Category: Tax

Tuition fees policy contrary to Jesus’s teaching – bishop

December 15, 2010 11:42 am by Jim Pickard

As I had predicted, the coalition yesterday lost a minor vote on the chief coroner but won an easy victory over tuition fees. I watched the debate from the press gallery in the Lords, which was more packed than usual.

There were some robust defences of the policy from coalition peers, including Lord (Paddy) Ashdown, who argued: “We do not complain when young people have to take out a mortgage debt of £150,000 or £200,000 to buy their house. This is not like a credit card debt; it is much more like a mortgage.”

But perhaps the most striking speech was by the Bishop of Lincoln*, who described the hiking of tuition fees as “deeply flawed”.

Those reasons offered indicate an attitude to higher education which is radically different-the phrase “game-changer” has been used-from anything that we have known before and is deeply troubling to those of us who see education as a key component in human flourishing; that life in all its fullness which Jesus came to bring.

We hear it argued that it is the individual student who benefits from higher education, so it is reasonable for the student to pay, albeit not up front-thank goodness-but eventually, through a repayment of loans. But that flies in the face of everything that we believe and cherish when it comes to what higher education is all about and why it matters.

Later, Lord Pattern, vice-chancellor of Oxford, said: “On this occasion, I am afraid that I do not agree with Jesus.” Technically speaking he was referring to the views of Lord Krebs, principal of Jesus College, Oxford, who had just spoken on the Labour side.

* He also has a wider remit as chair of the Church of England’s board of education

Posted in Tax, Treasury, UK economy, UK politics | Permalink

Local government cuts are steeper than they seem

December 13, 2010 5:41 pm by Jim Pickard

It turns out today that cuts to local government “spending power” will only be 4.4 per cent on average next year across Britain’s councils. So says Eric Pickles and his DCLG department. This sounds great compared to the figure floating around recently about a 10 per cent cut for the same period.

Except this is looking at apples and pears.

The DCLG has come up with the “spending power” figure to include all council income streams, including council tax – which will stay the same in the coming years. (This measure will also include “specific grants*”). Under this calculation, no council will endure more than 8.9 per cent cuts this year or next.

Pickles argues that this is the right way to view council finance given that some authorities get most of their money from council tax and others do not.

Yet the more important number here is the formula grant, which is the £29bn a year given by Whitehall to local government. It is this number which is falling substantially – by 27 per cent – over the next four years as a result of the spending review. The deepest cuts are in some of Britain’s most deprived regions, reflecting their heavier dependence on this central grant.

I’ve checked with DCLG and the cut to the formula grant this year will still be, on average, about 10 per cent, despite council pleas to Mr Pickles not to “front-load” the cuts to the first year of the four-year period. Some local authorities will be cut by 17 per cent in the same period.

To illustrate my point, visit this official breakdown and take one council at random: Wakefield. Supposedly its budget is falling by just 4.7 per cent between this year and next. Except the formula grant is dropping from £159m to £139.8m – which is a drop of 12 per cent in spending from central government. Many other councils are in a similar situation.

It will probably take a day or two for councils, or the LGA, to work out the full details of grant cuts across the whole of local government; it should make an interesting read.

(There is also another £85m for the coming year as a transition grant for those councils which depend heavily on the central grant. It’s still miniscule compared to the £29bn total, however).

* There is no obvious pattern to cuts in “specific grants” over the period, although I notice that Manchester’s will fall from £88.5m to £55.4m – a drop of 38 per cent.

Tags: Councils, Cuts, dclg, eric pickles, Local authorities, local government, spending cuts
Posted in Further reading, Recession, Tax, Treasury, UK economy, UK politics | Permalink

Ed Miliband and his first monthly press conference

December 13, 2010 11:53 am by Jim Pickard

It was a relief to Ed Miliband that his defeated elder brother took a step back from frontline politics after losing the Labour leadership race in September. But David Miliband has remained, like Banquo at the feast, a visible presence on the backbenches from where he could – at some theoretical later date – still return to wreak revenge.

A survey in yesterday’s Sunday Times makes troubling reading for Ed. It suggests that 12 per cent of the public think Ed would be the better Labour leader, far below the 37 per cent for David. That is a very similar finding to surveys published during the summer.

Meanwhile pollsters found that 40 per cent of the public do not rate Ed Miliband’s leadership skills, compared to 27 per cent who do.

Back then Ed’s allies shrugged off those polls. Within a few months, they argued, people would have seen Ed in action and would have warmed to him. (David’s position as foreign secretary had given him a higher profile).

