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Think pensions to get one up on Chancellor


darlingblog1.jpgTax: it’s all getting a bit of a drag. The number of people paying the highest level of income tax has almost doubled since Labour came to power, according to recent statistics.

“Fiscal drag” — a fancy name for failing to uprate tax thresholds and allowances in line with wage inflation — has meant that many hundreds of thousands of middle earners (such as higher-paid teachers, nurses, police officers and many civil servants) have been trapped into paying 40 pence to the Exchequer for every pound on some of their earnings.

Around 3.7 million people are estimated to pay higher-rate tax, up from just over two million in 1997.

That figure, estimates the Institute for Fiscal Studies, will rise to more than 4 million by the end of the current tax year, due to fiscal drag alone. Indeed, the individual taxpayer has borne the brunt of Labour’s tax policies, according to a report by accountancy firm BDO Stoy Hayward released to coincide with “tax freedom day” earlier this month.

Little substance to mortgage lenders “help” for borrowers


houses2.jpgThe trade body for the mortgage industry has written to the Chancellor of the Exchequer. In its letter to Alistair Darling, the Council of Mortgage Lenders (CML) outlines the range of steps that lenders are, apparently, taking to minimise problems borrowers may face in the wake of the credit crunch — and help limit the number of property repossessions. Its members have committed to four “significant specific measures”. These are, in the CML’s own words:

* To analyse their existing arrears management policies and implement any changes identified as a result of the industry guidance which we (the CML) are preparing. The guidance will be informed by the feedback we receive from the FSA (Financial Services Authority) on its thematic work on arrears management. We hope the industry guidance will in due course be confirmed by the FSA, but we are at a very early stage of this process.

Dear Chancellor… What would be in your letter to Darling?


darling.jpgLabour might appear to have calmed the storm over the scrapping of the 10 percent income tax rate for now. But new research shows the extent to which Britons are peeved about the level of income tax.

When asked what would be their key requests of Chancellor Alistair Darling, the largest proportion of more than 3,000 people polled for — 31 percent — said they’d like to see a cut in income tax. And, it seems, many Britons feel an obligation to help the less well-heeled: while 12 percent would like to see it reduced for everyone, 19 percent want a cut for less affluent sections of society.

Wednesday’s front pages


indycut2.jpgThe crucial poll win in Pennsylvania by US presidential hopeful Hillary Clinton came too late for many newspapers, who predominantly went instead with rising food prices and fears for a missing boy in Wednesday’s headlines.

THE INDEPENDENT: The Chilling Message From Zimbabwe’s Church Leaders

The paper runs a dramatic quote in red and black letters which says: “If nothing is done to help the people of Zimbabwe, we shall soon be witnessing genocide similar to that in Kenya and Rwanda.” Story here.

Media round-up: Taxing times for “Incapability Brown”


brownportrait.jpg******Gordon Brown returns to Westminster today facing a host of negative headlines describing him as a ditherer who has failed to make his mark as prime minister.******The Telegraph reckons Brown’s “failure to define what he stands for is provoking despair even among his loyal supporters” and charts his evolution from a dominant figure in politics under Tony Blair to “Incapability Gordon Brown”.******While Foreign Secretary David Miliband asserts that Brown has “strong values and convictions”, bets are already on for who would be odds-on favourite to take over.******Brown’s cut in the basic tax rate, announced in the 2007 budget, was to be paid for, at least in part, by the abolition of the 10 percent tax rate, but the plan has now turned into a “calculated tax ploy that mutated into a monster”, according to the Independent.******The olive branch offered by Chancellor Alistair Darling to quell the rebellion has prompted outrage, the paper says. It quotes Frank Field, the former minister leading demands for a package of social help for the poorest earners, as saying the measures offered were insufficient. “The talk about bringing forward a package this year or maybe next year just will not do,” Field said.******“If the rebels prevail, Brown could be ousted in days” is The Guardian’s take on Brown’s woes. “For Labour to have scheduled the vote on the 10p tax rate days ahead of the local elections, and with London on a knife edge, seems an act of incompetence so breathtaking that I’m left wondering whether it’s a Baldrick-like cunning plan,” columnist Jackie Ashley writes.******But there is some caution against rushing into finding a new leader. Tribune’s Joan Smith draws parallels to hapless former Prime Minister Anthony Eden: “As the Tories discovered in 1955, some people are not temperamentally suited to the top job and that will almost certainly be posterity’s verdict on Gordon Brown,” she writes. “And while it’s amusing to watch all the people who used to talk up the PM-in-waiting as they scramble to explain their man’s failures, it does leave Labour with a very big problem” — who would be best to replace him?

Consumers go it alone as storm clouds gather


storms21.jpgThe dust has settled on Alistair Darling’s first Budget and consumers have been given little reason for celebration. The Chancellor, though announcing various measures designed to increase housing affordability, has done nothing to help the masses.

There were no moves to give a helping hand to hard-pressed householders, already struggling amid rocketing mortgage, food, fuel and tax costs, to ride out an impending recession. Darling did pledge to introduce a savings scheme targeted at low and moderate earners, often least able to save: the “saving gateway” will attract government matching for savings over the duration of people’s participation in the scheme. This has the potential to introduce up to eight million people into mainstream savings in the UK who otherwise might not make thrift a priority.

Another “slap in face with wet kipper” Budget


francesca-lagerberg-2.jpgBy Francesca Lagerberg, head of the national tax office, Grant Thornton

Most Budgets have all the attraction of being slapped in the face with a wet kipper and sadly this one is unlikely to reverse the trend. As expected, from today up goes the cost of booze (4p on a pint) and fags (11p on a packet). Also for those who like driving larger less-green new cars there is a “showroom” tax coming in from 2009 that could cost them around 950 pounds.

However, for the entrepreneur there was a little cheer. After strong representations from business, Chancellor Alistair Darling has deferred the “income shifting” rules that were due to start from this April. These were a direct attack on family-owned businesses that include lower tax paying family members who take out dividends or profits but make a less significant contribution to the business. A case last year (Jones v Garnett) went against the government and it was looking to legislate to get the result it wanted. The proposals were wide-ranging and ill-targeted. A deferral will hopefully allow time to revisit this whole approach.