Monday, January 05, 2009

Cameron Turns Back the 'Do Nothing' Charge Onto Brown

David Cameron has just announced a plan to abolish income tax on savings for basic rate taxpayers. Good. It was a totally unjust tax anyway and a real discouragement to save. It will help pensioners in particular, many of whom rely on interest on their savings as part of their main income. It will be interesting to see how Labour attacks this plan. They can hardly say it is "doing nothing", which seems to be their latest Goebbels-like mantra. Indeed, the "do nothing" charge will be a very difficult one to make stick if, as seems likely, the government finally bows to the inevitable and adopts David Cameron's National Loan Guarantee plan, which would get credit flowing again to businesses. This will do far more for liquidity than the wasteful 2.5% VAT cut.

In his speech this lunchtime Cameron made four key announcements...

• Abolishing income tax on savings for everyone on the basic rate of tax
• Raising the tax allowance for pensioners by £2,000
• Publishing reports, for consultation, on green tech incubators and the green environmental market
• Undertaking a full-scale review of the creative industries
He also said...
Instead of Labour doing nothing effective they should take up our idea of a self-financing National Loan Guarantee Scheme to help businesses get through these tough times and help keep people in work. It’s now been over five weeks since we proposed this. Five weeks in which more businesses have gone to the wall – and more jobs have been lost. Five weeks in which Labour have done nothing. The Government could and should take that action now, today.
Just as a reminder, these are some of the other Conservative initiatives to ameliorate the effects of the recession...

* freeze council tax for two years
* abolish Stamp Duty for nine out of ten first-time buyers
* provide tax cuts for new jobs with a £2.6bn package of tax breaks to get people into work, funded by money that would otherwise go on unemployment benefit
* cut the main rate of corporation tax to 25p and the small companies' rate to 20p, paid for by scrapping complex reliefs and allowances
* introduce a £50bn National Loan Guarantee Scheme to underwrite bank lending to businesses and get credit flowing again
* give small and medium-sized businesses a six-month VAT holiday, funded by a 7.5% interest rate on delayed payments
* cut National Insurance by 1% for six months for firms with fewer than five employees, paid for from the above changes to the company tax regime
Just thought you'd like to know.

UPDATE: I've also written on this subject for CommentIsFree.

32 comments:

norfolkandchance said...

Why not just publish all the press release?

Jimmy said...
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Jimmy said...

Seems like only yesterday we were being promised no unfunded tax cuts.

Wonder what he'll come up with next week?

I wonder whatever did happen to that nice Mr. Osborne.

The Raven said...

It's funded by cuts in non-essential areas of spending, Jimmy.

And as for 'unfunded' - paying for tax cuts by borrowing is by its very nature an unfunded gesture.

Jimmy said...

"It's funded by cuts in non-essential areas of spending, Jimmy."

Of course they are. Silly of me not to have guessed.

Sweet and Tender Hooligan said...

Iain,

The two year 'freeze' on council tax is not anything of the sort. The parameters set out to councils for them to qualify for central Government help is so hard to meet that zero councils will actually freeze rates.

Mr Mr said...

This is actually a vote winner. Never did seem right taxing savings that have already been taxed in the first place. The tax free ISAs always seem to pay less interest than other savings accounts.

Raising the pensioners tax allowance by £2,000 will also be well received.Excellent stuff.

Expect a counter attack from Brown

Letters From A Tory said...

I still don't like the council tax freeze, as it stinks of central control and big government.

Local councils should be free to set whatever they want and face the voters in the council elections.

Alex said...

"cut the main rate of corporation tax to 25p and the small companies' rate to 20p, paid for by scrapping complex reliefs and allowances"

Well that's not a saving then. It is a transfer of savings from compabnies that claim a lot of those "complex reliefs and allowances" to those who do not. Those "complex reliefs and allowances" are typically reliefs and allowances for one or other form of capital investment. So the industrial companies that employ a wide variety of labour will suffer while the PR firms and life insurance companies will benefit. What is the point?

Jimmy said...

"The Tories said that spending on health, education, defence and international development would rise in line with Labour's existing plans. But the rate of spending growth in other departments would fall from 4.1% to 1%.

"Officials said that the party would set out at a later date how this could be achieved without hitting frontline services." [grauniad]

Anyone else here holding their breath? I know I am.

tapestry said...

has anyone worked out how many billions Brown has lost on UK bank shares so far?

He is borrowing 10% of GDP this year (GBP 157 billion), and depends on an economic revival to reduce that next.

He could be borrowing GBP 1 trillion if the recovery evaporates, a sum he won't be able to borrow at any rate of interest.

Brown didn't do nothing over the last twelve years. He spent every penny we had and blew away billions that we didn't have to boot.

Try saying the word PRUDENCE without smiling or laughing out loud.

Cinnamon Marine said...

Sweet and Tender Hooligan said...
Iain,

The two year 'freeze' on council tax is not anything of the sort. The parameters set out to councils for them to qualify for central Government help is so hard to meet that zero councils will actually freeze rates.

