Flawed tax plan
Bill Jamieson’s article (Perspective, 14 February) challenging George Osborne’s slowness to find a route to UK economic recovery suggested that the Chancellor ought to think of cutting VAT in some areas, cutting corporation tax, cutting capital gains tax and giving National Insurance holidays.
There would thus, however, be an additional, severe immediate reduction in revenues essential for maintaining, never mind improving, public services: it is hard to see how this could be covered by also immediately withdrawing benefits from “better-off” pensioners, reducing overseas aid, and/or removing the protection the NHS’s budget gets.
It might well be that the tax cutting could trigger a knock-on rise in tax-generating employments, but this surely would be a long time in coming, cannot be guaranteed, and thus could cause more overall hardship than keeping taxations as they are.
More money might have to be borrowed by the UK Government to limit this: if we’re going to do this, we might as well spend it on taxpayer supported infrastructure projects now, and try to kick-start enterprise developments and job creation directly. This could be especially important to Scotland, with so many projects on hold, or scheduled only for the longer term.
What were the circumstances in which former chancellor of the Exchequer Gordon Brown abolished the 10p tax rate in his 2007 Budget?
It was interesting to see that two of the people he mentored – Ed Miliband and Ed Balls – now want to disclaim responsibility for the measure but felt obliged to defend it at the time “on the basis of collective responsibility” (your report, 15 February).
Yet they both must have known that Mr Brown’s last Budget speech was in fact a pre-election one. He was the undisputed crown prince after prime minister Tony Blair’s expected resignation later that year.
In a crucial error of judgment, the new prime minister ducked way from the election that autumn, but it is difficult to believe that the two Eds – both influential in Cabinet – did not expect him to call one.
Indeed, that Budget had all the hallmarks of a pre-election bonanza.
Very late in his speech, Mr Brown announced that the basic rate of income tax was to fall from 22p to 20p in the pound in the following year.
The speech outlined plans for increases in child benefit, better allowances for pensioners and increases in the threshold for the higher tax rate, as well as increases in spending on education and health.
The abolition of the 10p rate was part of a scheme to simplify the tax regime and supposedly provide a better incentive to work. It was shortsighted in the sense that the government underestimated the number of people on low incomes eligible to pay it.
But it was part of an overall strategy to get Gordon Brown re-elected as prime minister and Messrs Miliband and Balls surely knew that.
Their disclaimers now do ring a bit hollow, particularly as they give no guarantee that the reintroduction of the rate will be included in Labour’s next election manifesto.
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