Tax

Kiran Stacey

The Liberal Democrats have a problem. They have staked their colours clearly to the mast when it comes to raising the minimum threshold for income tax to £10,000. Most expect it to be done by the end of the parliament, if not by 2014.

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

Kiran Stacey

When George Osborne told the country last November that he was going to miss the target of eliminating the current structural deficit by 2015, Labour were quick to tell everyone how the chancellor’s economic gamble had failed.

Not only was Osborne having to borrow more to pay for this failure, the opposition claimed that he was even now having to borrow more than Alistair Darling would have done under his deficit reduction plan. That claim was illustrated by this graph, showing the course of borrowing under Darling’s 2010 plan and Osborne’s modified 2011 plan:

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Kiran Stacey

The FT reports this morning that payday lenders (or legal loan sharks as they are also known) have been flooding into the country looking to take advantage of hard-up recession-hit borrowers and the UK’s lax lending laws. Borrowing at rates of up to 5,000 per cent, customers can find their debts escalating at a startling pace.

Even though many other countries have interest rate caps, the UK has never gone down that route. The government has always said it is wary of implementing such a cap in case it pushes poor people into the hands of illegal loan sharks instead.

Labour MP Stella Creasy has also waged a long campaign to get the government to crack down on these companies, and now her campaign is gaining momentum. Read more

Welcome to the Westminster blog’s live coverage of chancellor George Osborne’s autumn statement. One of the most eagerly anticipated statements since the coalition government took power was expected to offer a gloomy prognosis on the economy. Michael Hunter and Gordon Smith from the FT main newsdesk covered the statement live from 12.30 with additional comment from FT colleagues.

14.10 Thanks for joining us. You can find much more, including the full text of the chancellor’s speech and comprehensive analysis, including video interviews, at www.ft.com/autumn2011Read more

Kiran Stacey

Unless there is a last minute U-turn in Whitehall tonight, one of the ways which George Osborne will pay for the various jobs and infrastructure schemes in Tuesday’s growth review will be to squeeze tax credits.

This is a result of protracted bargaining – Osborne wanted to freeze benefits, but the combined efforts of the Lib Dems and Iain Duncan Smith put a stop to that. Eventually the compromise was made that credits would come under the axeman’s blade instead.

So who suffers if these are frozen or cut? Read more

Kiran Stacey

It was an intriguing PMQs today. As I have previously noted, Ed Miliband has begun to find his feet on the economy, and once again used this as his main attack line.

As he has done at previous sessions he chose an obscure policy that has achieved little so far (this time the “business growth fund”, which was set up using money from the Merlin agreement), and used it to embarrass the PM.

As has happened before, Cameron didn’t know what the policy was (in fact at the end, he started talking about the Regional Growth Fund – a different fund altogether). So when asked how many businesses the fund had invested in, he was unable to answer. Read more

Kiran Stacey

Here’s a sentence to set alarm bells ringing: the Department for Work and Pensions is currently undertaking a rather large and important IT project to change the way people can claim benefits.

As part of the project to roll up all the various benefits and tax credits people receive into one “Universal Credit”, DWP is creating a new system that would allow people to log in online, fill in some basic details and quickly calculate how much they can claim. The money will then be paid automatically into their bank account. Read more

Jim Pickard

Is George Osborne planning to scrap the 50p income tax rate? Yes.

But not today, nor tomorrow. Not this month, or next. Not even before Christmas. The move may not even take place next year.

The rate – which applies to those earning £150,000 – has always been classified as “temporary” by the coalition.

In recent weeks the Tories and Lib Dems have played up their differences over the issue. In fact neither think the 50p rate should be removed just now; the internal debate is whether to go for 2012 or 2013.

Danny Alexander insisted last Sunday that scrapping the rate was not a priority – and that lifting the income tax threshold to £10,000 should come first. Tory outriders such as Boris Johnson and Lord Lamont called for it to be axed; but even Lamont said this should happen in 2013. Johnson, meanwhile, is unfettered by the responsibilities of national coalition government. Read more

Kiran Stacey

And now for the big story of the day…

A row has been rumbling since the beginning of the year between cabinet ministers Iain Duncan Smith and Eric Pickles about $4.8bn worth of benefits.

To recap: Last year’s spending review decided the government should localise council tax rebates, giving councils the right to cut rebates for poorer residents and use the money instead on tax cuts or service provision. But that could lead some low-earners paying an effective tax rate of 90 per cent, something IDS worries will undermine the incentive to work that he is trying to create through the single universal credit. IDS wants instead to roll council tax benefits into the universal credit so it reflects claimants’ earning status. Read more

Jo Johnson

The 50p rate – dubbed the “banker tax” – was always going to be a blunderbuss of a weapon with which to punish the guilty men of the UK’s financial services community. But who is it really going to affect? Read more

One of the major issues facing renewables developers in the UK, especially those of onshore wind farms, is fighting through local planning problems. The British public (to generalise) has never been overly keen on the sight of mammoth wind turbines cluttering the green and pleasant land.

Previously, the answer to this has been national policy statements, which set out the national need for new energy infrastructure, so bypassing one test carried out by local planning authorities.

But the problem has never been that local authorities weren’t convinced by the need for nuclear plants or wind farms, but that local opposition was too strong.

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Jim Pickard

This is the point at which I have to wrap up and go for lunch I’m afraid. Here is a link to the live player on the Commons website in case the committee keeps going for a while.

To recap some of the most important points which will provide tomorrow’s headlines:

* Diamond said that the “period of remorse and apology” for banks needs to be over and the City should be allowed to move on.

* He said banks should be “allowed to fail” and that taxpayer-funded bailouts were unacceptable.

* He said he was committed to being responsible on bonuses, though bonuses at Barclays have not yet been set and therefore he couldn’t possibly comment on this year’s round.

* He defended Barclays shareholders from the suggestion that they are “uninformed”, given that they aren’t given a chance to discuss bonus payments before they are paid.

* He claimed not to know how many Barclays subsidiaries are offshore (although Chuka Umunna suggested it was over 300). Nor did he know how much of the tax paid by the bank was via its payroll.

* He reminded MPs that there was an inherent contradiction between being asked to behave responsibly – while being asked to lend more and more by politicians.

12.15: Diamond is asked by Andrew Tyrie whether matters would improve if executives had more skin in the game via unlimited liabilities. Unsurprisingly, this prospect is not very tantalising to the Barclays chief executive.

He cites the example of Stephen Hester, the highly-regarded new head of RBS. Would he have taken that job if he had unlimited liabilities? Ditto the new chief executive of Lloyds Banking Group, Antonio Horta-Osorio.

12.09: Andrea Leadsom, the MP who used to work for BZW, says Diamond has been talking in “fantasy” speak. Read more