David Cameron is fond of saying that u-turns are not a problem, they are actually a sign of strength and a government that listens to voters and is willing to change its mind.
He may be right: voters stuck with him through a spate of u-turns early in the government’s life – on selling off national forests, on GP commissioning, on sentencing. But today we have three in one day – will this now start to look like a government that doesn’t know what it’s doing?
The key may lie in the way in which the u-turn is handled. When he announced he was abandoning plans to offer 50 per cent discounts on sentences for offenders who offer guilty pleas, Ken Clarke united the House in laughter by telling MPs:
I have done a few u-turns in my time, and they should be done with purpose and panache when you have to do them.
The data released last night on how much the super-rich paid in tax in 2010-11 was fascinating. As Robert Peston comments on his blog, getting this information out of the last government was nigh-on impossible, as Labour didn’t want to put wealthy people’s tax affairs in the spotlight. So it is an amazing irony that it is a Conservative-Lib Dem coalition that is choosing to do so instead, as it looks to bolster support for its unpopular decision to cap tax reliefs, which will impact on charitable giving.
The Treasury released the data in an attempt to show us how much rich people avoid tax. George Osborne told the Telegraph that when he saw these figures he was “shocked”. And certainly there are some shocking figures within them, such as that thousands of people in the 50p tax band actually pay less than 20 per cent tax. Twelve people who are mega-rich, earning over £10m, even pay less than 10 per cent. Read more
David Cameron today repeated the claim his spokesman made yesterday that one of the reasons for the cap on tax reliefs was that some wealthy people were putting money into bogus offshore charities as a way of reducing tax.
The prime minister said:
I’m quite convinced we can get the balance right increasing philanthropy and charitable giving, which is an important part of our culture which I want to see expanded, and making sure the tax system isn’t abused.
The government’s comments on this have been met with confusion: if bogus charities were in operation, why didn’t the Charity Commission stamp them out?
The answer, strangely, lies in a legal case launched by a German man, Hein Persche, against his local tax office in the province of Lüdenscheid, in 2009. Read more
The reason was that certain individuals in this country on very high incomes are exploiting some of these reliefs to reduce their tax burden.
But surely the whole point of offering tax reliefs on charitable donations is to encourage wealthy individuals to give donations by allowing them to reduce their tax burden? The PM’s spokesman explained that it was not just use, but abuse of these reliefs that was concerning the government: Read more
Welcome to the FT’s rolling coverage of the UK Budget.
By Kiran Stacey at Westminster and Gordon Smith, Michael Hunter, Darren Dodd, Tom Burgis and Ben Fenton on the FT news desk.
All times are GMT.
16.45 So, that is about it for the live blog. The main FT coverage can be found in the usual place.
We thought we would leave you with a small image of what life in the Financial Times London newsroom is like on Budget Day. Below, you can see Chris Giles, economics editor, briefing the rest of us on what it all means. This picture was taken less than two minutes after the Chancellor sat down at 13.29.
So, from the FT live news desk, enjoy digesting the ramifications of the 2012 Budget, whether you are an outraged pensioner, a relieved 1-percenter or the Chancellor of the Exchequer. FT Live Blogs will be back just as soon as something big enough breaks. Goodnight.
Chris Giles briefs the Budget team on what it all means. Chris is the figure in a light grey shirt immediately below the left-hand TV image of George Osborne.
16.25 John Authers and Martin Wolf parse the 2012 Budget
16.06 The top trending phrase on Twitter in the UK at present is #grannytax.
And one of the main users of Twitter, Lord Prescott, has his say on the Budget.
Cameron gives 14,000 millionaires (him & Osborne included) a £40k tax cut funded by grannies. Shameful #giveitbackdave#grannytax
15.57 This was a budget, opines the FT’s Philip Stephens
that was in part “about George Osborne’s ambitions to establish
himself as David Cameron’s heir apparent”.
The chancellor talked about a Budget to put Britain back to work, but
the measure most likely to stick in the public mind was the cut from
50 per cent to 45 per cent in the top rate of income tax. It marked a
tilt to the tax-cutting right that he hopes will build his support on
the Thatcherite wing of the Tory party.
15.52 Podcast time.
15.48 Our colleagues over at FT Alphaville have been going through the
Budget documents and have found the official issuance plans for the
Osborne super-long bond.
