Rewriting the rules

It seems that GB is running a scorched earth policy. Make sure that all of the tax hikes necessary to pay for his profligacy land just after the next election.

Labour realise they will face a bloodbath at the next election, their only hope is to ensure that the incoming government has such a mess to sort out that they will appear incompetent to the public. Labour can then crow from the opposition benches.

Ended boom and bust? More like hidden all of the skeletons until they fall out of the closet onto someone else.

The right thing to do would be to put up taxes. Politically unpopular for sure, but at least it wouldn't saddle us with massive debt in the future. On the plus side this government is doomed anyway, so they really don't need to try and bankrupt the country just to get votes.

If we are borrowing now - at the start of a slowdown (optimistic) or recession (pessimistic) - then, to misquote the 1997 slogan, things can only get worse.

Increasing the national debt will leave a mess for the Tories, and though Labour can probably score points when in opposition, they should remember that people have long memories and still remember what previous administrations did in the 60s and 70s.

Taking the right decisions now would at least salvage some credibility for Labour on economic issues in the years that lie ahead.

In reality, the fiscal rules pledge has been reached and beached a long time ago.

Through the medium of PFI, Gordon has been keeping spending off the balance sheet for now, but ultimately this will come back to bite us all.

For him to recently criticise banks for 'off balance sheet activities,' is the height of hypocrisy. If the opposition were more aware, they could have a field day with this.

No wonder an economist told David Cameron at a Tory economic summit yesterday that "the next election is the one to lose".

Seemingly the truest thing said ever.....Except if labour win the next one they have another five years to scorch the earth further and therefore the one after next will be the one to lose.

Sometimes you just have to bite the bullet and say, "The sooner we start to clean the mess up the better."

Nick if this economist is openly saying this why the devil arent you juorno's challenging the government about this everytime you interveiw them. To quote Bill Clinton "Its the economy stupid"

Every question to any government person should be "Wheres the money coming from?" and keep asking until they throw themselves on thier swords.

@2 the right thing isnt to tax further the right thing is to do what every household in the land is doing. stop borrowing and stop spending.
That is the only way back to financial stability unless you want to carry on borrowing to pay for inflationary spending.

This shouldn't be a surprise to anyone over the age of 40. Labour Governments always run out of our money.

Of course, if we were in the euro, the government wouldn't be allowed to borrow so much.

But, goodness, being in the euro and having a supra-national body making sure that a national government can't wreck a national economy (and thereby damage economies beyond our shores) would never do.

Borrowing is pretty much the only thing left on the plate.

What taxes will they increase? Income tax? Watch as the economic immigrants go to pastures new, and people start spending less - further increasing the prospect of a deep recession.

Companies? Watch them either move their tax base to somewhere like Ireland, or take their business to more tax-friendly companies, along with the jobs.

The rich? Watch as they sail off to more tax-friendly climates too.

As for cutting spending, normally I would agree - but where? Reduce pay rises further and see a massive round of strikes. Laying off people will have a similar detrimental effect on the economy as increasing incomes taxes.

A much-overdue efficiency drive could save billions, but it would take too long.

Borrowing is the only thing Labour can do without risking massive damage to an already faltering economy and reducing tax receipts still further.

Brown has sailed us into the Symplegades, with increased tax on one side and decreased public spending on the other, ready to sink us.

It seems like there is another way..

Just imagine a solution that wouldn't need the fiscal rules re-writing, a way to generate a lot more tax revenue without taking it from the pockets of hardworking families, taxing a luxury item that people can choose to consume rather than forced to, reducing crime, diminish the power of street gangs and reducing the amount of drunken behaviour in our towns.

So, how long before the government revise their stance and de-criminalise and tax cannabis?

The biggest single problem this or any other government has is a decreasing ability to manipulate the economy at grass roots level because such a high proportion of it is service industry based. Many people can adjust their expenditure by, for example, eating out less, taking a few cans home instead of going to the pub, insuring third party on the car and so on. These are trivial in themselves but, if enough people do it, the effect on the service sector can be dramatic. Government is powerless to do anything about this so their only route if they use the taxation option is direct taxes. That, I suggest, would be political suicide.

The increased borrowing route may not in the long run be a clever thing to do, but it is politically more acceptable. Not for the first time, they have a choice. Are they a responsible government determined to do the right thing or a political party determined to stay in office?

Gordon Brown hasn't just re-written the rule book, if it ever existed, he is about to rip it up.
His grubby fingerprints are all over this latest announcement.
The next administration, likely to be Conservative, now has a mountain to climb and little option but to implement unpopular policies.
GB and his woeful, bungling cabinet make me sick. Go urgently!!

All I can say is that must be getting really tricky if Gordon has run out of room to move the goalposts and is having to contemplate changing the rules.

Brown has been burning our cash at a phenominal rate all through his miserable career - he is addicted to it.

He has used all his savings and housekeeping, he has used up our pension and other savings, he has stolen and sold our funiture, remortgaged our house, and now at rock bottom he is starting to think that the 'loan sharks' aren't really so bad - "just this once, just till payday".

But to anyone outside, it is clear that the solution does not lay in seeking ways of allowing him to feed his distructive habit, to ward off cold turkey for just a little longer.

The solution is to cut off his supply and make him face up to the fact he has a serious problem. For him to take a step back and hand the reigns to someone who can administer the 'tough love' that public spending needs, probably at great short term cost, but with a clear plan of where it will bring us in five to ten years time.

He was always the wrong man for the job - blairs greatest contribution to this country was to keep the lid on brown, his greatest betrayal to hand it over to him.