----

I can name you one council that would have qualify for the rate freeze in the next round of Council Tax increases if there was a Conservative Government now - Conservative controlled Forest of Dean District Council is proposing a 2.5% rise. The Conservative controlled Gloucestershire County Council is proposing a 2.9% rise, so not too far off either.

Man in a Shed said...

The tax on savings, but never on debt has always been unjust.

This move will be very popular as it will be seen a just.

As will cutting back wasteful public spending and reducing the role of the parasitic state (Jimmy).

simon said...

Goebbels-like???

I know that blogs are devaluing the currency of hyperbole and lowering the threshold of offence, but really....

Chris Paul said...

The problems with this are:

A. Scope

1. 60% of pensioners are out of tax on this anyway

2. Ditto other poorer savers

3. Mid range savers - pensioner or otherwise - can use loads of tax efficient products up to pretty generous limits

4. The main benefits for this fall on the richest part of the "basic rate" range, already helped with swingeing cuts in mortgage repayments etc

B. Funding

Funded by SLASH in Public Services in areas which may not be as sexy as NHS and Education (though I noticed Nadine had those areas up for grabs in her NY message) but which would mostly be made with cuts to jobs or services for the poorest elements.

In short this is a very regressive tax, albeit within the minimum rate range.

Chris Paul said...

very regressive tax ... cut that should have been

it's for the fairly well-to-do ... who we ought to be encouraging to spend, spend, spend

Old Holborn said...

Honest reporting from the Pakistan Daily

Oliver Drew said...

Jimmy - I assume you are a supporter of the government...maybe even a Labourite.

Therefore you should know that Labour/Labour supporters are in no position to lecture about "unfunded" tax cuts given what has happened over the last few months.

Lola said...

In other words - cut taxes. Well hoo-bloody-ray, supply side economics lives. And about time too. Cut taxes and you get wealth creation. Especially if you cut taxes on income, investments and private business. Tax and spend and you get wealth destruction.

Mostly Ordinary said...

This does nothing for me, I save a lot because I don't have a public sector pension and am not on the basic rate of tax so am going to still be paying out on my saving income as the Tories gleefully highlight.

Why is it based on your tax rate and not the amount you have in savings?

Hasn't won my vote. In fact the line:

Abolishing income tax on savings for everyone on the basic rate of tax (with top rate taxpayers continuing to pay the same)

Annoys me greatly.

Lola said...

...and you cannot have unfunded tax cuts. It's illogical. How can the government have unfunded income? It can have unfunded spending - which it has had for 11 years.

Tax 'cuts' are the State deciding not to confiscate our money. It is our money not the States.

So, what the tax 'cuts' (if that is what they are) will mean that the State has less money to spend. Good. It spends money very badly. The State'll have to save money somewhere (everywhere?). Good again.

Mostly Ordinary said...

Has there ever been any UK Government that saved billions by 'cutting waste'? It's the political equivalent of fat people saying they are big boned.

I would actually be happier if they just said "we're making spending cuts"

Jimmy said...

"Jimmy - I assume you are a supporter of the government...maybe even a Labourite."

Damn, my cover's blown.

Two points: firstly "unfunded" and "funded in a manner of which I dispprove" are not the same thing. Secondly, Mr. Osborne, before his recent tragic disappearance, made great play of his refusal to countenance any such thing.

Hamish said...

Excellent Tory policies.
I totally disagree with taxing interest on savings less than other income.
And I totally disagree with pampering the elderly.
But at least Cameron is creating some clear blue water.

Jimmy said...

"And I totally disagree with pampering the elderly"

He's got to throw in something for the members.

martin day said...

The Labour Party are the deliver nothing party!

Mines a pint said...

Expect McBroon and the Prince of Darkness to rubbish these proposals. IMO they seem to relish the pillaging of prudent and responsible savers if that helps bail out the reckless debt junkies.

Since inflation is way ahead of current interest rates, what little savings most people have is being rapidly devalued - but isn't that what Labour did in the '70s?

Alan Douglas said...

All very well, but this afternoon I heard Osbourne explaining carefully on radio that there would be no tax REDUCTION, merely a reduction in the INCREASE Labour plans from £ 30 billion to £ 25 billion.

Wtf ? How never-learn Labour dare to plan increases under the present state of affairs is one thing, but for the Tories to in effect support this, merely tinkering beyond the edges, is incredible.

Don't know the exact figures, but we are all fighting Labour so we can spend per annum £ 5 billion less out of what, £ 650 billion ?

Fergeddit.

Alan Douglas

wv : offorts (useless expenditure of energy, as in example above)

Chalcedon said...

Now at last we are getting some sensible and useful policies. I'm very positive about these ideas. I expect desperate noo Labour to nick them.

Jimmy said...
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Jimmy said...

Trivia fans may be interested to know that Osborne has described this imaginary tax cut as "fully-funded" in his Evening Hitler article. A google news search shows that the phrase was quoted in the Daily and Evening Hitler news stories, but if you click through you find this somewhat tendentious (to put it mildly) boast has been mysteriously redacted. Could they have started fact-checking after all these years?

Mark said...

I think Cameron's proposal on the tax on savings is a good one. I have been wondering which of the parties would go for something like this and I think it will be very popular, especially amongst older people.