Simon
        Posted March 20, 2012 at 2:20 pm | Permalink

        Electro-Kevin ,

        It would be incorrect to categorise the state pension received by someone who has paid for it with a proportion of their N.I. contributions as a “benefit” .

        I really object to this abuse of NI which was supposed to be a hypothecated tax into general taxation so cannot agree with absorbing it into income tax .

        I also wonder whether these statements will perpetuate the falsehood that employers N.I. contributions are anything but a tax on the employee ?

        The statement should definitely include ALL employment taxes and that means employers NI as well .

        • Electro-Kevin
          Posted March 20, 2012 at 4:47 pm | Permalink

          I fail to see what there is to disagree with in my first paragraph.

          The second paragraph pertains to someone tasked with a role such as distributing welfare payments (as an example.) Doubtless they’ve worked hard all their lives. However, their NI contributions/pensions are still part of the welfare cycle.

          Of course they deserve a pension. What I am saying, however, is that there may be a case for their pensions showing up on the books in the same place as welfare when the accounting is done.

    • lifelogic
      Posted March 20, 2012 at 12:26 pm | Permalink

      “We are forever being told that such immigration is a boon for wealth creators and that this is why we are doing it.”

      It can perhaps be good for the economy in the long term. In the short term it make everyone poorer, lowers pay rates, reduces taxes, increases the black economy and diverts fund overseas to families left at home.

      • Electro-Kevin
        Posted March 20, 2012 at 5:03 pm | Permalink

        ‘Perhaps …’

        One thing’s for sure and that’s that we can be unsure.

        We have absolutely no idea how many of us there will be. We have no idea WHO we will be.

        Not even the great John Redwood can speak with authority about anything with this unprecedented prospect, I’m afraid.

      • Bazman
        Posted March 23, 2012 at 9:38 pm | Permalink

        Cheap wages for businesses though.

    • sm
      Posted March 20, 2012 at 9:08 pm | Permalink

      Part of the solution must be a land tax which could be introduced to reduce employment taxes.

  9. Brian Tomkinson
    Posted March 20, 2012 at 9:16 am | Permalink

    Perhaps if Osborne was more interested in prudently running the economy and spent less time on his beloved party politics the economy would heading for a better place. I read from Fraser Nelson that someone called Rupert Harrison, his chief economic adviser, is the man who has done most to shape the budget. Perhaps this unelected individual would have a word in the ear of his boss and tell him that they may be slowly reducing the deficit but not the debt as Osborne stated yet again on the Marr programme last Sunday. We shall await tomorrow’s budget with no feeling of optimistic anticipation but expecting further evidence of a wasted opportunity.

  10. oldtimer
    Posted March 20, 2012 at 9:48 am | Permalink

    This morning Mr Osborne appeared in a recorded TV clip claiming that the deficit and debt were under control. This was news to me. Do you believe that it is under control?

    • lifelogic
      Posted March 20, 2012 at 5:41 pm | Permalink

      Well controlled acceleration perhaps?

  11. Caterpillar
    Posted March 20, 2012 at 9:49 am | Permalink

    1) “We know they are working on away to tap pension fund money to finance better infrastructure.”

    Can’t the Osborne 100 year bond strictly be an infrastructure & green bond (sorry to repeat but a social discount like rate on social like investment, with a slight help to greenwashing of pension funds)?

    2) “cheaper and easier simply to relax the capital requirements of the main banks. After all, we are now all meant to believe in counter cyclical regulation”

    Is this the time to start counter cyclical policy? It might be helpful, but presumably has a large downside risk, countercyclical policy should have been started during (that is to stabilise) the boom years. I know Brown & Blair didn’t believe in boom & bust, but how risky it to do now, and how easy would it be to stop?

    3) “announced a mortgage loan extension scheme”

    The property bubble hasn’t yet been deflated (part of the QE/ZIRP bulge) so counter-cyclical here presumably needs to first deflate the bubble before the Govt’s patronage for the construction industry. E.g. dynamic LTV would still demand large deposit for a residential property mortage because the bubble hasn’t been burst; tax payer underwritng for dynamic LTV, or such, first requires the bubble burst.

    3) “poised to announce help for lending to small and medium sized enterprises”

    Why not just simplify employing people? Dump employers’ NI even if it has to be raised elsewhere.