The UK has the people, skills, energy, enthusiasm, dynamism and creativity to be great (it always has had), we just need the road block known as 'the labour party' out of the way so we can create wealth, flourish and deliver prosperity to all through individual endeavour.

#7 - yes there are borrowing rules for the Euro.

these are the same rules the French and Germans have broken on a regular basis.

It is however their ball, and they will take it and go home if they don't get their way.


If you want financial probity, don't look to an organisation which is so corrupt its accounts have never been signed off.

Its a bit rich of posters to accuse Journalists of giving the Government an easy ride. Almost every article is negative and seems designed to aid the Opposition. By contrast Cameron and Osborne are allowed to make critical comments blaming all of our ills on Gordon Brown and ignoring external problems. Wheneer either politician is asked what he would do the answer is evasive and unconvincing but goes unchallenged. Cameron has alawys received this treatment starting with questions about his past drug-taking. had it been Kinnock it would have been in the papers for weeks but darling Dave was able to smile and give a brush-off answer which was unquestioningly acepted.

Nick, you must be working to a different definition of the word "rule" than I am. Gordon's economic "rules" were relegated to the level of "aspiration" many years ago.

Personally I'm pretty optimistic about recession possibilies - I work for a canned food manufacturer and everyone's got to eat, there's no-one else to do my job and thanks to ten years of crappy government I've just about worked my way back up to zero after university.

I've come to accept the fact that (even as a graduate) I'll never be able to afford my own home or pension, but it's going to be fun watching the people who created this situation running around panicking.

Yesterday's newspaper showed the photo of the bloated, over-fed face of the Mayor of Moscow's wife who bought the most expensive house in London. She should be taxed to the hilt here, together with all our ex-dom peers, such as Lord Ashcroft, who remarkably is not Nu-Labour, but a so-called Tory. All the parasites who manipulate Goverment, Stock Exchange and our daily life, should be subjected to Brown's cruel taxation. This should not be reserved for decent-living UK citizens who have no ex-dom bolt-holes.

Frank_Castle

I agree with everything you say. An awful lot of much-needed taxpayers have already moved out of the UK and there will be more to follow if their earnings and pensions are worth less in real terms as time goes on. This money won't be replaced easily, as more and more people are made redundant and claim benefit which will be a further drain on the public purse.

I don't think more borrowing is the answer but without reducing spending, it is the only thing left on the plate, as you say.

The Government should have implemented a massive efficiency drive three or four years ago, but I still don't think that would have generated nearly enough money as things stand at the moment. We really are between a rock and a hard place and another two years of this will see us well and truly sunk.

I have a friend who has emigrated to Greece, and their equivalent of council tax, energy, petrol and water is a fraction of what we pay here. She has to pay for her dental treatment but even privately, it is still noticeably less than we pay through the NHS. It really does open one's eyes to the total and utter mismanagement of this country over the last 11 years.

Another tactics over strategy moment from Gordon. His only hope is to do the right things, however painful and win some respect. Flinging his own golden rule to the winds will lose him the last vestiges of his reputation for prudence. The Govt can then be easily branded as typical tax and spend Labour and the Tories won't let the electorate forget who got the country in this mess, right or wrong.

He just can't seem to make a good decision at the moment. It's like a slow motion car crash.

Phoenixarisen

The thing is, that a lot of our MP's probably fit into that category. They can vote themselves what they like, and there are plenty of loopholes, of which Joe Public are blissfully unaware, to be exploited, too.

The politics of this is easy. As the Tories say, it is the final nail in the coffin of Browns supposed economic competence. He will no longer be able to cry 'black hole' to any other party. No economic credibility left.

The economics is much harder. More borrowing is inevitable but a responsible government would now look very hard at its own spending. I think the public would understand if government spending was reduced given the economic position. No chance of that from Brown of course. The Tories are still too scared to talk about this course of action although they will no doubt try to do it when in power. Much to my great surprise, Mr Clegg seems to be the only one to even mention reduced spending (although without going inti any specifics!).

A mess that will take a long time to srt out in any case!

My advice would be the same to anyone who is spending more than they're earning....stop spending so much.

Borrowing more is not the answer.

#20
Shellingout you are so right. The so-called "John Lewis" List could be accompanied by another list, "The Fiddlers List" which would embrace MPs of all parties, and politicians from both Houses. This is probably the one subject most of them agree on, how best to screw Joe Public.

I think that Gordon Brown has done a fantastic job for the United Kingdom over the last 10 years as Chancellor and PM. We should all be proud of what he has achieved. History will judge him as one of the greatest politicians of the last 100 years.

Only joking!!

Phoenixarisen

I have often wondered if, when debating subjects like taxation, the chancellor and his board first discusses whether or not they will be adversely affected, before making a decision which affects the rest of us, but that's just me being cynical.

skynine

I was wondering what you were on, until I saw your #25 comment!

Re-writing the rules finally blows away any pretence of 'prudence' or responsible management of our economy.

Having squandered the good years, Labour is now in melt-down and is grasping at any straw to try and buy itself more time.

This proves once again that Labour can not be trusted with the economy when the going gets tough.

I agree with #1 maas101 that Labour is now pursuing a 'scorched earth' policy. By plunging this country deeper into debt, they are creating serious problems for the next government - just as they did in 1979. Brown doesn't care because he knows he won't have to pick up the bill.

The Government is staring into the abyss. Although I admit I don't like the Labour Party and its leader I take no pleasure at all in this. Borrowing more is a problem for the future. Taxing more affects our citizens now. Spending less affects our citizens now. Any option is painful.