The question, it seems, is not how long the bond should be, but how
Tim Farron, the Lib Dem president, told me yesterday:
I suspect that we are going to see a Budget which has got more Liberal Democrat stuff in it than Tory. The amount of money being returned to individuals will go overwhelmingly to middle and lower income earners.
The Lib Dems have made raising the personal tax allowance (what you can get paid without paying income tax) one of their flagship policies. So when George Osborne says at the Budget in two days’ time that he will raise that allowance beyond inflation, it should be a major victory for the junior coalition party.
It is interesting therefore, to take note of a piece of research published today by CentreForum, a think tank with close ties to the Lib Dems, showing that raising the tax threshold* to £10,000 (the eventual aim), would not be especially progressive. It fares especially badly when compared to an alternative proposal, to lift tax credits instead, which would cost the same amount of money.
The think tank produced the following table detailing who benefits from either move, which paints the difference in stark terms: Read more
Labour MP Sharon Hodgson was given short shrift from the prime minister today when she asked David Cameron whether the following statement was true:
The problem is policy is being run by two public school boys who don’t know what it’s like to go to the supermarket and have to put things back on the shelves because they can’t afford it for their children’s lunchboxes. What’s worse, they don’t care either
The prime minister told the MP for Washington and Sunderland West to celebrate the fact Nissan is building a new car in Britain rather that focusing on “whatever nonsense” she had read out.
That “nonsense” actually came from his own benches in the form of the rebellious and outspoken Nadine Dorries – she made the comments to my colleague Kiran Stacey this week when asked to discuss child benefit. Hers is not a lone voice: Mark Pritchard, MP for the Wrekin, also made similar remarks to the FT about the prime minister a few days ago. Read more
I wrote earlier this week about the options open to ministers for solving the child benefit conundrum.
To recap, the government’s current proposals to axe child benefit for higher earners lead to two problems:
Families with one person earning above the threshold (around £42,000) will lose their benefit, but those with two earning just below it will keep it.
The lack of any tapering means it will become a disincentive to earn a promotion that takes you just above the £42,000 mark.
The most likely answer appears to be that George Osborne will find some extra money to move the threshold to £50,000 instead. But that solves neither issue, only moves the problem higher up the income scale.
But another proposal is floating round the Treasury: to reverse the plan altogether and instead cap child benefit at a certain number of children (most likely to be three). Read more
1) The fairness issue. Under the current plans, a family where one person earns £43,000 and the other person receives nothing would lose the benefit, but one where both people earn £42,500 still received it.
2) The cliff edge. If you earn just below the higher-rate threshold, you actually lose money by getting a small pay-rise, because you will suddenly lose all your child benefit.
Various solutions have been floated to these two problems.
The first is that you could lift the threshold for losing child benefit to £50,000, essentially making sure it hits a smaller, wealthier section of the population. But apart from the money it costs, this actually solves neither of the above problems. Ministers might see it as a good and simple way to generate some more positive feeling around this policy, but it doesn’t fix the major issues at all.
I wrote this week about talks between the Tories and Lib Dems about the possibility of lowering the cap for how much workers can put into their pension pots while still enjoying tax relief.
Since then a couple of pensions experts have got in touch to explain some further implications of the measure, which mean that for two reasons, it could be more controversial than I first realised.
Firstly, I suggested that people enjoying the maximum 50% tax break enjoy a 50p top-up to their pension pot for every £1 they put in.
In fact, the relief is worth even more, because the amount is a tax relief calculated on pre-tax income. So if you qualify for the 50% relief, and put in £1, your tax is waived, meaning that the government has essentially put in 50p of the £1 you put it. Cancelling this for some people would therefore be even more of a blow than I first calculated.
The problem is, this will cost money – £4bn if it’s done by 2015, £5.5bn if it’s done by 2014 – and there isn’t much of it floating around. Lib Dems will tell you they are keen on two options to pay for this: one is to clamp down on tax avoidance; the other is to tax the pension contributions made by higher earners.
Both options are likely to make some kind of appearance in the Budget in March. But it is the latter that raises the serious money, and carries potentially serious risks for the coalition. Read more
Jim Pickard is the FT's chief political correspondent, having joined the lobby team in January 2008. He has been at the FT since 1999 as a regional correspondent, assistant UK news editor and property correspondent.
Kiran Stacey is an FT political correspondent, having joined the lobby in 2011. He started at the FT as a graduate trainee in 2008, working on desks including UK companies and US equity markets before taking over the FT's Energy Source blog.