    4) “To me the art of taxing the rich is to tax them in a way which makes them stay and pay.”

    Assets and public works’ projects, at least in ancient Greece (not just the Business Secretary) –

    {And my usual comment – inflation slows growth! It might be one thing for the Chancellor to forget the rebalancing aim in a postcode payscale policy, but to forget the damage of inflation in a growth policy is … well another thing.}

  12. alan jutson
    Posted March 20, 2012 at 10:01 am | Permalink

    I see the government has an idea to send us all a list of where all of our taxes are spent (broken down list of percentages).

    This at least seems like a reasonable idea, as long as it comes out with some other mail (no point in paying twice for postage) perhaps it could also be put on a web site.

    I understand that it will show that 35% of all tax collected goes on welfare.
    If true, this just shows how much the state has control over millions of potential voters lives, and perhaps gives the reason why so many continue to vote for the Labour Party, no matter how badly they perform.

    John, does the welfare payments total include the state pension, if so how much of that 35% is the basic State pension.

    Reply: I think it must include the basic state pension. In 2010 the state pension was £70 bn out of £200 billion of benefits and tax credits.

    • alan jutson
      Posted March 20, 2012 at 10:05 am | Permalink

      If the government already has the spending list refered to above, then surely it is not difficult to see where expenditure could be cut to best effect, so that taxes could be reduced.

      When will the government learn that you cannot tell Banks to hoard more capital, to increase reserves, but lend more, all at the same time.

      • Brian Tomkinson
        Posted March 20, 2012 at 5:23 pm | Permalink

        But the government doesn’t want to stop spending our money; they are far more interested in increasing our taxes.

        • alan jutson
          Posted March 20, 2012 at 6:07 pm | Permalink


          Exactly, thats the problem.

    • lifelogic
      Posted March 20, 2012 at 7:37 pm | Permalink

      Seems like a waste of trees, money and taxes to me. Anyone who wants to know where the government wastes our money can find out very easily already. I get local council tax ones from the council all the time – where I hold properties they go straight in the bin I must have had hundreds of them over the years.

      • alan jutson
        Posted March 21, 2012 at 11:32 am | Permalink


        I would agree to a degree, but it seems to me that only those interested in where their money is spent would take the trouble to find out.
        Surely its better to inform all of the population that the HNS, POLICE, and EDUCATION are not really free, then perhaps you can argue the point of savings on both this and other aspects of government waste.

        Very few people realise exactly how much is spent or wasted, and this in my view is a reasonable start at educating them.

  13. Mike Fowle
    Posted March 20, 2012 at 10:15 am | Permalink

    I was interested to see proposals for tax payers to receive details of how their taxes are spent is said to be included in the budget. This seems to be Ben Gummer’s 10 minute rule bill he announced recently. As usual, the press are attributing all sorts of nefarious motives for such a measure but it seems only sensible to me if you want an informed debate on how our taxes are spent and how much should be raised in taxation.

    • Bob
      Posted March 20, 2012 at 9:03 pm | Permalink

      All sales receipts should show duty and vat paid as separate items.
      Especially important for fuel duty/vat.

  14. wab
    Posted March 20, 2012 at 10:30 am | Permalink

    The 50% tax rate has not been in place long enough to know what its real impact is, and in particular rich people would have pushed some income through before the tax rate came in, because they knew the tax rate was coming in, but that was a one-off. Channel 4 News pointed this out last night (ok, with only one explicit example, but the wider principle is obvious).

    “The art of taxing the rich is to tax them in a way which makes them stay and pay.” It is pretty obvious from the avoidance of stamp duty on house purchases, that the rich are never willing to pay taxes that everyone else has to pay, and they can afford accountants to make sure they do not.

    • Bob
      Posted March 20, 2012 at 9:17 pm | Permalink

      The British suffer from a real envy problem, and the 50% rate is just playing to their feelings of jealously.

      It’s not about raising revenue for the good of the country it’s about punishing wealthy people to make the less well off and less well educated feel better, and of course it attracts their votes.

      Uneducated and unproductive welfare dependent people have the same voting power as highly educated and productive people.

      Before the lefties start whining, I exclude the genuinely sick and disabled from the above comment.