But the starting point today is a much higher tax burden than in our history and much higher spending. This surely points to spending cuts as the primary move forwad. Borrowing more really does shore up problems for the future and would be cowardly and expensive.

The Government will have to identify specific areas for spending cuts. In addition it will have to revise downwards the spending budget for each department across the board. For example if each department had its 2008/2009 budget (and future ones) cut by 2% that woud save around £12 billion per annum to be supplemented by further cuts in specific areas.

Tough choices but the Government say they are in the business of tough choices. Its about time politicians did more to justify their existence and being honest about the tough choices and making and implementing them would help. And actually leading the country by making them and seeing them through regardless of complaints or strikes.

26 sellingout

It's impossible not to be cynical. However, I think the chancellor is so arrogant, and not frightfully bright. Therefore, with the rest of his brutish cabinet, he has enough animal cunning (excuse the insult to animals) to make sure his ass is covered.

Compare Gordon Brown to Nigel Lawson, Norman Lamont and John Major. There is only one Chancellor who managed ten years of growth and it certainly wasn't Lawson who abolished motgage tax relief and organised the election winning boom also known as Thatcher's Economic Miracle. Major took us into the ERM at the wrong rate and Lamont ran about like a headless chicken, accompanied by his adviser Dave Camoron, a man noted for guiding his boss away from the drainhole during his televised statement. Clarke was better than Lawson or Lamont because he was free of the dogma of Thatcherism and Professor Walters. But he didn't have tme to produce a stable economy after the mess he inherited from Lamont. Brown was the best by far.

I think throwing away rule of a self-imposed limit on the amount the government can borrow is madness.

It could all work out if the economy picks up in say 12 months.

But if not then Brown will have mitigated a free-fall in support temporarily. In the long run he has lost the last vestiges of credibility.

Even if the economy does pick up he still has a zillion other problems.

Quite quite doomed.

It really had not occurred to me before that a 'technique' used by companies to make it unpleasant for them to be taken over, namely, the 'poison pill' could also be used by an incumbent Government to make life very difficult for the people who, by default, fill their shoes.

But patently, that is now a very real possibility.

Goodness knows how this economic carnage will be resolved in 2010, given that the Tories will be in power at Westminster, the Scots, via the SNP referendum, will be off doing their own thing, with the Welsh in hot pursuit.

One of the sobering facts about politicians is that they love spending other peoples money.

That is why this poster gets a bit hot-under-the-collar when they proclaim that they are 'accountable'.

They are only really accountable when they are directly responsible for the tax-payers money that they spend i.e. if it is wasted, there should be a personal comeback on the politicians involved i.e. made bankrupt if necessary.

If that sort of regime were in place, fiscal responsibility would change overnight.

I have to say, being of a certain age, it does always seem to end up like this with Labour in charge.

Tories bad, Labour worse.

What a choice.

Vote independent!

The only responsible course of action for the government now is to cut its spending.

Tax increases are politically impossible and borrowing has a serious political downside.

Now why can't the government grasp the nettle about public spending?

Easy question to answer: their only remaining supporters are to be found amongst the recipients of public doles.

If Brown does a Seventies on us then he will create another Thatcher to follow him.

18: "I have a friend who has emigrated to Greece, and their equivalent of council tax, energy, petrol and water is a fraction of what we pay here. She has to pay for her dental treatment but even privately, it is still noticeably less than we pay through the NHS. It really does open one's eyes to the total and utter mismanagement of this country over the last 11 years."

no it doesnt, it opens one eyes to the fact that the men and women of greece are paid less than us, and hence our money is worth more there than here. fool.

This comment was removed because the moderators found it broke the house rules. Explain.

LOST £14 BILLION ON TAX CREDITS! This is what we know about how much more has been lost? Unheard of tax recites coming into the treasury from oil revinue, more in tax revenue than any other Government. GB has had more money to play with than any other Chancellor/Priminister and yet there is no money in the pot. If any other CEO run his business the same way he may have received a golden handshake but he would have been shown the door at the same time. GB knows his days are numbered so he will make it as dificult as possible for the incoming Tory government to do anything positive. It's 1979 all over again it will take 10-15 years to put right then just as it is all coming together you jurnos will get fed up with a Tory government and tell us it's time for change. Next time I hpe you remember what change we got the last time. A grining idiot who will only ever be remembered for taking us into several wars of which at least one was illegal. With a wife that done nothing but freeload and leach of anyone and every one. Who's chancellor impoverished us all through stealth taxes (we will not increase the income tax burden) destroyed the best pension funds in the EU, while the boss retired after a not so successful decade in power to multi millions of pounds worth of deals. ALL NICE AND COSY THEN.

@31

Gb didnt make a stable economy either. He lived off Ken Clarkes legacy and a global period of sustained growth, he failed to save during those times and now we are faced with him via darling borrowing more to sustain his overextravagant spending.

If it was your family budget what would you do....Borrow more,treat yourself to that new car or curtail spending!

So now Gordon’s pimping out Prudence

moderate progressive

My friend sold her house in the UK to live in Greece. It wasn't a mansion either - just a normal 3 bedroomed semi.

She bought a house in Greece for a quarter of what she sold her house here for and she works out there. It's still much cheaper to live there than living here and she has a very nice life. Who's the fool then?

Nick, I'd be interested to get your views on my article over at Comment Is Free, taking you to task for your contention on the news last night and this morning that the government only has TWO choices, borrowing or taxing. Glad to see you appear to have figured out the third choice now - but what WERE you thinking?

https://www.guardian.co.uk/commentisfree/2008/jul/18/bbc.television

I think many of you are being unfair... Its not poor Gordons fault.

