Election Budget for UK

George Osborne is, in addition to being the UK's Chancellor of the Exchequer, the Conservative Party's internal election strategist.  So this begs the question, will he use the upcoming budget as an opportunity to start the process of rolling back the state and reducing taxes?  Will he take the chance to load the dice in favour of the Conservatives or at least directionally the Conservative way?

There is a convention in British politics that a current government cannot burden future governments or tie their hands etc..  This doesn't though, seem to apply to taxation.  Rates set by one government end-up being followed by successors.  Neither though does it seem to apply to any other than 'future unclear' policies.

So..........

How about a budget from George that lays out a tax-cutting and spending-cutting strategy, into the future?  How about the 2014 Budget speech going something like this.

Tax Threshold
The popularity of this coalition government's policy of raising the tax threshold, which will reach £10,000 starting this year, is such that we will continue with this strategy of taking more and more low-paid people out of tax, altogether.  The budget that I bring before the House today, includes measures to raise the tax threshold to £12,000 from April 1, 2015 to £15,000 by April 1, 2017 and £20,000 by April 1, 2020.

Income Tax Rates
The budget also includes measures to reduce the basic rate of taxation to 18% and the next rate of taxation to 39%, with effect from April 1, 2014 and to reduce to 15% and 35% respectively by April 1, 2017.  Also to eliminate the current top rate of tax, of 45%, with effect from April 1, 2016. 

These measures will serve to continue the reduction of the tax burden on the lower-paid, which has been a feature of this government's tax policies.  At the same time, recognizing that the 45% rate is a dis-incentive to individuals we will abolish this punitive level.  We already know, from numerous independent and government fact-based studies, that high rates of taxation produce little in the way of meaningful income raised for the exchequer and only serve to engender a divisive culture of envy.

Inheritance Tax
Inheritance Tax is often cited as an iniquitous tax since it argues against our people putting money away for their future and providing for their loved ones.  It also taxes that which has already been taxed.  With effect from April 1, 2015 the nil-band threshold will be raised to £1 million.  This will then be raised by £200,000 on each successive April 1, so that by April 1, 2020, the nil-band threshold will be £2 million.  At the same time, with effect from April 1, 2015, the rate of taxation applied will be reduced to 30%.

Non-Doms
The issue of non-domiciled taxpayers has long been an issue for this House.  People that live in the UK and enjoy all the benefits that this brings, do need to contribute more to the country in which they reside.  Effective from April 1, 2014, the so called non-dom tax will be raised to £100,000 and will then rise by increments of £200,000 on successive April 1, until April 1, 2020.

Fuel Taxes
It is widely recognized that fuel duties impose a heavy burden on small and medium sized enterprises.  This government sees such SMEs as a powerful force in continuing the growth that the policies of this coalition government have engendered.   Effective from midnight, all fuel duties will be reduced by 5%.  We intend to go further and enact, in this budget, future reductions in duty such that in the next 4  successive years, on April 1, fuel duties will be reduced by a further 5%.  Thus by April 1, 2018, fuel duties will have been reduced by 25% from their current levels. 

SMEs
Staying with SMEs and here we mean a business that employs less than 500 people.  Effective from April 1, 2014, an SME that engages a new employee, will be able to enjoy a 5 year NIC holiday for that employee for both the employer and the employee.  We will also enact legislation that extends this 'holiday', until the new employee's 25th birthday.  So either 5 years NIC holiday or until the person reaches 25 years of age, whichever is later.  This is expected to provide a further boost to the employment prospects of our youth and to help Britain avoid some of the horrendously high levels of youth unemployment, seen elsewhere.

Green Taxes
The government is committed to protecting the environment, however, after review of the so called 'green taxes' that were brought in under the last administration, we have decided to abolish them, with effect from April 1, 2014.  Our review has concluded that these taxes do nothing meaningful to reduce carbon emissions but do place a very heavy burden on the pockets and budgets of our people.   Our review results point to the conclusion that temporary reductions or freezes in these taxes is a gimmick.  What is needed, to help the British energy user, is abolition that will aid our industry and improve its competitiveness, where it is up against other nations that are not so burdened and this will also bring very welcome relief to our people, particularly those on low or fixed incomes.

Spending
While the positive effects of cuts in taxation on the economy are known and thus expected, this government believes it prudent, if I may borrow a phrase, to also reduce spending.

This government believes that it is not a given that government has to be involved in everything.  In the past we managed very well as a nation, when we had smaller government.

We are seeing for example, in the educational reforms that are being implemented, that when central and local government step back and allow other providers into the system, great and beneficial changes follow.