      Wealthy people will do what they can to protect their wealth from confiscation, because if they didn’t, they wouldn’t stay wealthy for very long. Ask Ken Livingstone.

  15. Dan H.
    Posted March 20, 2012 at 11:32 am | Permalink

    First of all, I would say that someone in Government has played an absolute blinder by managing to convince the chattering classes that government actually has a right to extort tax from the citizens of this country come what may, and that there is a just and correct level for this tax. Unfortunately these self-same spinners seem to be believing their own spin, a cardinal error.

    The top 10% of earners pay 55% of all income tax at present. If we carry on trying to soak these virtuous few for yet more and more money, though, they’ll get ever-cleverer in evading the grasp of HMRC, up to and including simply leaving the country. That happened last time we tried this trick; it happens in the USA every time a state tries the same tactics. The Laffer Curve is one of the very few economic theories which has actually been exhaustively tested in the real world.

    This being the case, what we need to do is get smart regarding tax and benefits. As things stand, we do not need a huge labouring class; manual labour is expensive due to the stupidity of the minimum wage, so automation is common in UK factories, robots being cheaper. So, if we don’t need legions of poor grunts, why foster their creation? Child benefit needs amending to, say, only the first two kids of a family (or if one wishes to be evil, the first two live births).

    Taxing poor people only to feed their taxes back as benefits is inefficient; the tax-free allowance needs increasing, and benefits ought to be all tax-exempt to reduce the numbers of civil servants needed. Income tax and National Insurance need combining (they are the same thing), and plans for a Flat Tax ought to be laid in. A series of Government Information Films explaining how 30% of £100 000 is more than 30% of £10 000 also needs to be made, to head off the strident jealousy-led assertion that the rich should pay more tax; they do already and would under a flat tax.

    • lifelogic
      Posted March 20, 2012 at 7:44 pm | Permalink

      Indeed a flat tax is already progressive the rich pay perhaps £1M for the few public services they actually use (perhaps worth £3000 PA). The poor pay nothing for the usually far more services that they use.

      • Bazman
        Posted March 23, 2012 at 9:41 pm | Permalink

        Not expensive enough for the rich who if they do not like it, can ‘choose’ to make their money abroad if they can.

    • uanime5
      Posted March 20, 2012 at 9:35 pm | Permalink

      “The Laffer Curve is one of the very few economic theories which has actually been exhaustively tested in the real world.”

      The Laffer Curve hasn’t been tested at all because there’s no way to test it in real life due to the huge number if variable affecting tax revenues. It can’t even be used to calculate the optimum rate of tax because it’s so vague.

      “A series of Government Information Films explaining how 30% of £100 000 is more than 30% of £10 000 also needs to be made, to head off the strident jealousy-led assertion that the rich should pay more tax; they do already and would under a flat tax.”

      This won’t work because 70% of £100,000 has a greater purchasing power than 70% of £10,000. Why would anyone be happy to earn a pittance while their employers to give themselves multi million pound salaries?

      • Caterpillar
        Posted March 20, 2012 at 10:32 pm | Permalink


        There’s been at least three decades of research on the Laffer curve. It has even separated out the effects of avoidance and economic activity. The economic activity effect has also been considered in terms of actual reduced activity vs. white-to-black market switch.

        Anyway, UK still seems slightly to the left, but close to the slippery slope. Given the uncertainties you mention possibly too close, but not clearly over. The problem the UK may be seeing at the moment is the avoidance effect, not the economic activity effect. The opportuntiy to avoid is enhanced by pre-announcing increases and decreases in rate.

        Overall I favour lower tax, smaller Govt and more economic activity. Nonetheless from purely a revenue raising point of view the Laffer research (which does exist) would not at the moment suggest reduction in taxation – though it is a close run thing.

  16. lifelogic
    Posted March 20, 2012 at 1:17 pm | Permalink

    Released today:-

    Consumer Prices Index (CPI) inflation fell to 3.4% in February, down from 3.6% in January. Retail Prices Index (RPI) inflation – including mortgage interest payments – fell to 3.7% from 3.9%. inflation.

    Interest on bank deposits circa 2% (if they can repay you) less 50% income tax sounds like a great investment!

    • Bazman
      Posted March 23, 2012 at 9:42 pm | Permalink

      We b need some answer from fools like you. Not numbers.

