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How typical of BBC News to cut away when it looked as though Darling was just about to be properly held to account. Osbourne had some very harsh words from the Chancellor but I'm afraid it looked as though it was Vince Cable's questions as to exactly how many of the 5.3 million affected were to be fully compensated were going to be the more telling in terms of picking the statement apart. As for the Conservatives, I'm afraid we don't come out looking especially principled from all this.

On another note, I noticed that Darling was emphasising "this year". We need to look out particularly for more fudging in the next budget!

What is interesting is Gordon Brown saying -in both interviews to the BBC and Skynews- that it was impossible to increase the tax allowance.

There is nothing significant in the statement and Labour MPs are stupid if they believe these fake words.

Chris, don't watch the BBC, watch here:

Personally I am dismayed at this statement, Darling is borrowing yet more in order to fund this. It will make the problem worse in the future.

What happened to “making the tough, long term decisions”?

This government gives short-termism a bad name! How it has the ‘brass-neck’ to try and pull off these sort of ‘volte-face’ is simply beyond me, it happened over NR, it happened over Inheritance Tax and now on the 10p rate… its simply farcical.

I assume that Gordo was there with a big gormless, grin as he tries (in an increasingly delusional manner) to convince himself he’s actually a political genius who’s just conducted a masterful tactical manoeuvre?

Still not good enough. 1.1 million people (or there abouts) are only going to be compensated by about a half. Let's hope the media aren't going to be completely taken in by another con.

A friend earns £7500 pa, she stood to lose £180 per year which is over a weeks pay, this now gives her back 66% of her loss so it's better than nothing.

The average loss is compensated and only from one year. And on the back of borrowing.
BBC cut away but GO's response was to pick up on the 'one year factor'.
Did the BBC cover Darling getting a ticking off for giving the details to the press gallery but not to the HoC!

By the way, does this affect our budget deficit even more? Perhaps we're behind Hungary, Pakistan and Egypt by now....

I don't know, does anyone have the relevant figures?


From what i see Nick Robinson is already lauding Darling 'wrong footing the Tories'... although i cant see the media falling for it, frankly the damage is done and all the government is doing is digging itself deeper with this.

Raising the threshold is a good long-term objective, but it will nevertheless be an expensive way of compensating those hit by the 10p tax abolition as all taxpayers will benefit.

Twelve thousand dead in China, but the BBC News website immediately puts this as the top story...

I totally agree with Chris(above) - I was almost sceaming at the TV for George to ask "where is the money coming from?" Afte all the jibes over the years about "unfunded Tory Rax cuts" this was an open goal for the Tories.
Glad he asked about next year though.

Not quite sure about the small print but surely higher rate taxpayers would end up paying more? If the higher rate threshold is down £600, this will cost higher rate taxpayers £600x 40% = £240, whereas the basic rate savings will only be £600x 20% = £120. So a tax increase of £120 on the higher rate tax payers?

The media are not buying this.

Sky are critical of the overall fiscal policy of the government, BBC are commenting on government borrowing and asking why Brown did not do this in the first place.

The BBC is extremely critical (which is a surprise.)

Surprised to see your verdict here. It was right to raise the threshold but utterly wrong to pay for it by borrowing, instead of cutting waste. And one year only? That's also wrong.

Now is emphatically not the time to deepen our debt.

BBC News "the 40p rate threshold would change so that higher earners' tax bills would be unchanged"
NE - They only need to decrease this band by £300 instead of £600 to stay neutral.

I agree Louise that it should ideally financed by a reduction in waste, not extra borrowing. There's plenty of waste around.

a-tracy - indeed.
"I am therefore reducing the threshold at which an individual starts to pay tax at the higher rate by £600."

Point 24:

Editor - How can this be the right thing, when its being financed by borrowing (which we can ill-afford) and is for one year only. The government's economic policy is a complete mess; this is the point that we should be emphasising. Remember what happened the last time Labour tried to "wrong-foot" the Tories on the economy...

This is shambolic. The lowest paid still losing out as Brown and Darling attempt so give another nod to middle England. People won't be fooled though with this being paid by borrowing or should I say deferred taxation.

