"This is a bribe"

The great Eric Pickles has just called from Crewe.  He was out canvassing and the Darling announcement had already reached peoples' ears.  Crewe's verdict: "overwhelmingly negative".  Here are some of the things that were said to Eric:

• This is a bribe.
• This is all being paid for on the never, never. We'll all end up paying even extra in the long run.
• The only thing Brown wants to do is save his neck. He doesn't care about us.
• It's too little, too late.

Labour did the right thing today - but for the wrong reasons.  Gordon Brown still should get punished in Crewe for his tax on the poor - now, partly - but not wholly, reversed.

Our immediate verdict, pasted in the earlier thread, at 4.05pm was:

"Cynical? Yes. Related to the by-election?  Yes.  Forced upon Labour?  Yes.  Even more borrowing?  Yes.  The right thing?  On the face of it, Yes.  As Lord Forsyth advocated some weeks ago: Raising the personal tax allowance was the right response to this issue.  The Tories should have recommended this option weeks ago, too.  We should now press for these higher thresholds to be made permanent.  It is right that as many low income people as possible are taken out of the tax system."

Here are some further thoughts:

• It was the right thing to do although completely unnecessary if Gordon Brown hadn't made such a pig's ear out of things in the first place.  It's right because too many people on low income pay tax. It's right to help families who are currently struggling with higher and higher bills.
• The Government shouldn't fund this by more borrowing. Britain's fiscal position is bad enough. Darling should be finding economies to pay for this. Darling should hire Patience Wheatcroft once she has finished auditing London for Boris.
• The Tories should soon switch emphasis from talking about "Darling's panic measure" to calling for this increased threshold to be permanent.  We must become the champions of low income taxpayers (as Lord Forsyth suggested).
• We also should also set up a "scorched earth watch".  In a typically brilliant post Fraser Nelson writes: "Now and again, Labour bangs on about a "black hole" in Tory proposals of one or two billion. And yet they jack up the national debt in this way without so much as blinking. I suppose the more Brown thinks Labour will lose the next election, the more minded he will be to vandalise the public finances. This may be the start of a scorched-earth policy. We'll be watching."

Comments

[CCHQ Spy]

Andrew Grice has blogged this at The Independent:

"It's a remarkable U-turn which shows just how much damage Gordon Brown's decision in his last Budget has done to both to Labour and Brown personally. The interesting thing is that Darling considered limiting the likely damage from the tax shake-up when he drew up his March Budget but decided he simply didn't have the money. Now, miraculously, he has found it, by yet another rise in borrowing. It illustrates the depth of the hole that Brown is in.

No doubt minds in Numbers 10 and 11 Downing Street were focused by next week's Crewe and Nantwich by-election. Although Labour MPs cheered Darling in the Commons this afternoon, whether the move will save Labour's skins in Crewe is another matter. The damage may already have been done. Outside the chamber, old Labour heads were a little more sober. "A high economic price to pay for very little political return," one told me. Another said: "This is Operation Stabilise Gordon Brown. It will help him among Labour MPs, but I'm not sure it will change much in the country.""

[Andrew S]

Glad that the people of Crewe aren't taken in by this. Such a cock up and a pathetic attempt to correct it, and they expect people to be grateful as if they're being kind!

[Brian Ingle]

Jocks away!!!!

[Tanuki]

Lowering the point at which people on middle-incomes are hit by the 40% rate of income-tax will just mean extra 'fiscal drag' hitting policemen, teachers, nurses, laboratory-technicians, young professionals trying to pay off student-loans.

This really is a horrible rob-peter-to-pay-off-paul measure.

[Iain]

Yes it is a bribe, for Brown wouldn't find £50 million to honour the police pay award, yet £2.7 billion can be found to save his job.

[David (One of many)]

I'm so cross with this stunt I'm currently trying to move the engagement I have on Saturday, so I can get on that bus and tell as many people in C&N what complete balls this is.

[David Sergeant]

The issue isn't whether Darling's tax concession is or isn't good enough. The issue is that Brown increased the tax on the low paid deliberately for a cheap short term headline and Labour MPs didn't complain for a year until their voters noticed. More, as with wrecking the pensions this 10% debacle AND his new changes were all introduced in a way deliberately to misslead parliament. That Robinson thinks it is good stuff knowing what is going on seems clearly to indicate he is knowingly going along with missleading viewers for the benifit of Labour and, probably, his career prospects.

[David Belchamber]

Labour is not strong on accountability. If we only knew the person responsible for this absolute fiasco that has caused the government such grief, we could all call for him to be sacked for incompetence!

[Louise Bagshawe]

Eric Pickles will have called this right. It's not the right thing - the fact it's from borrowing is not an incidental extra, it's a major fiscal disaster. The 'scorched earth' point is an excellent one. I shudder to think of the state of the nation's finances when George Osborne takes over at no. 11.

How to finance this? Take a look at the Olympic budget, for starters.

[EML]

This sounds more and more ridiculous the more it sinks in - where the hell is he going to get the £2.7bn from???

If we had announced something like this Labour and the media would have a field day over "unfunded tax cuts".

Absolutely breath-taking how arrogant these guys are!

[Daniel Furr]

This comment for BBC "Have your say" sums it perfectly up;

"er...is my maths wrong here. I work out that as a higher rate taxpayer I'll pay an extra £120 a year. I gain £120 because of an increased personal allowance but seem to lose 40% of 600 or £240.