  17. RDM
    Posted March 20, 2012 at 1:21 pm | Permalink

    Totally agree Andy Man!

    But with one addition. Banking and access to finance for a startup. People on the Dole need access to startup capital (loans), now! Give them a chance to take whatever opportunity life affords them! Getting cash to the bottom will allow anyone, who puts the work in, to build a life for themselves, but it is also the quickest way to get the Business Cycle working for us!

    For the Treasury, BIS Civil Servants, Elitist Politicians etc …, anyone blocking the British People from gaining access to the British Banking system. You are talking Crap!

    Unless you get Businesses to spend enough of their cash within GB, not look for better return overseas?, then the rest of us have to be allowed to carrier on, and build a life for ourselves! We have a Debt burden that will take a fews more years to pay down.

    “The World of Work” does not work, if there is not the work available!!!

    We must be allowed to take what ever opportunity life affords us! There are so many startup opportunities available, to compete locally, Technology, etc … that it is highly embarrassing to a country like ours to be in this state!

    With such a short Political cycle; It is obvious that the politicians are getting desperate, if they start talking about long term infrastructure projects as the main source of growth? Well, you have a problem; Infrastructure spending can only support growth, not create it! Growth comes from the bottom up, from competition, from new ideas, etc…



    • outsider
      Posted March 20, 2012 at 3:24 pm | Permalink

      Broadly agree but banks should not be in the business of providing risk capital for start-ups. Any loans should be fully covered by security with a margin on top. People should use their own funds, raise money from friends, family or angels or even flog some stuff on e-Bay to raise some capital, thereby showing the initiative that will be needed if they are to succeed.

      • lifelogic
        Posted March 20, 2012 at 7:45 pm | Permalink

        Indeed but you cannot even get not risk well secured capital at the moment.

        • Bazman
          Posted March 23, 2012 at 9:43 pm | Permalink

          Corporations have billions to invest so why is this?

      • uanime5
        Posted March 20, 2012 at 9:37 pm | Permalink

        Why risk your own money when you can do nothing which is risk free? If you want people to take risks you have to minimise the detriments in order to overcome initial inertia.

    • uanime5
      Posted March 20, 2012 at 9:43 pm | Permalink

      The Government already has a scheme for giving money to entrepreneurs. Most unemployed people don’t take advantage of it because they lack the skills to run their own business and will lose many of their benefits. So it’s simple too high risk for most people.

      What you’re saying is contradictory. If the world of work isn’t providing enough work then this is because there isn’t enough work available, so if you start a new company it will fail because there won’t be enough work to sustain it. New businesses are most successful when the economy is rapidly growing, not when it’s declining or sluggish.

  18. Mark
    Posted March 20, 2012 at 1:24 pm | Permalink

    I note that David Miles is once again trying to stoke up the property bubble like an addict in search of another high.

    With these ludicrous ideas we’ll never get the banks sorted out. He develops a property derivative without stopping for a moment to consider the kind of herd behaviour it would induce that would make bubbles even worse than they are already.

    Banks need to wind down their dependence on mortgages. It’s crowding out lending to the real economy.

  19. Max Dunbar
    Posted March 20, 2012 at 1:30 pm | Permalink

    “The art of taxing the rich” sounds a bit like “fairness” rhetoric. Who are the “rich”? Are they the bourgeois exploiters of the toiling masses? What is “fairness”? Who decides?

    • Bob
      Posted March 20, 2012 at 9:31 pm | Permalink

      People like Ken Livingstone?

  20. Alan Wheatley
    Posted March 20, 2012 at 1:50 pm | Permalink

    Re mortgages, where do building societies feature in the governments plans?

    I read in a building society Summary Director’s Report, received today, “We have remained profitable throughout one of the longest and deepest financial crises ever known and we expect the positive trend to continue …”. Seems to me we have ended up with too much banking and not enough mutuals.

    Reply: the government likes mutuals and has called for more of them. Not all, of course, were financially strong and some had to be absorbed by others.

  21. Alan Wheatley
    Posted March 20, 2012 at 2:05 pm | Permalink

    “Will the Chancellor go for more revenue, or play to the gallery that likes soak the rich and successful taxes even if they do bring in less?”