Balanced Budget
This government aims to continue to reduce the deficit and strives to start to pay down our already high debt.  The country is now experiencing economic growth, after the disruption felt by the 2008 banking crisis.  The growth is not as uniformly spread, as we would like but the tax cutting measures, of which I spoke earlier, will start to address this.  However, we do not believe that it is sustainable to continue with old borrowing and spending and borrowing  patterns.  Every householder knows that when times are better, then is when you put money away for the future - when you can afford it.  That isn't the time to go out and get further into debt!  As for the average household, so for the country.

This budget will enact legislation to ensure that with effect from the fiscal year commencing on April 1, 2014, all budgets placed before the house are balanced without the aid of further borrowings.  Going further, any surplus that is achieved, where taxes raised exceed public expenditure, will be used to pay down government debt.  We owe this commitment not just to the current inhabitants of Britain but to the future generations.  We must be able to look into the eyes of our children and grandchildren and say that we put a great debt burden on you and your children but we are working to lift this burden.

Department of Energy and  Climate Change
With the earlier mentioned abolition of so called 'green taxes', the Department of Energy and Climate Change will cease to exist, from April 1, 2014 and all of its personnel and facilities will be reduced to zero by April 1, 2015.

Local Government
We have continued to see local councils failing to heed the message that all households have received in the last few years.  Belts need to be tightened!  Speak to any working person, up and down the country and they will tell you that they have had to draw in their horns and learn to spend less.  This is plain common sense but it hasn't percolated through to some of the town halls in Britain, where waste and profligacy continue.  Therefore, the settlement for Local Government, for the fiscal year commencing April 1, 2014 will decrease by 15% from the preceding year's levels, across the board.  There will be an exception to this.  Those councils that propose no increase in fiscal year 2014 Council Tax rates, will not receive a decrease in the settlement. 

From April 1, 2015, the settlement will be reduced by a further 5% and this will continue for the fiscal years commencing April 1 2016, 2017 and 2018.  Again, those councils that do not increase council taxes for their people, will only see the settlement be reduced by 2.5%  in those years

Welfare Benefits Cap
My colleague the minister for Works and Pensions will introduce legislation that reduces the so called benefits cap, to £20,000 with effect from April 1, 2015 and then by £1,000 for each successive year up to 2020, so that by April 1, 2020 the cap will be £15,000.  This government believes that as a nation we must make work pay and reward the workers not the shirkers.  These are strong words but it is a fundamental of the British way of life that hard work should produce rewards, not idleness.  It is not the job of government to give people the wherewithal for life's luxuries.  A safety net, yes! A  smartphone or wide screen TV, no!

Welfare Trap
My colleague will also introduce legislation with the aim of eliminating the so called Welfare Trap, where persons coming off of benefits find that for every extra pound they earn, the cost of taxation and reductions in benefits are such that the effective value to them, of working is very small.  This legislation will take effect from April 1, 2014 and will allow for transitional arrangements for those long term unemployed - defined as those having been in receipt of state benefits for longer than 12 months - such that for the 12 month period following their taking up employment, the reduction in benefits will be such that the effective rate is not greater than 50%.  After those 12 months, and continuing for a further 6 months, the reduction in benefits will be such that the effective rate of reduction would be 25%.  This would mean that after 18 months, the special concession for a  long term unemployed person would cease.  This government did not create this welfare trap but this legislation will give people the opportunity to move into employment and off of benefit dependency.

Other spending
All other departments, except for the Ministry of Defence, will reduce departmental budgets, for the year commencing April 1, 2014 by 10%.  For the years, commencing April 1, 2015, 2016, 2017 and 2018, the budgets will reduce by a further 5%, from the immediately preceding year's budget.      

This is a budget for the people of Britain, this proposes reductions in taxation, paid for by reductions in spending.  We don't aim to put money into people's pockets.  We aim to leave it there and not take it out in the first place!  This is a budget unashamedly for workers.  This is a budget also for our children and grandchildren - we must start to reduce debt, for their sakes.  

I commend the budget to the House!

Taxing times for the Chancellor

With the UK budget scheduled to be unveiled on March 20th, Chancellor George Osbourne is receiving lots of advice on what to do.  So I will throw in my 'two-pennorth worth'.

Essentially there are three problems.  The UK is over-taxed, lacks economic growth and is over-stretched, debt and deficit wise.

I hold to the opinion that economic growth and tax reductions are self-supporting.  Cuts in taxes (however these are labelled) will stimulate growth.  There has been talk of further bouts of Quantitative Easing - where the Bank of England prints 'money' and pumps this into the economy.  I still hold to the view that the only way such inflationary measures will work is if you actually put the money printed, directly into the hands of consumers.  Please don't tell me that the BofE buying government debt is benefiting the economy (I will return to this later).

So to tax cuts and economic growth.