Great. A tax cut.

""unfunded Tory Rax cuts" this was an open goal for the Tories. "

As is the fact that Brown is now borrowing to make tax cuts, which a fundamental breach of his very tarnished 'Golden rule' which was supposed to be 'borrowing to invest'!

I think the Editor is right, we SHOULD welcome this but let's examine the small print before rushing to judgment.

Any talk of Tory black holes is very hollow now.

So people who weren't hurt by the 10p fiasco will also gain from this except those on the higher rate of income tax. Seems if basic rate payers can benefit then higher rate payers should benefit too.

How should we pay for this? Spending cuts, not borrowing.

While the action taken to help the poor by raising the tax threshold is welcome, the government's overall fiscal position remains a mess.

The problem for us is that we don't have a coherent alternative. We should have proposed raising the tax threshold - this should have been our policy even if we didn't give exact details. When we didn't come up with any specific proposal or policy to help those on low incomes except saying that we wouldn't have done what Labour did , it's bound to look like we've been wrong footed when the government announces measures to help.

So the £2.7m is going onto borrowings. Who says the government is affected by the credit crunch? However, a tax cut funded by borrowing is merely a deferral of the inevitable cut in public spending … using the logic that Labour have to attack Conservative desires to see tax reduced, that would be a £2.7m cut in public services, then – all for the sake of trying to avoid a few days of bad headlines next week.


let's just hope that the rabble at HMRC are able to produce the correct tax codings for us all. highly unlikely methinks!

Oops - £2.7bn, not £2.7m - bit of LibDem maths creeping in there - sorry!

The Conservatives should have recommended this ages ago.We failed to demonstrate that we were on the side of the poor.

ConHome is wrong to support higher borrowing to fund this. It should be paid with less spending on quangoes and press officers.

As Guido has pointed out;
This is a unfunded tax cut, which the government accused the Tories of wanting.

This MUST be Cameron's attack line.

Borrowing to fund a tax cut when times are hard is much better than borrowing to spend on public expenditure which the government has been doing recklessly. While it doubles up as a pre bye-election gimmick, a tax cut surely helps to stimulate the econmoy. And raising the tax threshold (if raised significantly) should encourage more people into work.

How Nick Robinson thinks this wrong foots the Tories is beyond me. It is a Labour Chancellor who has made 10 emergency statements, this one to specifically correct a calamity of Gordon Brown's making which at the time had Labour MPs roaring their approval, and will cost billions in additional borrowing to pay for. This at a time when house prices are to fall by 10% (according to today's government report) and inflation has soared above the Chancellor's forecast of only weeks ago.
Not long for poor Darling to have to cope with this misery I suspect. Soon it will be someone else's turn to do Gordon's bidding.

Err...How is it, precisely, that we have been "wrong-footed"? We said that it was good to get rid of the 10p tax band but that doing so in a way that targeted the low-paid for a tax rise was a mistake. After insisting and insisting and insisting that there was no real problem and that if there was, the way to deal with it was through benefits/tax credits, the government has finally folded like a pack of cards and don what they should have done in the first place - raise thresholds. That sounds to me like a huge, crushing victory for the Conservatives, not some kind of vague embarrassment!

Is it me or is this a tax raise for higher rate tax payers?
Darling raises the 20% threshold by £600 yielding a benefit of 20% * 600 = £120 but reduces the 40% threshold also by £600. This is a loss to higher rate tax payers of 40% * 600 = £240.
So a net loss for higher rate tax payers of £120?
No-one has mentioned this.

Fraser Nelson "It's the economics of the madhouse"


I'll keep a close eye on politicshome for reaction, which I bet will not be good long-term

One other point. Isn't this politically sensitive change during the time of a by-election illegal?

At the end of the day this is £2.7b more for the people of the UK, and £2.7b less for this crappy government. It's got to be good news!

Apart from the fact that borrowing is going to be even higher now ...

not a tax rise for higher rate payers: at the bottom, they pay 20% of £600 less. At the top, they pay 20% of £600 more. In the second case, 20% is the difference between the basic (20%) and higher (40%) bands.