    This juxtaposition of options illustrates the malaise that undermines our politics. Why is it that a logical argument sustained by evidence is presumed not to find favour with “the gallery”? Are “the gallery” considered so stupid or so intrinsically biased as to be beyond reason?

    It seems to me that politicians in general and the government in particular should argue the case in which they believe. This is the essence of politics. The right case should be a popular case. There seems to be some inherent resignation that making the case isn’t worth the effort. Or is it a lack of confidence in the rightness of the case or an inability to present it successfully?

  22. Robert Taggart
    Posted March 20, 2012 at 2:22 pm | Permalink

    One recalls fondly ! the Lawson budgets of the late 80’s.
    Did he not have a ‘golden rule’ ? – to abolish at least one tax every budget ? This may have been fiscally neutral – other taxes rates increased or their thresholds held – but, surely, the less the bureaucracy the less the cost of collection ?
    Time to abolish National Insurance – increase income tax instead – how would a thirty pence rate work ?

    • Mike Fowle
      Posted March 20, 2012 at 4:38 pm | Permalink

      Agree about Nigel Lawson. I believe his three rules of taxation were: make them simple, make them low, make them universal. If only….(Tax needn’t be taxing says Gordon.)

  23. outsider
    Posted March 20, 2012 at 3:46 pm | Permalink

    Dear Mr Redwood,
    You rightly deprecate saddling future generations with liabilities. So will you please expose and oppose what is reported to be happening to the Royal Mail pension funds. The Government is reported to be taking on all the liabilities for pensions earned up to now as part of the Whitehall plan to sell the Royal Mail to a foreign monopoly* at any cost. In exchange it will receive the assets that currently fund these liabilities ( though there is a shortfall due to QE and low interest rates). These assets, which earn far more than the cost of government borrowing, will then be sold to dress up the current deficit, leaving future generations of taxpayers to meet all the pension liabilities.
    This depressing chicanery reminds me of a similar deal by the French government to cut its deficit for one year so that it could fraudulently meet the Maastricht tests for joining the euro.
    It is also a chilling reminder of a similarly cynical deal by the last Government. It took on (or made taxpayers take on) the nuclear decommissioning liabilities of British Energy in exchange for a controlling stake, which it then sold to the French state company EDF. The proceeds disappeared into the pot, leaving future taxpayers to meet the bill with no corresponding assets to pay it.
    Repeating this exercise would be bring nothing but shame on your Government.

    *They always end up as a monopoly. eg America’s UPS is currently bidding for TNT which, as memory serves, owns the Dutch post office and may well be the favoured buyer of Royal Mail.

    Reply: As I understand it the state effectively stands behind the Royal Mail Pension fund anyway, as it owns the Corporation.

    • outsider
      Posted March 20, 2012 at 5:26 pm | Permalink

      Reply to reply. It is fine for the Government to act as guarantor to a funded pension scheme ( as many employers used to do). It would be quite different to fritter away the scheme assets to pay for current spending and leave future taxpayers to fund the whole of the pensions payable up to 60 years ahead.

    • Brian Tomkinson
      Posted March 20, 2012 at 5:40 pm | Permalink

      I very much share outsider’s concerns. If the government utilise the Royal Mail pension fund’s assets to help reduce the budget deficit ( not paying off our debt but merely reducing the rate at which they are increasing it ) they will be burdening future taxpayers with the total liabilities of those pension scheme members. In other words expecting our children and grandchildren to pay – something I continually hear ministers saying is unacceptable. If, as you, say the state currently stands behind this pension fund then it is only liable for the pension fund shortfall not the total liabilities. Are you prepared to allow your government to squander pension fund members’ savings and set up a Ponzi scheme which would be illegal, if it were anyone but the government doing it, for political expediency?

      Reply: The aim as I understand it is to allow sale of the Royal Mail, as no private buyer is likely to want the pension fund and its net liabilities, which are already an effective debt of the state. I read that the assets will b e acounted as a reduction in the deficit, but of course they will also need to increase the total liability figure for state funded pensions. As I see it it confirms the £4 billion deficit the taxpayer already stands behind, if you net the long term extra liability off from the short term asset injection. The government is not planning to spend the £37 billion of assets. Their sale will I assume take place as an alternative to borrowing more.