The blame can only be laid at the feet of the last Tory Government - who left the economy is such a shabby state.... err over 11 years ago. I am sure that GB can spew out hundreds of statistics to prove the point

Now let us try and guess who will be the first NuLabor spokesperson to use this defence.

Number 31

I think that you have taken the advice at Number 9 a little too readily.

GB has presided over an Enron style house of cards. If he did what he did in a public or private company, the police would be fingering his collar.

@31, billatbasing

Might want to get your facts right.

When Major got the reins in 1990 inflation was over 11% and growth was at -1.5%, by 1997 inflation was reduced 2.6% and growth was at 3.5%

This is actually the best economic record of any PM since the war. Black Wednesday may overshadowed that, but the facts and figures are unarguable.

By the time Labour got to power, the economy had had 5 years of consecutive growth and inherited a surging economy, whilst the world was entering what is now called the NICE decade.

Brown was given success on a plate, and to his credit he continued that success very well. Although that legacy is being tarnished by his failures to save cash and gold sale.

You want to compare him to Lamont? Well, now's the time - Lamont turned the British economy around from recession to growth at a difficult time. Let us see if the Brown/Darling team can manage the same.

I'm still baffled as to how anyone in this country still thinks that Brown was even a competent Chancellor let alone any kind of financial genius.All he's ever been capable of is inventing yet more taxes and wasting the money.The 10p tax fiasco would suggest he lacks basic intelligence,let alone has any kind of financial acumen,the man's a total disaster.His "economic boom" was a credit-fuelled bubble,as false as he is.
I'm a factory worker,after financial problems several years ago I don't borrow money,I don't buy what I can't afford.This means I'm solvent and I have a few quid put by in case things go wrong.That's not financial wizardry it's common sense,something sadly lacking in our great leader...oh and I don't bite my fingernails either.

'Brown ... destroyed the best pensions system in Europe'.

So often we see that written and it is repeated today on the thread.

Unfortunately, from my understanding of it, this is yet again, an example of the law of unintended consequences.

It is true that Brown removed the tax credits that pension funds could reclaim on their investments, which has had the effect of sucking some 50 billion pounds out of pensions since.

Now, accordingly to those stunning bright people at the Treasury (the elite of OxBridge), that removal of the tax credits would be compensated for by the Government simultaneously reducing the rate of Corporation Tax, thus allowing companies to pump more money into dividends.

Which would cancel out the loss of the tax credit to the pension funds.

Has'nt quite worked out that way, has it?

What those people in Whitehall simply do not seem to get is that company profits are extremely volatile and you simply cannot rely on dividends being increased year-on-year.

Nevermind, the Treasury bods are sitting on gold-plated index-linked pensions, courtesy of the taxpayer.

Yet again, no meaningful accountability for a bad mistake.

40:

good for her. what i said was, of course greece is cheaper to live - but its not a result of economic mismanagement, as your earlier posting stated

"You want to compare him to Lamont? Well, now's the time - Lamont turned the British economy around from recession to growth at a difficult time. Let us see if the Brown/Darling team can manage the same."

lamont burned billions of our money. he turned the economy round in a far better time for the UK than the current world economic state is now - oil and food prices werent quite so high if i recall correctly.

and, a deep recession tends to result in a period of growth and low inflation afterwards

45 DevonportDave

Good for you! You sound a really sensible, nice person. Wish you were the Chancellor, and ol' Whitehead could go off and chew the cud (or fingernails) with his mate.

#17 Lets look at the Mayor of Moscows finacial contribution to the UK. Buying a £50mil house is £2million in stamp duty. Even if she doesnt pay any tax when she is here what do you think she will do? - Spend millions on Bond St, expensive restaurants etc. Basically keeping a lot of retail workers/kitchen staff in employment and contributing millions more in VAT. If you tax her death she wont come here and the country will get nothing. Stop thinking Socialist all the time!

I want her here - what is your tax contribution to the public finances?

moderateprogressive

Perhaps I didn't make myself clear. She saw the writing on the wall and moved because it was getting too expensive here - a direct result of government mismanagement. Read the other posts - I'm not on my own.

This comment was removed because the moderators found it broke the house rules. Explain.

51:

the last 6 to 12 months notwithstanding, we had the longest period of low inflation in living memory! as a result of mismanagement? despite high and condinued growth? i think not

Number 50

I don't think Non-Doms pay stamp duty, but agree that provided she spends lots of cash here is welcome.

50 LeveEUnow

I say, old chap, I'm absolutely horrified. I've been called many things in my life but never been accused of thinking like a Socialist.
Actually, my tax contribution to the public finances was typical middle of the road Joe Public. Unfortunately, I was forced to retire when it was discovered I was past my sell-by date, so now I just sit around, another Victor Meldrew.

re: 41 FrankFisher

Congratulations for getting that past the moderators; I mentioned the same thing under 36 but it got blocked.

I didn't mention/know-about the article you mentioned, but the logic in posting 36 was basically saying what that article that you mentioned seems to say.

@48, moderate progressive

Oil was near historically low prices then, indeed they plunged when Iraq agreed to missile inspections.

However, the economy was in a period of actual contraction, and inflation was significantly higher than now.

Back then was as difficult as it is today, albeit for different reasons.

As for your statement that growth and low inflation tends to follow a recession, that's true, but certainly not to the extent of 5 years of growth encompassing a 7% swing and an almost 8% drop in the rate of inflation.

53

Not screwing it up is not the same as getting it right.