More importantly, why has the BBC failed in its balanced reporting objectives and completely ignored that this will cost future generations £2.7 BILLION.

All to win a by-election. This government is DESPERATE.

Bring on the next Polling Day!

"The problem for us is that we don't have a coherent alternative. We should have proposed raising the tax threshold - this should have been our policy even if we didn't give exact details."

Yes as I and others on this message board have said, the line of attack should always have been to the question 'What you would have done?' Was to have said the Conservatives want to simplify the tax, raise the tax threshold to take people out of tax, and scrap the tax credit system. Unfortunately all we got was opposition to the 10p tax band removal, that on its own just sounded very opportunistic.

George Osborne in the Commons sounded very gloating, political and shrill, not nice to listen to.

Good. And-to be fair- thanks for the Tories for acting like an opposition and holding the government to account on this.

Now let's hope that's enough to hold Crewe and bring Labour back from the brink.

Osborne made me sick today. All politics. No principle.

Is this an unfunded tax cut?. I thought Labour were constantly blaming the Tories for that. Better keep their mouths shut in the future.

Politically, the higher rate change issue is neither here nor there - though it may animate some ConservativeHome readers!

bold off

Oh dear, Oberon, you've done my usual trick.

Type out 'I must not leave the bold on' 100 times, and have it on my desk for 9 in the morning, Houston. Class dismiss!


So Britain already has the worst level of borrowing in the EU, and Darling is extending the credit even further.

Not sure whether I'll get anything extra from this, but once I've worked it out, I'm sending my savings straight to the Crewe Conservative Association.

If Darling's having to borrow more cash to pay for this then does that push him over the 40% of GDP borrowing threshold - one of the golden rules - that people were so concerned about back when Darling delivered his budget earlier this year?

Am I correct in thinking that our rate of borrowing has been adversly commented on by the IMF? Could the IMF impose sanctions as a result of the further increase in borrowing?
Relative the the earlier comments about the Oosborne response I note that he had no prior knowledge of the statemnt and needed to hand write the response in double quick time!

Presumably everyone who earns over 6 grand a year will be 120 quid (20% of 600) a year better off- whether you earn 7 grand or 700 grand.

I don't agree with higher earners gaining from a move intended to compensate the low paid.

Still overall it's a welcome move.

Thinking about this if he's raised the tax free allowance from 5435 to 6035 and then he decreases the Higher rate for income over further earnings of 35400 instead of 36000, then it's neutral for higher rate tax. 40% tax doesn't kick in until 41,435.

I stand corrected- higher earners will not benefit from this. Good.

This will surely see the golden rule being broken. Before this it was running at 39.something%. Are there anymore goalposts for Labour to move to avoid breaking it?

"does that push him over the 40% of GDP borrowing threshold "

I think it was the 30% rule, and yes it does, the fact is the rule was broken a long time ago, its just that they have put PFI (£100 billion ) Northern Rock (£50 billion ) and Market liquidity (£50 billion ) off the balance sheet so its not counted into Government debt, along with the public sector pension liability (£1.3 trillion).

But the real significance is that Labour are borrowing to give tax cuts. This is a big no, no, and clearly goes against all the preaching Brown has done over the last 10 years where he said he would only 'borrow to invest'. Clearly there was a sub-clause to this he never told us about that he would only borrow to invest, apart from when he needed to get out of a political hole he had dug himself.

Raising the allowance £600 only compensates £60 per person by my count, whereas low paid workers like my friend Craig are around £230 worse off from abolishing the 10p rate.

No,simon, it's £120 per person (income that was going to be taxed at 20% will now not be taxed at all)

I just switched Bold off, I hope.

Gosh there's going to be payback for this next year! Talk about throwing a dry cloth on a chip pan fire - didn't anyone tell him you should wet it first.

I'd have probably looked at using the P6T system to identify those people who earned less than £16500 last year and sent them or their employer a personalised tax code increase for those affected.

Let me try

It would be interesting to see who is going to lend us £2.7 billion at short notice.