      • Brian Tomkinson
        Posted March 20, 2012 at 9:11 pm | Permalink

        If a business group was having problems financing its debt and decided to sell a subsidiary company but found that no one wanted to buy it because of the pension fund, would the owning company be able to take the pension fund money of the subsidiary, use it to help reduce its borrowing requirements and then sell the subsidiary? I don’t think so but those who make this action illegal can do what they like. Why should governments be allowed to operate Ponzi shemes?

    • Bob
      Posted March 20, 2012 at 9:36 pm | Permalink

      Will FRS17 apply to the government?

      • Christian
        Posted March 20, 2012 at 10:12 pm | Permalink

        The UK Accounting Standards Board has yet to confirm one way or another – can’t see it happening!

  24. Barbara Stevens
    Posted March 20, 2012 at 5:48 pm | Permalink

    I see that the intention is to ‘tap into pension funds’ to fund infastructure idea’s, well aren’t these funds managed for the people who own them and pay into them, not for pubic use but funds for their retirement. What if the funds refuse to lend? Which is their right if the money is their members money. How can any government assume it has the right to use money that is not theirs to borrow. Will there be enough profit for them to agree? I see we are going to be told where our money is spent, individually, how nice, but I bet foreign aid will not be mentioned and where it’s spent, and how much. As I see it we now spend £20billion in aid, that could make a dent in the national debt, but no, we are funding others while we borrow to do it. How logical is that? Keep blinding us with figures won’t impress the lay person at all, in fact as I see it, it’s hiding the truth behind waffle. No government can keep telling us this and that, while we all know they are wasting our money left right and centre, Whitehall alone wastes billions with their ‘credit card’ allowances.
    The ordinary man and woman in the street is not daft, they see and hear, and are disgusted at what we imagined were intelligent beings running this county, it appears not. May be we should scrap the EU, and begin all again from scratch, may be then we’d have some plain commonsense and old fashioned thrift.

    • Bob
      Posted March 20, 2012 at 9:53 pm | Permalink

      “The ordinary man and woman in the street is not daft”

      Is there any evidence to support this assertion?
      (bearing in mind they keep voting for just three political parties who have virtually identical policies.

      The coalition are about to embark on the final phase of the destruction of our education system through the appointing of Les Ebdon as head of the Office for Fair Access (OFFA), which will result in lowering of standards at university in the same way as that phasing out the grammar schools did for secondary education.

  25. Martin
    Posted March 20, 2012 at 6:08 pm | Permalink

    After almost two years in power the Prime Minister has finally realised that there are problems with airport capacity in SE England. It is a great pity he decided to veto a private sector third runway at Heathrow. Now he wants the private sector to fund transport projects. What will his policy be in two years time?

  26. A Different Simon
    Posted March 20, 2012 at 7:42 pm | Permalink

    The quickest way to create and return jobs and prosperity is cheap energy .

    Cuadrilla , Europa Oil and Gas , Igas , Dart etc aren’t going to invest a penny more in UK shale until they see certainty from the Govt that it is serious about getting the gas and liquids out of the ground .

    The Govt review of induced siesmicity is just like the whole planning system .

    We will get left further and further behind if every time anyone tries to do anything it gets delayed 9 months as a matter of course pending appeal .

    The country needs an enema John .

    • A Different Simon
      Posted March 20, 2012 at 10:05 pm | Permalink

      Also leadership .

      Someone with the guts to say we are going to get this stuff out of the ground and we are going to do it safely .

      Pity the Govt doesn’t have anybody like that .

    • uanime5
      Posted March 21, 2012 at 7:37 pm | Permalink

      Surely it would be wiser to let other countries figure out all the problems associated with extracting shale gas then just copy what they do.

      • A Different Simon
        Posted March 22, 2012 at 12:59 pm | Permalink

        The US and Canada have broken a huge amount of ground for us .

        Shale extraction technology is progressing at lightning speed .

        There is no comparison between the best operators in the US and Canada like Talisman and the get rich quick merchants .

        The amount of water used in fraccing is being reduced to a quarter of what it was a couple of years back along with the pumping requirements .

        Some wells are not even fractured with water ; liquidified natural gas is used instead .