#46 JohnConstable:

"Has'nt quite worked out that way, has it?"

Well it probably has, and that's why pension funds are now something like twice as big as they were then.

You probably know that it is all much more complicated than you make out, and that the main reasons for the demise of pension schemes are the increased longevity of pensioners, and the minimum/maximum funding requirement rules introduced by the Tories in the 90's. I went through some of this yesterday on here, and I'm not doing it again, but this story about Brown 'destroying' pensions is almost certainly nonsense.

moderateprogressive

It's not growing now, though, is it? It's falling away from us at an alarming rate.

If you think things are bad now, it's going to get much, much worse and we're the one's who will end up paying for it all.

jimbrant

"but this story about Brown 'destroying' pensions is almost certainly nonsense.

Tell that to my spouse!

58:

on the contrary, in this neo-liberalist age not getting it wrong is correct, focusing on supply-side policies like encouraging FDI and increases in the labour pool is the main government economic related activity.

57:

you are right, i was responding to the statement that it was a difficult time- my point was that now is more difficult now than back then, due to globalisation factors.

the economy was in a diffucult time due to the domestic factors, actions of the previous tory chancellors, particuarly the lawson boom, rather than global factors as the current problems are now.

# 59

Yes Jim, I deliberately simplified it because I think our posters do not want to know about arcane accounting rules (FRS17) etc.

And not so long ago, I read a whole article on under-performing pensions which did not mention Browns tax raid at all!

As you rightly say, increased longevity has played a big part, because actuaries mis-calculated that.

Pension fund managers have often produced very mediocre results too.

Luckily for me personally, I never partook of pensions, believing that the generous 'tax break' was not a good enough reason, amongst others, to participate and have made 'alternate' arrangements.

PS. I would not blame Gordon Brown for all the ills of the world, after all he has severe personal burdens, which any reasonable human would sympathise with.

Nick was right. GB only has 2 choices either / both of which are a slow death for his credibility and that of his government.

Cutting expenditure would be suicide.

So once again it will be the job of the Conservative Party to administer the foul tasting medicine to UK plc. All because Gordon Brown didn't follow his own prescription that was handed to him by the Conservatives in 1997. He did it for two years, and then ignored the wise doctors of the economy.

@18. - If you are going to compare how cheap prices are in Greece compared to here, then at least do it in context. The Greeks earn less than us, their state pensions and other benefits are lower than ours therefore what seems cheap to you actually isn't.

People do the same with Spain pointing out how property is cheaper, food, drink tobacco, clothes all cheaper but they don't take into account the acerage wage in Spain is only 7,800 pounds gross so living in Spain is not cheap if you are Spanish.

Even USA. Things are cheaper there, but their wages are an awful lot lower.

If you want to make these comparisons, adjust them to account for wage levels or they are meaningless rubbish

The title of the blog Rewriting the Rules, this Labour government has a track record of rewriting, amending , changing and u-turning to suit their political needs.

When a government is elected it sets out its policies, ambitions and aspirations and then continues to update via the Queens speech. What we are seeing is government on the hoof, policy change, taxation change , and now fiscal change all done without even taking to some of their own ministers.

If prudence was the in word when GB was chancellor, whats happened to the cushion I doubt there was ever one only spin spin spin. Lets hope Brown has the decency to call an election before we have another unelected leader from the Labour Party.

Labour is dead in the water led by the lame duck and dithering Gordon Brown, supported by an ineffective Cabinet frightened to say boo. Come on Charles Clarke make your voice heard.

While the 40% rule is entirely arbitrary, and the UK's level of public debt much lower than many similar economies, I hope that Darling will resist the obvious temptation to change the self-imposed controls. Since it's difficult to identify areas where savings of any significance could be made in the short-term (in spite of facile comments on here about Quangos and so on), I would support increased taxation. The obvious target would be tobacco and alcohol (with a possible exception for draught beer), which as well as raising revenue would possibly have a beneficial effect on health and society. I wonder how much the duty would have to go up to balance the books?

I am a drinker myself, but IMO it is much too cheap these days.

66: exactly. be prepared, though, for an irrelevant answer, which shows a lack of understanding of what you just said

68:

what would be interesting, is introducing a new higher tax band for high earners, as a temporary measure during this crisis. if the chancellor would pledge to remove it in say two or three years, then people would be unlikely to move away - the so called brain drain - because it wouldnt be worth the hassle. meanwhile, it would really put david cameron's compassionate conservatism in the spotlight

When you next get the chance to question Gordon Brown, as you no doubt will have in time, could you please ask him how on earth it is the 'right long term decision for the country' to be borrowing more money as a way out of a slump?

#61 shellingout:

"but this story about Brown 'destroying' pensions is almost certainly nonsense.

"Tell that to my spouse!"

No, you tell him/her - to look at what really happened, and not to believe everything in the press or Tory propaganda.

re: 66 Red Lenin

very true; the way to do it would be to live in a country which has cheap living costs but earn your money from a country/client that has high wages by working remotely somehow, eg via the internet.

Back to the good old days of the brain-drain of the 1970's; this is one of the reasons why setting tax levels too high is a bad idea; when it gets to a certain level everyone who can move will move, and then the government ends up with no uk-based businesses and no high earners, hey presto most of the tax revenue disappears in a whiff of smoke.

These days there's a very large number of people who can work remotely in that way, so increasing taxes too much is much more damaging now than it used to be.

#70 moderateprogressive :

Would it not also be wonderful if they increased the 40% rate a bit, but at the same time halved the prescription charge and removed the residential care charges for those with long-term health problems ? I do not ever want a return to Old Labour, but a bit of honest socialism would not go amiss!