For the bye-election perhaps a leaflet on the lines of a spoof loan statement.

Borrowing £120 - bribe
With interest payments and a warning that your government may be foreclosed if you don't keep up the payments....

Just a thought.

Why is it right that as many low-income people as possible be taken out of the tax system?

This is pretty much the approach taken in the U.S. where most low-income people don't pay federal taxes.

From a small -r- republican perspective this is not good: it creates a group of people who are in some real way not real citizens. For some growth of government is per se good: they're not paying for it, so (they think) they can only benefit from it.

Dont fall for it, come the next tax year, were going to be screwed royally when the tax allowance is cut.

This is great news!

Far from "shooting the Tory fox" as BBC Nick implies, this opens the door for Conservatives to increase the lower threshold properly.

Just like inheritance tax, this makes it impossible for Labour to attack us on this. We might argue for more but they have given the green light to the policy in principle.

Two things that George Osborne really needs to press home:

1. This is a temporary move, for one year only.
2. It doesn't even fully make up for the deficit for that year.

All in all, it is of little worth. £120 isn't much. It's not properly targeted and is politically opportunistic.

They might as well have split the £2.7 billion between the electorate of Crewe & Nantwich if they really wanted to win the vote...

Clearly this is the cleanest solution, and the easiest one for Labour to explain to the electorate (especially in Crewe and Nantwich).

I think the Tory response here has got to be about manipulation of the tax system by GB for tactical political advantage (which has created the 10p problem in the first place), followed by a quick fix (also for political advantage given timing, short-term nature, long terms costs due to yet more borrowing).

GB must be exposed as someone who puts short-term political tactics ahead of long-term direction for the UK.

It is a shame DC did not offer a solution based around compensating those least well-off funded by cuts on specific failing / wasteful Government initiatives (I think the public mood is such that people will swing behind the idea of well 'targeted' cuts for specific benefits).

The chancellor should never borrow to finance a tax cut. He must cut his own expenditure, such as the hair brained, ill thought out schemes that have been inflicted on us over the past 11 years, which are soon abandoned. The rest of us have to use less fuel, eat less and generally tighten our belts. Darling must do the same with his own costs and stop wasting our money. He must show an example by living within his own income. How on earth are we going to repay all the Labour government's borrowings? What a right mess it has got us into.

This is good news because I am opposed to high taxes on the lowest paid. The borrowing is a concern but nevertheless this move has effectively shifted the debate to the right. After all one way to control public spending is to starve the beast.

Right, so now I am eligable for Tax Credits, that's all well and good....

Except, because this area is still full of predominantly common sense thinking people the question on the street is now:

If I am eligable to get this money *back* why was it taken in the first place?

I wonder- will his lowered tax-threshold for middle-income earners [those on 40%] also pull down the NI-payment threshold for middle-income earners?

If so, Darling's pulled another fast one and added yet more ordinary people to his execrable "fiscal dragnet".

It seems Darling has got his sums wrong. Reducing the personal allowance by £600 is worth £240 to HR taxpayers (marginal rate 40% x £600 = £240). Reducing the threshold just measn that £600 of income si then tax at an extra 20% (40% - 20%) = £120. HR taxpayers therefore £120 better off.

But hey, I'm just an accountant. Clearly the Chancellor knows better.


Apols for the tyops!

Oh, and "Reducing the personal allowance" should have read "Increasing ...", but the point still stands.

Exactly right Virginia, I think what we have here is the beginning of a theme for the next election.

The concept of 'targeted' tax cuts, specifically identifying waste and projects the electorate do not care for, really takes the fight to Labour (and turns the tables on Labour and their so-called 'targeted' tax and spend).

Not only does this approach pinpoint areas where the Government is failing, it puts a potential saving on cancelling them and identifies potential benefit to the tax payer - very difficult in current climate for Labour to effectively counter-attack.

If in parallel, the guarantee to stick to Labour spending plans is amended so as only to apply to critical areas (such as NHS, police, defence etc.) then the strategy becomes credible whilst also addressing potential 'same old Tories' argument from Labour.

