Bakers take the heat out of the VAT rise

Fee and KJ discuss the 'pasty tax' levied on hot takeaway foods

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Chris seeks access to a David Cameron TV appearance

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Budget serves up more bad news for older people - how much can they take!

 

By Dr.Ros Altmann, Director General of SAGA 

This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.

There was plenty of bad news for older people in this Budget:

Shock rise in age allowance hits middle-income pensioners - poorest and richest are unaffected:  The big shock in this Budget was the astonishing stealth tax announced for 5 million of Britain's middle class pensioners.  Any pensioner with income between around £10,000 and £24,000 a year will pay more tax in future than they would have done without this change.  The Government says this is a measure to 'simplify' the tax system - and it is true that the age allowance is very complicated - but the reality is that this is really just a revenue-raising exercise.  People reaching age 65 in the next couple of years will be £4 a week worse off as a result of this measure.  If their state pension had been reduced by £4 a week there would be uproar, but abolishing the age allowance has a similar effect - although only for the middle income pensioners.  The very poorest and very wealthiest are not affected, because the age allowance is phased out once older people's incomes reach around £24,000 a year. So it is the decent middle income pensioners, who worked hard and saved hard to have a bit of extra income in later life - the very people that we should be valuing highly - who are hit by this move.  The Office for Tax Simplification report did point to the complexity of the age allowance, but recommended that, if it were removed, other measures could be introduced to offset the income reductions for pensioners.  The Chancellor chose not to listen to this and just removed the allowance.

Nothing for savers:

There was nothing in this Budget to help savers, especially older people trying to live on the income from their savings.  The policy of ultra-low interest rates for the last three years, has hit savers hard and there was still no help from the Chancellor. 

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Liebrary: Does the UK have to keep reducing corporation tax to tempt businesses to come here?

"Stopping the lies is an impossible task. But spreading the truth just takes a re-tweet."


With the Chancellor's Budget announcing a drop in Corporation Tax down to 22% in 2014, her Majesty's Treasurers got their crayons out and came up with this super poster.


It Demonstrates very effectively how low Britain has dropped its Corporation Tax. 


With only Turkey, Saudi Arabia and the Russian Federation offering lower corporate tax rates, how much lower can the Chancellor get?


As an added temptation, the Chancellor has offered the 'patentbox' scheme offering a 10% corporate tax rate. This is available for profits made on intellectual property and patent licencing income. Not much job creation there. No factories needed, just a couple of guys counting the money as it rolls in. But the chancellor has worked out that if someone is going to get their tax, it may as well be him. Should I have said "it may as well be Britain"? Not really. Politicians collect the sugar to distribute to whom they will, in return for what they want. For example, tax cuts for millionaires paid for with tax hikes for pensioners.



So why, inspite of all these temptations, are all those companies still incorporated in the US, Japan, Germany, France and other countries who charge oodles more corporation tax? 


Could it be that British Chancellors, from Gordon Brown through Alastair Darling over to George Osborne have not yet learned the lesson of the nightclub slapper? A short skirt only guarantees you a drafty backside! 


 


And yet, the message from a succession of Chancellors - Britannia is ready to drop everything to get your business.


Improving infrastructure, investing in training and education, they would make Britain more competitive and attractive to business. But investing in Britain and in Britons costs money. Much easier to cut the rate of tax.


Britain becomes ever more like a tax haven for companies and foreign oligarchs. But not if you are an ordinary domiciled ripped-off Briton.

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Budget 2013 Update: Corporation tax to drop to 20% in 2015, equaling the lowest rates of the G20.  And way way below corporation tax rates of G7 countries who are supposed to be our main competitors as shown in this graphic by our HMRC doodlers:

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Don't be fooled. It was bank borrowing that caused the debt crisis, not consumer borrowing.

So who was the "irrational" borrower that brought down the economy? And was the culprit actually "irrational"?


If you weren't sure why the banks got themselves, and everyone else, into such a pickle with the Credit Crisis, the 2012 Budget Document is the source of some nice nuggets of information. Civil servants, competent and on the whole moderately paid, have little incentive to avoid the truth and will often slip it in if they can.

The financial sector, having burned down the economy, tried to plant the box of used matches in the hands of the public. Ordinary Britons were fingered as a major cause of the crisis due to accepting a rush of cheap credit they couldn't afford. 


They glossed over the fact that the banks and building societies were the pushers of the cheap credit. And they also omitted to point out that actually it was overwhelmingly the banks - not the consumers nor the non-financial businesses - that went on a borrowing frenzy.

Why did the banks borrow so much? "Casino banking" is intended to be derogatory, but bankers probably don't realise they are supposed to feel insulted - as it couldn't be closer to the truth. Idiot sons for hundreds of years have been gambling away their family fortunes - relying on indulgent parents to bail them out. Cunning bankers have been gambling the nations money in the same way - knowing that indulgent politicians would bail them out using the taxpayer's money.

Here is how borrowing boosted bankers bonuses in the good times, and crushed the economy when their bets went wrong:

Idiot Son: I have £50. 