That shift in public opinion does not seem to have happened, however, although Labour as a party is now consistently ahead in the polls. The unknown unknown is where Labour would be polling if it had a more charismatic and decisive leader.

David is keeping his powder dry in terms of any remaining Labour ambitions. This morning he was quoted in his local newspaper saying:

“I’ve got to admit I wish the leadership campaign had gone differently, but who knows what will happen in the future?…I think Ed’s done well. It’s a very difficult job being the leader of the
Continue reading: “Ed Miliband and his first monthly press conference”

Posted in Further reading, Recession, Tax, Treasury, UK economy, UK politics | Permalink

The impending leap in public sector pension contributions

December 10, 2010 7:28 am by Jim Pickard

This is one of those subjects which seems rather dry until the consequences are spelled out in your monthly pay cheque.

Yet the implication of an official document published on Thursday is jaw-dropping. That is: that many state workers could see their pension contributions more than double in the future.

Lord Hutton’s interim report into public sector pensions has already recommended that pension contributions by state workers should rise in April 2012 by 3 per centage points from their current level (typically between 3 and 11 per cent of pay depending on the job). This is to remedy an imbalance between employee/employer contributions. But will the increase stop there?

With riots outside and conflict in the Commons yesterday was a fantastic day to bury dull but important news. And the Treasury did indeed release its consultation paper “on the discount rate used to set unfunded public service pension contributions“.

Continue reading: “The impending leap in public sector pension contributions”

Posted in Tax, Treasury, UK economy, UK politics | Permalink

OBR: tax avoidance clampdown will make no difference

November 29, 2010 4:51 pm by Alex Barker

Here’s another example of the OBR shrugging its shoulders at coalition policy.

The Office of Budget Responsibility reviews the Lib Dem-backed crackdown on tax avoidance and concludes that it will have no impact on compliance rates.

This is a bit embarrassing for the Treasury, particularly given they expect the policy to raise at least £7bn by the end of the parliament. Much like the coalition immigration policy, the OBR is almost saying the government may as well have not bothered.

They of course put it in a slightly more diplomatic way:

The Spending Review 2010 settlement for HMRC included overall resource savings of 15 per cent. This assumed 25 per cent efficiency savings and a £900 million investment to addressthe tax gap and tackle tax avoidance and evasion.

This included measures to increase criminal prosecutions, tackle offshore evasion, extend HMRC’s coverage of high risk areas and the greateruse of debt collection agencies.

Inevitably there are always large uncertainties about the effects of both the efficiency savingsand additional investment. As a result, we have not included the impact from either factor in the November forecast.

Tags: Danny Alexander, Liberal Democrats, Office of Budget Responsibility, tax avoidance, tax evasion
Posted in Coalition, Tax, Treasury, UK economy | Permalink

Osborne’s paean to the Irish economy

November 17, 2010 3:02 pm by Alex Barker

Here is a fine example of the dangers of politicians writing seemingly innocuous op-eds for newspapers.

Ahead of a trip to Dublin in 2006, George Osborne used an article in The Times to pay homage to the Irish boom. The opening paragraph about Ireland’s “shining example” to economic policymakers is a classic:

A generation ago, the very idea that a British politician would go to Ireland to see how to run an economy would have been laughable. The Irish Republic was seen as Britain’s poor and troubled country cousin, a rural backwater on the edge of Europe. Today things are different. Ireland stands as a shining example of the art of the possible in long-term economic policymaking, and that is why I am in Dublin: to listen and to learn.

The conclusion is almost as cringeworthy:

The new global economy poses real long-term challenges to Britain, but also real opportunities for us to prosper and succeed. In Ireland they understand this.

They have freed their markets, developed the skills of their workforce, encouraged enterprise and innovation and created a dynamic economy. They have much to teach us, if only we are willing to learn.

To be fair to Osborne, many of his arguments are still valid even after the crash.

A well educated workforce, top notch R&D investment, and competitive tax rates to encourage investment are all as important now as they were during the boom years.

But there is not a word of caution about potential imbalanaces in the economy. No mention of the racy property market, reckless lending, or his views on the dangers to Ireland from having joined the Euro.

Continue reading: “Osborne’s paean to the Irish economy”

Tags: George Osborne, Ireland
Posted in Conservatives, Europe, Tax, Treasury | Permalink

The questions for IDS in his plan to give hard labour to workless

November 7, 2010 11:46 am by Jim Pickard

I am trying to take my eyes off the Mail’s scoop on Tony Blair giving a £50,000 lecture to toilet roll and disinfectant manufacturers – and instead concentrate on the big issue of the day. That is, Iain Duncan Smith’s plan to make the workless do manual labour in return for their dole money.