Together we could deal with the present short-term revenue problem, and get a bit more equity into the system.

(BTW, I must declare a personal interest in at least one of my suggestions).

74: i completely agree. no-one wants a return to 83%, but a more progressive taxation system would be both morally and politically astute.

71:its a fairly widely accepted consensus, currently being put into effect in the US with their rebate checks, and has been for around 80 years.

@59 - I work in pensions and you're right. Mortality, distorted bond returns, reductions in annuity rates (gilt yields), changing funding requirements and volatility in the markets have all had a far greater impact. Removing the ability to re-claim the tax credit on dividends has had an impact but not the one the Tories would like to claim.

People often look for easy scape goats for things they do not understand or cannot control. The fact is that because of the above factors the old days of stable final salary schemes is gone.

BTW if you look at previous comments I've made I am no fan of GB.

If the reporting was more even, this country might have seen the reality of Britain as it now is, and Brown Bottle et al would be joining the increasing numbers in the job queue.

As it is, the Beeb appears to be doing a trade on licence fees for PR. As Frank Fisher at the Guardian rightly says, "The Beeb's role should be to ask questions, not to frame the issues in a way that preserves mainstream political power".

Can we please have someone who gives a less biased view?

@68

Do you by any chance drink draught beer? I can think of now other reason for why there should be a possible exception, surely alchohol is alcohol. And you may feel that the comments about quango's are facile, but they're accurate. While some do a worthwhile job, most are just micromanagement for micromanagement's sake

@9

Well that's the elephant in the room isn't it. An obvious new source of tax (and thus money) but no one wants to go their because they'll be crucified by the Daily Heil

Wow, I can post comments again!

"53. At 1:27pm on 18 Jul 2008, moderateprogressive wrote:

51:

the last 6 to 12 months notwithstanding, we had the longest period of low inflation in living memory! as a result of mismanagement? despite high and condinued growth? i think not"

Of course, our low inflation during the past decade had nothing to do with global conditions - unlike the present dire straits in which we find our economy, according to Bean.

Re #66 Red Lenin
& #73 getridofgordonnow
"the way to do it would be to live in a country which has cheap living costs but earn your money from a country/client that has high wages ..."

Cross-border commuting is actually commoner than you appear to think. Within the EU there's quite a lot between Belgium, Luxemburg, France, Germany, Austria and the Netherlands in the places wherever there is a large conurbation near a border.

It's Switzerland where it's very common - especially around Basel, Lake Geneva, Lake Constance and in the Jura. The French even have their own word for it: frontalier.

Taxmen always find a way to share the take, of course.

"68. At 1:56pm on 18 Jul 2008, jimbrant wrote:

... Since it's difficult to identify areas where savings of any significance could be made in the short-term (in spite of facile comments on here about Quangos and so on)..."

Really, how do you know? I thought we employed Government ministers and civil servants to determine patterns of expenditure.

"the next election is the one to lose"

Yes, by us!

Cut spending, tighten belts, stop borrowing, live within your means. That will be me and you for some time to come.

Borrow, spend, tax, missmanage. That will be Clunker and Co until 2010 when they have no choice but to call an election.

But seeing as they are re-writing prudence and fiscal policy, don't be surprised if they find away of avoiding the next election under some pretense of 'National Emergency'!

Re #74 jimbrant
& #75 moderateprogressive
"no-one wants a return to 83%"

I agree with both of you that 40% shouldn't be an "absolute" ceiling, but get your facts straight, but one is needed. 50%, perhaps?

With the 15% unearned income surcharge, the top rate under the last "old" Labour government was 98%.

No surprise then that one of the few growth industries in the late '70s was tax accountancy!

80:

well no, of course the global economy was important, particuarly cheap goods from asia. brown benefitted from a prosperous economic environment - undoubtedly.

bank of england independance, allowing expert economists to ensure a close match between demand and supply, was also beneficial, as was the encouraging of increased labour supply, through the provision of child-care to single mothers, liberal immigration etc.

yes brown took credit that in truth wasnt 100% realistic - but would you really expect any politician to say no, actually, i had nothing to do with it, please elect the tories at the next election. would a man so truthful and decent and disdainful of spin as david cameron do differently? a man who claims he is green whilst having a car follow him to work? who goes to the arctic for a pretty photo-op, ignoring the damage caused by flying there? who wears four sets of a clothes at a party conference?

reminds me a little of the 1992 election where the tories won after a scare-campaign, promising no tax rises, and shortly afterwards increasing taxes

none of this, of course, changes the fact that current inflation is not home-grown.

@moderateprogressive and jimbrant

How about leaving us higher earners the hell alone?

I have spent the last 16 years investing my earnings into college and nightschool, I left school with no GCSE's graded over a D, bucked my ideas up at college and went through a succession of low-paid jobs before I got myself on the IT ladder and climbed it.

My reward for continually investing in myself and my future? Getting taxed more.

I haze zero problems in helping those who genuinely can't work, helping people gain qualifications to improve their lives, but I'm fed up at being a soft target because I had the temerity to become a success.

When I see some of the dealers on the local estates raking in cash from dodgy beer, fags and drugs whilst on the dole and with partners screwing the benefits systems every way they can, part funded by my taxes, I sometimes wonder why I bothered.

Really makes me bitter that.

#86 Frank_Castle

Is that draught bitter?

"Claim the credit for success / Pass the buck for failure." - that is what it is all about (as it ever was!)