        The pock marked pictures of early days of shale extraction are generally vertical wells or not even shale wells . Modern horizontal wells are typically draining 4 square miles per well pad .

        Poland is proving shale extraction can be done safely to the rest of Europe .

        Even for those cases where the radioactive Radon level of gas extracted from source rocks is higher than gas extracted from source rocks , the half life of radon is so short (less than 4 days) that short term storage should eliminate the difference .

  27. uanime5
    Posted March 20, 2012 at 8:49 pm | Permalink

    “Income Tax revenue was poor this January, with self assessment revenue down in cash terms.”

    This is more likely to be due to fewer people in employment and more people working part time than the wealthy having to pay the 50% tax rate. Especially since job creation is falling while unemployment is rising.

    “The past moves down in the top rate from 83% to 60% and then to 40% all boosted top rate taxpayer revenues massively.”

    The increase in tax revenues was more to do with creating a large amount of easy credit that lead to high growth until the bubble burst than reducing tax rates to 40%. If cutting taxes for the rich resulted in increased tax revenues then George Bush’s tax cut for the wealthy would have resulted in the US tax revenues increasing, rather than decreasing.

    • Mark
      Posted March 21, 2012 at 3:12 pm | Permalink

      Balderdash. The numbers in employment are stable and right in line with last year’s budget forecast. Today it was reported that February income tax receipts were £1.8bn lower than the previous year. Such a decline can only be accounted for through much lower receipts from top rate taxpayers.

    • Mark
      Posted March 21, 2012 at 3:34 pm | Permalink

      Some reading for you:

      HMRC think that the 50% tax may well have resulted in lower revenue in 2010/11 (after allowing for tax payments brought forward to 2009/10), and all the pointers are that the longer it stays the more damaging it gets. Add in the evident loss this year, and that conclusion is obviously right.

  28. sm
    Posted March 20, 2012 at 9:51 pm | Permalink

    Re:Capital Requirements.

    If the banks are robust and solvent we would not have QE/ZIRP, special loans etc.

    Have we resolved ‘the too big to fail’? If not capital requirements must go up until systemically they can be restructured and reset. Are all the assets at a truly stable fair value?

    The current banks need to be bypassed via direct help to SME perhaps by eliminating NI and bringing in new competition.

  29. David Langley
    Posted March 22, 2012 at 11:41 am | Permalink

    I am given to understand that soon we will be given a document after the budget explaining where all the tax take is spent.
    The shortfall e.g. the PSBR which I think we all understood to mean we want to spend more than we take will also be explained presumably. Mrs L and myself often sit down together to look at our budget and we do not think that borrowing to fund our lifestyle is a good idea. We actually trim off all encroachments to ensure that we remain in our limits of (Mr Micawber would agree) financial viability.
    I can think of numerous things I would like to do to the people who decide we should as a Nation live beyond our means. Borrowing may be a good idea from time to time, but requires a great deal of what ifs before doing it.
    I would like to take a red pen to many liabilities that government i.e. yourselves may think important but to me and Mrs L are a downright liberty with our money. Let us have the budget proposals first and give us a chance to get red ink on our fingers then we will be truly democratic.

  30. Derek Emery
    Posted March 23, 2012 at 8:55 am | Permalink

    The seems to be a massive disconnect between politicians and economic reality in the UK and EU. At the height of the boom New Labour went on a spending spree and kept down interest rates creating a house price and borrowing boom. Economists state you should reduce debts and raise interest rates in a boom to reduce the impact of the inevitable following recession, which would have incidentally prevented the house price boom.

    Both EU and UK politicians post-crisis were massively in favour massively hiking banks capital requirements now the boom had disappeared. Obviously this could be expected to reduce bank lending as banks find it hard to borrow more capital in a recession. I would have thought this effect would be completely obvious. There is no chance in a recession of banks going on a lending spree so why increase capital requirements now. Perhaps politicians prefer to shoot themselves in the foot to prove to themselves they are still alive?

  31. Bazman
    Posted March 23, 2012 at 9:52 pm | Permalink

    Disgusting simptons like Lifelogic, apologising for the lack of investment by the government and corporations taxing the poor, pensioners, employing their mates/cronies and the millions with no pension, employment rights, minimum wage, health, and health safety or accommodation should be shot in a totalitarian way do you not agree. Ram it.

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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