Firstly, let's do something simple about employer National Insurance Contributions (NIC).  Though how something that is compulsory can be called a 'contribution' escapes me.  So, how about this.  Effective from the day that this is announced, any Small, Medium-sized Enterprise (SME) that engages a new employee, will be able to enjoy a 5 year NIC holiday for that employee.  In my mind, an SME is one that employs less than say 500 people.  That should help stimulate employment growth and reduce a cost burden on companies.

In fact, let's take it one stage further, and extend the holiday, until the new employee's 25th birthday.  So either 5 years NIC holiday or until the person reaches 25 years of age, whichever is later.

Secondly,  be bold!  Reduce the basic rate of tax to 15% and accelerate the raising of the tax thresholds.   Raise the threshold for 2013/14 to £12,000 and, here is the crafty bit, enshrine in the budget a commitment to raise it in the next 5 years by £2,000 each year.  I appreciate that this may provide a dilemma for the Labour party - will they oppose or finally stand-up for low-paid taxpayers?  This might flush out who it is that they actually represent - the workers or the shirkers!

Third, reduce the next rate from 40% to 38%, again, with a commitment to reduce this by 2% per year for the next 5 years.  That might help the squeezed middle class that politicians bleat about so often but rarely actually do anything about!

Fourth, eliminate the 'green taxes' that are currently imposed, with immediate effect.  These economically insane charges merely transfer money from masses of people to an ever-richer few.  The taxes can never work in reducing so called greenhouse emissions, the science on so-called global warming is being daily discredited (and exposed for its untruths) and the UK acting unilaterally is plainly madness.  Sorry Britannia but you no longer rules the waves and while you saddle your people and companies with ever higher energy prices, the rest of the world is getting on with making a living!

Fifth,  and this is where the equation starts to balance out and where we address government debt.  Commence a programme of real cuts in government expenditure.  In all departments, take the 2010/11 out-turn as the basis and cut all expenditure by 10% in the coming year and enshrine 2% cuts in expenditure for the next five years.  Again, challenge the tax and spend socialists to decide on whose side they are on - the tax payers or the public service unions?

Sixth, abolish the Department for the Environment and Climate Change - completely.  Oh and this is over and above the savings from the preceding paragraph!


Please stay with me, not far to go now.

Seventh, Include a measure that with effect from after the 2015 election, MPs expenses will be subject to the same tax rules as those of the rest of the population.  That is, the benefits in kind that they receive (free or subsidized transport, meals and housing support) are taxed just as they would be if these privileged few were treated the same as the general population.  Some may say this is unfair but since those standing for election know the terms and conditions under which they will be employed, I suggest we ignore their complaints.  Remember their basic salary is more than two and a half times the national average wage.

Eigth, Local Government - commencing with this fiscal year, set a limit of minus 5% on council taxes - so they must cut council taxes by at least 5%.  Those that don't will see the central government grant being reduced by the amount that they would have had to reduce expenditure  to afford this cut.  Again, enshrine this in the budget and see the socialists and their fellow tax and spend travelers squirm.

We must get to a stage where tax increases - income, NIC and council taxes - are not considered natural, quite the reverse.  We have come to a stage where a council pats itself on the back if it keeps a council tax increase down to inflation levels.  That is plain wrong - what we need is cuts and continuously so - councils, like government, need to get out of the way and only do the things that the individual can't do.

Ninth, tell all government departments to re-negotiate all of their PFI deals, with a minimum target reduction of 20% in PFI fees required.  If these can't be achieved because the financiers won't play ball, then cancel the contracts.  Walk away and give them back their schools, hospitals and government office blocks and make a court date!  

Tenth, ensure that the budget includes a measure that states that if the recently 'won' EU budget cuts are not approved by the European Parliament, then the UK will immediately cease all payments to the EU - all payments.   Please don't even bother to talk about democracy and such, in the same breath as the  EU, EU Commission or EU parliament and that such an act would be undemocratic.  These people need to understand that we, the people, have had enough.  There is no more money, as Liam Byrne said.  There is no more gravy train.  No more is going into the trough!

OK, so maybe this, when run through the various Treasury models, won't be cost neutral but since we are increasing the deficit anyway, isn't it better to do so, in order to put money into tax-payers pocket's?  That is my kind of Quantitative Easing!

Livingstone Tax and Hypocrisy = Less NHS

Based on the figures produced by the Ken Livingstone campaign, I believe that the biggest saving he has made is actually in National Insurance Contributions both for himself and his company.

Add to that the shielding of income by then paying the other company shareholder (his wife) through a dividend rather than income and the savings just add-up.