• I bet it on a "six line" (odds 5:1) spin of a roulette wheel.
• If I win. I pocket £300 (my original £50 plus 5 x £50). 
• A 500% return on my original money! 
• If I lose.
• There goes my £50. Back to daddy for some more cash.

Cunning Banker: I have £50 million. I borrow another £250 million.

• I bet it all on bonds, equities, derivatives (odds 5:1) not unlike the spin of a roulette wheel. 
  
• If I win. I get £1,800 million (my original £50+£250 million,  plus 5 x £50 million plus 5 x £250 million)
• I pay back the £250 million. I pocket £1,550 million.
• A 3,100% return on my money!
• If I lose. 
• The taxpayer bails me out. The taxpayer loses his job, has his benefits cut, has his pension reduced and deferred, the nation is protected by an aircraft carrier with no aircraft.

*** MORE DATA FROM McKINSEY report "Debt and deleveraging: The global credit bubble and its economic consequences" added to this post in December 2012***

"The United Kingdom and Spain stand out for having the biggest increases in financial sector debt relative to GDP. These figures reflect the rapid growth of the financial sectors in those countries as well as a gradual shift by their banks away from relying on deposits to fund lending towards raising money by borrowing in the wholesale markets."

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Government does us a favour by taking away our money because it is all to complicated for us.

At last, we know why governments in recent decades, both “left” and right and right-ish, have thrust more money at the wealthy and snatched more from the less well provided for. 


It is because it is all too complicated for us, having all that money. Which is why the recent Budget included a 'major simplification' for pensioners.

We have to thank the Chancellor, George Osborne who made this clear in his 2012 Budget speech:

“We should also simplify the age related allowances - which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system.

The National Audit Office points out that many pensioners don't understand them.

These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded away.

So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6th April 2013 and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.

This will protect the existing level of allowance pensioners have, while introducing a single personal allowance for all.

It is a major simplification.”

In summary:

• Age related allowances are complicated.
• The National Audit Office says many pensioners don’t understand them.
• Pensioners have to fill out self-assessment forms.
• Conclusion: to simplify things, we will take these allowances away.
• “It is a major simplification”, says Osborne.

In the words of Ros Altmann, the Director General of SAGA:

“This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.”

Could it be it isn’t just the government? Could it be all companies – banks, electricity, rail etc. – are doing us a favour by ripping off our money? Because having money is just too complicated for us? Well thank you so much!

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Fee is dismayed by the 50% fees banks levy on pension pots

Foreign pension providers are just the ticket

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The gang debate David Cameron's plans to privatise the roads

Road signs o' the times

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Why a 50% top rate for income tax is too low. And how the government provides a sneaky unlimited 32.5% avoidance route for the über-wealthy already

As the 2012 Budget approaches, Tory ministers and their cohorts argue for the abolition of the 50% income tax rate. They claim it fails to achieve the objective of raising more tax, and acts as a disincentive to wealth creating businessmen.

The falsity of these claims is easily demonstrated:

a) Should the 50% rate of tax result in significant extra tax collection?

Yes it should. According to HMRC figures for 2010-11 £23.3 billion was expected to be collected at the 50% rate. This means £46.6 billion of taxable income at this top rate. Reducing the top rate from 50% to 40% would mean £4.66 billion of taxes would be lost, handed back to Britain's wealthiest. Except the wealthy know how to dodge the tax. Cutting the tax would be a reward for bad behaviour!

b) Does the 50% rate of tax discourage creative dynamic entrepreneurs?

No it doesn’t. Nearly 60% of employment in this country is provided by small and medium businesses. The directors of these firms earn on average £90,000 – well below the 50% tax band. Creative dynamic entrepreneurs rarely sit on the boards of FTSE100 companies, or in the banking halls of the City. Creative dynamic entrepreneurs tend to reinvest their profits in their companies, rather than extract them as 'remuneration'. They do the extraction once their creativity and dynamism has faded.

In any case, the government provides the wealthy with many loopholes to circumnavigate this tax. The 50% rate only applies to employment income and interest on savings - the only sources of income most Britons have. Tax on dividend income, while not exactly an enigma wrapped in a puzzle, is just obscure enough to escape general notice. According to the HMRC figures for 2010-11, those earning over £150,000 slipped more than £14 billion of dividends through this particular diversion, taxed at 32.5%.

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Will The Big Switch shake up the energy market? Join the Which? campaign to get a better deal!

 

 

By Richard Lloyd, Executive Director at Which?

Until now, hard-pressed consumers have had to go it alone when they want to negotiate a better tariff with the energy giants. That is why Which? and online campaigners 38 Degrees launched The Big Switch, a completely new way to buy energy using the power of thousands of consumers to negotiate a market leading deal with suppliers.

There has been an incredible response with more than 200,000 people joining together to get a better deal in less than a month. This unstoppable tide of public opinion shows the public demand for fairer, more affordable energy.

People can sign up until the 31^st March, and once we know how many are interested in switching, we will hold a ‘reverse auction’ where energy companies are invited to put forward their lowest price per kilowatt of electricity and cubic meter of gas.

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