It throws up plenty of questions. Namely:

1] How much will it cost to find the work and ensure that claimants are carrying it out? Bear in mind that there are now 1.5m people on Jobseekers’ Allowance. (A total of 5m are on some form of out-of-work allowance, of which 2.5m are on incapacity benefit). If all are put through this system it would surely cost billions of pounds to administrate.

UPDATE: It will only apply to a small minority of claimants. The scheme may prove to be rather symbolic.

2] Will the entire scheme instead only apply to a handful of the unemployed? To quote the Sunday Times: “Job advisers will be given powers to send benefits claimants on placements“. That sounds discretionary rather than universal.

UPDATE: Indeed. The DWP tells me this scheme only applies to those who aren’t trying hard to find a job. “It gives advisers more discretion when someone is not working at trying to find a job,” says a spokeswoman.

3] What kind of work will they be doing? The theory is that each will have to do four weeks of work at 30 hours a week – that is a block of 120 hours’ labour.

UPDATE: The scheme would be carried out by councils, companies, charities and other voluntary groups. Yet none have signed up to the deal or – it seems – even been approached, according to the DWP. It is still very early days as to how this would work, it seems. Don’t be surprised if the scheme ends up in the hands of existing welfare-to-work providers.

4] Will any of this be economically productive? If so, how will they match people’s skills with the requisite work? (It’s a complicated challenge).

5] Will companies be able to take advantage of the unemployed by getting them to work for almost nothing? Does that leave people open to exploitation?

6] Is the scheme as radical as it sounds or do officials already have similar powers?

UPDATE: The latter. “Advisers do have powers in place at the moment, but they are not very widely used,” says the DWP. I’ve done a bit of research and it turns out that Labour’s “Flexible New Deal” – which was around last year – forced people to do ‘four weeks’ work experience’ .

7] If it is not economically productive, will it all be fruitless Keynesian tasks such as litter-picking, digging holes or rolling boulders up hills and back again?

8] Will the policy only apply to those who have been out of work for a certain length of time? If so how long?

UPDATE: Yes, it is aimed at those who show no interest or application in finding a job. But defining such individuals is down to their advisers – which implies a rather arbitrary judgment. Some officials will doubtless be tougher than others.

9] How often will they have to do the hard labour? Once a year? Every six months? Every five years?

UPDATE: It is still not clear

10] Does it only apply to “layabouts” (the phrase in the Sunday Times) and “no-hopers” (News of the World)? Or will the 1m currently in work – but expected to lose their jobs as a direct or indirect result of the spending review – also face the test?

UPDATE: In theory, no, at least not at first.

Posted in Further reading, Recession, Tax, Treasury, UK politics | Permalink

Will Woolas defeat set a bizarre precedent?

November 5, 2010 11:29 am by Jim Pickard

Phil Woolas has just lost an historic court case in which he was accused of making false claims before the general election. There will now be a re-election for his seat, which he won in May with a majority of just 103 votes.

The case was the first of its kind for a century.

As the FT reported last month:

Phil Woolas was re-elected by a slim majority in Oldham east and Saddleworth, beating the Liberal Democrat candidate Elwyn Watkins. Mr Watkins claims Mr Woolas made false statements about him in an attempt to influence the result.

The court heard that Mr Woolas’s campaign team aimed to “galvanise the white Sun vote” against Mr Watkins, claiming Mr Watkins had tried to “woo” and “pander” to Muslim fanatics and militants, the court was told.

Now the Labour MP has lost the case it will set a curious precedent for British elections, where mud-slinging is widespread and many candidates are thrifty with the actualité.

Without wanting to trivialise a no doubt serious case, where does Woolas’s defeat leave Britain’s political parties in future elections? Will their leaders have to muzzle all candidates for fear of twisting the truth?

Take this general election, where the Lib Dems made a fervent promise to protect tuition fees and prevent them from rising higher. It was a promise worth its weight in hot air. Should some of their MPs face fresh elections?

Continue reading: “Will Woolas defeat set a bizarre precedent?”

Tags: Election, Labour, Lib Dems, oldham, oldham east and saddleworth, Phil Woolas
Posted in Recession, Tax, Treasury, UK politics | Permalink

How BAE Systems locked ministers into ordering two aircraft carriers

November 4, 2010 3:54 pm by Jim Pickard

The letter published today by the Treasury – from BAE Systems to David Cameron – is a bombshell that explains in stark outline why ministers pressed ahead with an order for two aircraft carriers despite fiscal constraints.