The long line of continuous Tory governments since 1951 have progressively overseen the reduction of this country to near penury. Not that we were not bust after the war anyway - but at least we had a dream and that dream was the NHS - it may be flawed (and opposed by Churchill in 1951) but it is the best thing that has ever been done for the people of this country. It was not the product of middle of the road middle ground politics it was firmly Socialist.

Where are the principles now? In any of the Tory parties. It is all opportunism dressed up to look like conviction. 'Prudence' was doomed to die on the alter of free market economics. We used to talk of controlling the money supply - but we do not do so any longer etc. etc.

The holding of principled positions is a luxury that only a fringe party can hold, be it Green or BPN. What have we, the voters, done to politics to force the majority of our politicians to inhabit the grey middle ground? Why can't they stand for something any more?

Why is David Cameron totally unable to have any firm policy (other than not to have any firm policies!) Why is Gordon Brown scared of the Calvinist Scottish religion of his birth?

For the sake of the Nation please stand for something other than being prepared to do anything to get elected and board the gravy train- have some courage. Are they all mice?!!!!

Economics is an art - a slight of hand - a question more of confidence than of any particular figure. Every figure is capable of being fiddled! So be it 40% or 50% or 30% who cares so long as they fiddle things with the PFI/PPP etc.

#59 Jim - you think that the assertion that Brown destroyed pension schemes is almost certainly nonsense.

I think that qualification "almost" gives the game away. Just like the one you gave elsewhere when you said that, as far as you knew, Blair didn't parade the falsity of an Iraq/Al Qeada link (when he did).

In relation to pensions, the Government was warned about the financial consequences on pension schemes of the loss of the tax credi pension had, up to that time, enjoyed. Gordon swiped away the tax credit in 1997. The justification for the swiping of this money was that companies would make-up the deficit through paying in higher contributions, which in most cases has happened. However the cost of this was the loss of the final-salary scheme, and reduced pensions in other cases.

The advice to Gordon in 1997 was that the changes he was to implement was likely to reduce the assets of the pension providers, and thus the pensions they could pay. In the event of a loss of asset value, pensioners or companies would have to pay in more to get the same pension.

The relevant documents showing the afvice Gorndon received are published on HM Treasury website. "Abolition of Tax Credits, July 1997 Budget"

I'm sure you know most of this already. The trouble is, it's a bit inconvenient.

Many of us noted your tame reporting of this Government's position when, in respect of the economic slowdown and rumours of a change in the fiscal rules, your options went no further than tax increases or further borrowing.

I see that you have now aimed to cover your back by your most recent addendum of an option which should, rightly, have appeared in your earlier reporting by offering "...they could slash public spending". And about time too. Your reputation for objective reporting (whatever it may have been!) is diminished by this episode.

But I sense that even now, by your use of hyperbole, 'slash' (public spending), means that you offer this as an undesirable thing, therefore still leaving as 'best' options tax increases (unlikely - not up front, anyway), or what presumably would be Brown's preference (I ignore Darling) for an alteration to the fiscal rules to allow additional borrowing. Why do you say 'slash'? Why not the more objective and sensible 'reduce'? Why not 'make savings'? Do you really want Brown to sink us further up to our necks in hideous debt, and also, as things will stand, our children and our children's children? You give Brown too easy a ride.

#89 Apologies for the typos. It comes from hitting the submit button a shade too early!

re: 86 Frank-Castle

It's not just high earners who don't like the idea of high earners being treated as a soft target.

A lot of aspiring people on low/middle incomes don't like it either, because it's a barrier to stop you from wanting to better yourself.

People need to remember national insurance too, which means that it's more like well over 50% income tax in reality, not 40%.

When you get much above 50% income tax that's the point at which most people believe it's not worth the effort of putting in extra work because the relative gain for the amount of effort often isn't worth it unless you suddenly jump to a mega-level of money. Get to around 65% and that's when people start to physically leave the country.

I've never understood why someone earning more money should be taxed at a higher rate, because it's effectively a punishment for doing well for yourself; if you earn it you should pay the same rate as everyone else. You earned it, why should you be penalized for working hard? Not fair I say, and stifles entrepreneurship and effort and is generally counter productive in the long run.

I reckon they should raise the threshold (massively) at which anyone starts to pay tax, have a single income tax rate, get rid of national insurance completely, and generally make the state less bloated and more efficient - That's all perfectly do-able, it's just a case of working out the precise mathematics/logistics of it. It'd be infinitely fairer all round, would be easier admin-wise and so save a huge amount of money, and would encourage people to be productive and people would have an incentive to better themselves.

Mind you, the idea of people wanting to better themselves is totally against everything that labour stand for, so I can't see anything like that ever happening under labour.

What is jimbrant talking about?

How can the pensions problem only be down to an increase in longevity?

A tax credit was removed at a stroke from pensions funding. That's an unplanned, unfunded removal of cash from the pension system. By your ExChancellor.

Now we have the worst budget deficit since 1946 for the three months to June - an issue you seem to have little comment about other than to say percentages are arbitary. This is not low by relative standards it's the highest it's been for over sixty years.

We also have the second highest current account deficit in the European Union after Spain ... a country heading rapidly into recession.

You're always asking for evidence to support cases on these posts but you appear to be unwilling to address the rather compelling evidence against the alleged 'prudence' of your ex chancellor.

He was the most profligate chancellor since the war and it was money we patently didn't have an he is now having to borrow.

It might be hindsight, but I think that removing the tax credit for pensions was always going to have serious consequences for them.

Allowing companies to choose between make more profit or reinvesting the money into pensions was only ever going to end in one outcome.