Here is the data from the Ken Livingstone Campaign

2007/08 2008/09 2009/10 2010/11 Income from Employment £131,000 £21,645 £5,710 £5,700 Interest Income £16 £137 £18 £33 Dividend Income £6,667 £55,556 £63,333 Pension Income £5,242 £21,483 £25,502 Sub Total Income £131,016 £33,691 £82,767 £94,568 Tax on Earned Income £44,122 £4,864 £18,453 £22,691 Tax on Dividends  £1,260 £10,500 £11,970 Total "Tax"  £44,122 £6,124 £28,953 £34,661 The Tax on Dividends figures are 'odd'.  It is not clear what they represent - Income Tax paid on dividends received, in which case they seem very low - or maybe Corporation Tax paid by Silvetta Ltd. Anyway, let's have a look at these numbers as HMRC would have looked at them and, based on the incomplete data provided, would have presented as a Tax Return calculation. 2007/08 2008/09 2009/10 2010/11 Total 2008 to 2011 Income from Employment £131,000 £21,645 £5,710 £5,700 £33,055 Interest Income £16 £137 £18 £33 £188 Dividend Income £0 £6,667 £55,556 £63,333 £125,556 Dividend Tax Credit @ 10% £667 £5,556 £6,333 £12,556 Pension Income £5,242 £21,483 £25,502 £52,227 Sub Total Income £131,016 £34,358 £88,323 £100,901 £223,582 Less Personal Allowance £5,225 £6,035 £6,475 £6,475 £18,985 Net Taxable Income £125,791 £28,323 £81,848 £94,426 £204,597 Tax at Basic Rate 10% £223 £0 £0 £0 £0 Tax at next rate 22% or 20% £7,121 £5,405 £5,442 £6,247 £17,094 Tax at Higher Rate £36,476 £0 £0 £0 £0 Tax on Dividends at 32.5% £2,383 £19,861 £22,642 £44,886 Tax Charged £43,820 £7,788 £25,303 £28,889 £61,980 Less Tax Credit at 10% £667 £5,556 £6,333 £12,556 Total Tax Due £43,820 £7,122 £19,748 £22,555 £49,425 Effective Rate 33.4% 21.1% 23.9% 23.9% 23.4% The Livingstone Campaign have included the year 2007/08 income into the table. This seems to me to be irrelevant, other than its inclusion makes the overall 'effective  tax rate' appear higher.  For the whole of that year, Livingstone was employed as  London Mayor and all information suggests that Silvetta Ltd didn't then exist.   Now, let's take a look at what would have happened had Livingstone not declared dividends but instead had paid the same dividend as income and paid tax through PAYE, like you or me. 2007/08 2008/09 2009/10 2010/11 Total 2008 to 2011 Income from Employment £131,000 £28,312 £61,266 £69,033 £158,611 Interest Income £16 £137 £18 £33 £188 Dividend Income £0 £0 £0 £0 £0 Dividend Tax Credit @ 10% £0 £0 £0 £0 Pension Income £5,242 £21,483 £25,502 £52,227 Sub Total Income £131,016 £33,691 £82,767 £94,568 £211,026 Less Personal Allowance £5,225 £6,035 £6,475 £6,475 £18,985 Net Taxable Income £125,791 £27,656 £76,292 £88,093 £192,041 Tax at Basic Rate 10% £223 £0 £0 £0 £0 Tax at next rate 22% or 20% £7,121 £5,531 £7,480 £7,480 £20,491 Tax at Higher Rate £36,476 £0 £15,557 £20,277 £35,834 Tax on Dividends at 32.5% £0 £0 £0 £0 Tax Charged £43,820 £5,531 £23,037 £27,757 £56,325 Less Tax Credit at 10% £0 £0 £0 £0 Total Tax Due £43,820 £5,531 £23,037 £27,757 £56,325 Effective Rate 33.4% 16.4% 27.8% 29.4% 26.7% You will see that for the three years in question, Livingstone saved £6,900.  However, he and his company then went on to save National Insurance Contributions. Here the personal and Corporate savings really add-up.  The figure is in excess of £25,000 If these numbers are wrong and someone on the Livingstone campaign wishes to contest them, there is always the right of reply.  Absent that, I must conclude that the use of Silvetta Ltd has lowered the tax and NIC take for the UK.  How many NHS employees or Teachers would £32,000 pay?
It isn't just the minimizing of tax and NIC payments, when the country is struggling, that sticks  in the craw.  It is the blatant hypocrisy of someone who castigates others when they do the same and berates the government for not spending enough (of the money that they gather in taxes and continue to borrow!!)
If you like your hypocrisy served with the rankest of flavours - vote Ken.
If your nose can't stomach the stench, vote for one of the others. Oh! That Pension income.  That suggests that Ken would require a pension pot of around  £450 -500,000 to fund it.  This then accumulated while a public servant.  How big is your pot? Note also, that we haven't seen the accounts of Silvetta Ltd and don't know who is funding them.  Suggestions of Iran TV and Venezuela sometimes surface but as with so much about this, we just aren't being told.