This is not to say that savings cannot be made within ringfenced budgets, they clearly can and savings/efficient gains achieved should reduce the level of future budget increases.

By doing this we can share both the proceeds of growth and of savings. Unfortunately, some of the proceeds will have to go towards paying the change of Government 'inheritance tax' (otherwise known as the Labour debt mountain).

No more boom and bust!!!

Excellent, now can we push to raise the threshold further and introduce a flat tax of 20%? I'm sure the TPA can provide us with billions of pounds in wasted money to fund this. And as I'm soon to be a higher rate taxpayer I resent the idea of having almost half my extra earnings confiscated.

Fantastic news at last a tax cut. Pity we can't promise one!

Desperate measure by an increasingly desperate government...

However, Osborne must do better....completely outgunned by Cable

The House of Comons including frontbenches of both main parties really were wrongfooted from the start on this - it was in last years budget and yet MPs didn't start complaining in numbers until after this years budget was announced, at which point vast numbers of bandwagons were jumped on.

The ineptitude from government and opposition on this is staggering, the government should have known better when they proposed it and the opposition should have been far quicker in vigorously opposing it (including backbench Labour MPs who were mysteriously quiet at the time).

Public spending should have been cut rather than borrowing increased, even if it mean't going deeper into re-writing the budget - I think that really it did need a Mini Budget to sort it out once the 10p rate had been scrapped.

It's worth following through the links to Neil Reddin's blog and then the clarifying statement apparently issued later yesterday making it clear that the higher rate tas threshold is actually being reduced by £1,200 not £600 to ensure that higher rate tax payers do not benefit. Darling's own statement to the House, mentioning £600, was therefore wrong. Whilst it would be nice to blame Darling himself, this really shows Treasury incompetence as they will have written his statement.

Whilst higher rate tax payers will not after all benefit, I fail to see how it is part of compensating, or undoing, the harm to the lower paid to give someone near the top of the basic rate band, say on £40,000 a year, a £120 tax cut when he has already benefited from the basic rate tax cut from 20% to 22% to a greater extent than the abolition of the 10p band had cost him. If the Government's real intention was to target help on those who had lost out, shouldn't they have increased the threshold by the full 50% of the old 10p band and then reinstated an intermediate 22p or 23p rate above a narrower basic rate band? But, oh no, that would have been unpopular and the real purpose of course was to stem the unpopularity, particularly in and around a well-known Northern railway town. So instead we have an unfunded tax cut across the board for all but higher rate tax payers. But I think Osborne may have been wise not to attack immediately on the unfunded aspect because, as has been pointed out, the Government's action has given a perfect reposte to Labour opposition to any proposed tax cuts of our own that we make between now and the election.

The Darling boob on the higher rate makes me wonder how accurate the £2.7bn cost is. Surely the cost of the changes will be partially offset by reduced tax credit payments to the lower paid who have benefited and I am sure some attempt will have been made to take account of this? But how has it been estimated in a hurry and would it not be tempting (even charitably assuming competence by the Treasury) to err on the side of overestimating the saving in tax credits? If I were an Opposition Treasury statement I would be probing very hard as to whether the £2.7bn figure is accurate. It might prove as flaky a figure as the average Olympics budget.

The prime angle of attack on this whole thing should be on competence, and on running fiscal policy for the next day's headlines.

During the Northern Rock Saga the Conservative Party was rightly very critical of the Labour Government, yet failed to come up with a decent alternative early on (if only they had listened to John Redwood). With the 10p tax mess again the Conservative Party was rightly very critical of the Labour Government, but yet again failed to come up with a suitable alternative. What we should have done is say that we would raise the personal allowance to compensate people and that it would be funded by the a cut in waste, we could even have linked it to a very specific cut.

Being critical of Government without an alternative will only get us so far.

The problem with coming up with an alternative is that they will nick it, water it down/gilt edge it, make a f-up of the implementation and then say "Well it was your idea" when it fails.

The Tories have tied their own hands - they can't recommend tax cuts. The government can go ahead and make them. I suggested this course of action on the "Let's cut stamp duty" thread. I wish they had acted earlier.

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