Even when it was obvious what was happening, Brown refused to back down. Pensions were destroyed on his watch, as a consequence of his decisions.

Brown destroyed pensions.

#89 TerryNo2:

pensions - see #76 gottwald for what is probably a more informed view than mine.

You have to distinguish between major and minor influences, and short and long term effects, and look at the overall situation and not take single measures in isolation. I was aware of the advice you quote, and I don't think you give all of it. You also forget that it was the previous government that started the process, for very sound economic reasons. The tax concession was I think widely seen as a distorting economic influence.

al Quaeda/Saddam link - please give your evidence that Blair made such a claim. I'm not aware of it, and would be genuinely interested.

BTW, I said 'almost certainly' because I rather object to the unwarranted certainty that is often displayed here. Very few, if any, of us are real experts in the areas on which we comment, and I try (but often fail) to display a bit of humility in recognition of that fact.

This is another nail in Gordon Brown's reputation. All the Conservatives' accusations about how New Labour have failed to put money away in 'the times of plenty' are being proven right. I sense he's the kind of man who will care how he's judged by history. Well right now, I think he'll be placed well down the prime ministerial pecking order, a country mile behind other failuresthe like Neville Chamberlain.

Nice idea #73 - getridofgordonnow until you factor in the exchange rate. My pitance from the UK has remained steady this year but it buys 20% less now because of pressure on the pound.

Re #92 getridofgordonnow

I agree that there should be a limit and that about 50% is the point where problems of killing the golden goose starts. I also accept that NI contributions are effectively a myth and consolidating them with income tax as all PAYE systems already do makes sense. Sadly, no chancellor is yet brave enough to court the headlines it would produce in the red tops.

I really don't see why you think a single rate would make anything much simpler, as the vast majority is collected through PAYE nowadays and it's no big deal for a computer to calculate the amounts while keeping track of thresholds.

If you're a one-man band using PAYE tables to collect your own taxes manually on HMRC's behalf I do have some sympathy, having been there in the '80s, but that is relevant to a very few.

The only really good idea implemented during Brown's chancellorship was the 10% starting rate, which removed a negative barrier to going off benefit.

Rather than the crazy array of Tax Credits to which NuLabour are committed, that idea and the whole benefits system should have been (and still could be) consolidated into a single system using negative tax rates and so both collecting taxes and paying benefits and pensions at the same time. It's not rocket science, but arguably beyond HMRC's current IT people. Such a system could be as prograssive as our political overlords wished.

The whole point would be fairness to all and would ensure that everyone who earned an extra pound would get to keep some of it - essential if you wish people to come off benefits of their own accord.

#94 Wopitt:

I have said before that this is a complex area, but to ry to put it in simple terms:

1. The tax change didn't just encourage firms to make bigger profits, it encouraged them to put those profits into investment rather than dividends. This is I think widely seen as being a 'good thing' for the economy more generally, and therefore for pension schemes in the medium and long term. That is why the previous government had started the process themselves, and done about a third of the job (I think).

2. The tax change has been (IMO) a very minor element in the damage done to pensions, if it played any part at all except in the very short term. The major influences were increased longevity (especially), the effects of firms reducing the reserves in their pension schemes in accordance with government policy in the 90's, and the financial environment alluded to by gottwald at#76.

I think I saw somebody ask how changes in longevity could affect pension schemes. I would have thought it was obvious, but to give a simple explanation if a scheme was based on a pensioner retiring at 65 and then living to 74, it would arrange its finances to pay a pension for 9 years. If it turned out that the average pensioner actually lives until age 77, the pension would have to be paid for 12 years - a 33% increase in cost. That effect dwarfs the influence of any action by Brown.

"85. At 3:28pm on 18 Jul 2008, moderateprogressive wrote:

80:

"well no, of course the global economy was important, particuarly cheap goods from asia. brown benefitted from a prosperous economic environment - undoubtedly."

Fine.

"bank of england independance, allowing expert economists to ensure a close match between demand and supply, was also beneficial, as was the encouraging of increased labour supply, through the provision of child-care to single mothers, liberal immigration etc."

And, as a result of low interest rates, arguably artificially low, and lax regulatory conditions, individuals were encouraged to borrow to purchase property - in many cases, beyond their means. This inevitably lead to huge house price inflation, conveniently omitted from Government Price Indices.

"yes brown took credit that in truth wasnt 100% realistic - "

Good. We agree on this.

"but would you really expect any politician to say no, actually, i had nothing to do with it, please elect the tories at the next election. would a man so truthful and decent and disdainful of spin as david cameron do differently? a man who claims he is green whilst having a car follow him to work? who goes to the arctic for a pretty photo-op, ignoring the damage caused by flying there? who wears four sets of a clothes at a party conference?"

This mini-rant about Cameron seems irrelevant to the present discussion. Brown has been 'in charge' of Government finances fo 11+ years. I'll wait until Cameron is in power before deciding what he will or will not spin. Brown's actions, particularly on borrowing and off-balance sheet fiddles (for example, PFI and public sector pensions) have made a major contribution to the current situation where even more borrowing is needed.

"reminds me a little of the 1992 election where the tories won after a scare-campaign, promising no tax rises, and shortly afterwards increasing taxes"

NuLab would never do such a thing...

"none of this, of course, changes the fact that current inflation is not home-grown."

A rather sweeping statement. I don't know to what extent inflation is home grown, but, for example, I don't see how Council Tax inflation is anything but that (of course, it's a tax and therefore doesn't count in the calculations).

If the Government has to borrow more, one result is likely be higher inflation, partly as a consequence of a devalued currency.