Alex revealed a month ago that the contract was written in such a way that cancelling one of the ships would still leave taxpayers with a similar bill to proceeding with both.

As he wrote for the FT newspaper:

Mr Cameron had pressed Liam Fox, defence secretary, to recheck costs of the programme after expressing bafflement about one carrier being more expensive than two. The anomaly is caused by a “terms of business agreement” with BAE Systems that requires substitute work to be provided if the second carrier were to be cancelled.

Paul Waugh points out that the cost of both carriers was £5.2bn with the cost of one at £4.8bn, almost as much.

In fact the letter makes it clear that cancelling one of the carriers could have been even more expensive. This is because of “consequential costs”, including “rationalisation”, amounting to £690m because three yards would have to be closed with the loss of 5,000 jobs. Then there would be “additional rationalisation costs”. And finally, a potential termination liability.

The letter suggests that BAE Systems could be compensated in part through some alternative contracts for other kit (“the direct award of more work” might “ameliorate” the position) but this alone would not be enough.

As Andrew Tyrie, Treasury Select Committee chairman, has put it:

“This letter shows what an impossible position the government were put into by this contract. This is an absolutely crazy situation…we also need to know how to prevent this from ever happening again.”

Tags: BAE Systems, contract, cost, hawks, two carriers
Posted in Recession, Tax, Treasury, UK politics | Permalink

Look out Silicon Valley – here comes Lea Valley

November 4, 2010 11:47 am by Jim Pickard

For some inexplicable reason there were titters at the morning lobby press briefing when the prime minister’s spokesman said that a new technology city near the Olympic Park would “rival Silicon Valley (pictured)”.

David Cameron will say later today that:

“Right now, Silicon Valley is the leading place in the world for high-tech growth and innovation but there’s no reason why it has to be predominant.”

It is true that the government has done well by luring Google, Facebook, Intel and McKinsey to set up outposts at the new tech park by the River Lea. (Although BT politely declined, according to Guido). And there is nothing wrong with having ambitions, a la Field of Dreams (‘build it and they will come‘).

But Stratford (pictured) still has some way to go before it catches up with Silicon Valley, the Californian hub of American high-tech enterprise, which is home to the following 100-and-something companies (courtesy of Wikipedia).

Posted in Further reading, Tax, Treasury, UK politics | Permalink

David Cameron appoints yet another business figure

November 2, 2010 9:53 pm by Jim Pickard

New Labour was very fond of appointing business figures to ceremonial jobs as a way to convince the world that they understood enterprise.

It was also a cunning device to create diversionary “good news” when events were not going to plan. The trend reached its surreal peak when Gordon Brown appointed Alan Sugar as Lord Sugar and made him enterprise tsar – on the day that the beleaguered Labour prime minister was almost toppled by an uprising of his own ministers.

In the post-CSR environment, David Cameron and his team are determined to foster a climate of upbeat events and news stories to shift the focus off the deepest cuts for a generation. This may explain why the prime minister was planning to unveil a new wave of “trade ambassadors” next week to co-incide with a trip to the Far East. This news management has alas been spoiled this evening by FT columnist Mark Kleinman (also business editor of Sky) who reveals on his blog* that Richard Lambert, the outgoing director-general of the CBI, is one of them.

Continue reading: “David Cameron appoints yet another business figure”

Tags: business, cbi, Coalition, director-general, lambert, outgoing cbi director-general, richard lambert, trade adviser, trade ambassador, trade envoys
Posted in Further reading, Tax, Treasury, UK politics | Permalink

Mark Field MP prepares attack on ministers’ anti-City stance

November 2, 2010 3:52 pm by Jim Pickard

If you have not yet read Too Big to Fail, by Andrew Ross Sorkin, buy it now. The book – an account of the downfall of Bear Sterns and Lehman Brothers – explains the credit crunch in a clear way and reads like a thriller. It’s the best business book since Liar’s Poker or Barbarians at the Gate.

I’m reading it at the moment and it is a stark account of how unfettered casino capitalism nearly brought the financial system to its knees. It’s also a reminder of why politicians are so keen to rebalance the UK economy away from the City of London and towards regional industries.

Vince Cable was the most outspoken when – in his conference speech – he decried City workers as “spivs and gamblers“. Other ministers have followed suit in more moderate language.

The only problems with this admirable desire is that a] The City still accounts for a huge proportion of UK GDP (and jobs and tax take), b] Labour spent a decade trying and failing to revive industry, with manufacturing declining faster than it did under the previous Tory administration and c] There is little or no money left to subsidise ailing or fledgling industries in the regions.