A chancellor who can't add up er do we have a problem!

Oh and everyone read the small print - you can't trust any puppet of Mr Brown's

John, oxford "

[Roger]

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!!!

[Dan Hassett]

I agree with Louise. It is absolutely not the right thing to do. Unfunded tax cuts are deferred tax rises - the stealthiest tax rises of all.

At a time of economic uncertainty and the twin demons of rising inflation and falling growth, the last thing that the markets need is fiscal irresponsibility. This can only add to the weight of negativity that is producing a seemingly unstoppable downward economic spiral.

[matthew]

Daniel @ 20:01. The chancellor is misleading people. The higher rate BAND has been narrowed by £1200.

The personal allowance has increased by £600, and hence the salary at which you pay 40% tax is reduced by £600.

More fiscal drag, more people in the higher rate net, more people completing unnecessary tax returns.

[a-tracy]

Daniel/Tanuki - The way I understand payroll tax; the tax band applies to your income after tax allowances and any reliefs have been taken into account; you're not taxed on all of your income. The amount you start to pay 40% tax will be the same as it is now 41,435.

5435 free then every £1-£36000 is taxed @ 20% = 41435 before 40% tax starts
6035 free then every £1-£35400 is taxed @ 20% = 41435 before 40% tax starts

As an example if you earn 40,000 - presently you have 5435 tax free and 34565 @ 20% (because you pay 20% tax from the next 1 - 36,000) this equals 6913 in tax.

From Sept ’08 after the change, if you earn 40,000 you have 6035 tax free and 33965 @ 20% (because you pay 20% from the next 1 -35400) this equals 6793 in tax which gives you the £120 pa saving.

Now 43000 pa less 5435 = 37565 – 36000 (taxed at 20% =7200) leaves 1565 to tax at 40% which gives you a tax bill of 7826.

Sept 43000 pa less 6035 = 36965 – 35400 (taxed at 20% =7080) leaves 1565 to tax at 40% which gives a tax bill of 7706. The same £120 saving.

Polly Toynbee will probably go and whack Darling with a big stick. But I'm not celebrating because we're all going to pay it back so get saving. The government debts are our debts.

[Man in a Shed]

Capitalists at work had this idea going on 7th May also !

Labour are running out of money and have maxed out the credit card. Their party is bust and that's how they will leave the country given half a chance.

I shining a torch at the Labour party finances works for us in so many ways.

[James Burdett]

I think we need to go round and round the country starting in Crewe explaining that government borrowing is really a deferral of tax rises. £3bn pounds on borrowing is actually a deferral of a penny on the basic rate of income tax. The question needs to be implanted in everyones mind when will Darling claw back this money?

[matthew]

a-tracy, you're wrong. The 40% band has been cut to £0-£34,800 of taxable income. This is 100% certain from the fact that they said the higher rate tax payers won't be better off. This means anyone already in the higher rate band is no better off than when it was 0-£36,000.

Once again, the government don't make things clear when they announce them.

Will it come back to the bite them?

[Sam R]

This is akin to the thug who, having beaten his wife regularly, suddenly decides to stop.
And then expects everybody to say what a fine chap he is.

[David (One of many)]

Sam R, I think that analogy is too kind. It's rather more like he stops beating her for a couple of hours in order to take her out for a nice meal. And then starts the beating again when they get home.

[MadCobbler]

a-tracy: I have zero clue what you said up there, but I assume it had something to do with money....

Anyhow, I snooped around The Spectator et al. and found this nifty graph over on Political Betting.

http://politicalbetting.com/wp-content/uploads/2008/05/crewe-betting.JPG

Seems that Labour has caught up slightly as a result of Darling's "Non-Tax" though how this will be seen "on the ground" I don't know...

[Daniel Furr]

Have you seen the front of tomorrows independent?

http://www.politicshome.com/UploadedFiles/FrontPages/LargeImages/FrontPage_aa2c655c-44e2-4981-b22d-72d59f58f97d.gif

Gordon is not going to like that.

[matthew]

I doubt Gordon cares very much what the Independent's reader thinks.

[Malcolm Dunn]

Absolutely desperate! This shows the essential moral bankruptcy of New Labour where holding office is the only thing that matters. It didn't give me any pleasure to watch Darling being taken apart by Paxman on Newsnight. Only made me feel sad and angry that the man running the finances of my lovely country is so obviously not up to the job. The last time I felt this, was in 1992 when the government made their equally desperate attempts to keep us in the ERM.
Ihope the price John Major and Lamont paid for that is also paid by Brown and Darling.

[James Burdett]

Had a quick look at the HMRC website and they confirmed that the Higher rate band will be reduced by £1200 pounds to 34,800. When one considers that prior to the budget the band started at 34,600 the Chancellor has effectively all but cancelled the indexation of the higher rate of tax this year. I hope the CCHQ boffins are working out how many extra people will be caught in higher rate tax as a result of today's move.

[Prudence Jock]

Your fox has been shot!

[Matt Wright]

I think the term "scorched earth policy" is very relevant to Labour at the moment and I started using it as well about 3 or 4 weeks ago as I noticed Labour at local and national level behaving totally irresponsibly. They just don't care anymore and will say and do anthing to temporarily save their necks. Will the public see throught it - yes they will. Labour are going down now and everyone knows it. What other economic black holes are hiding away and other crass dodges have they tried to pull. It will all come out.

[Edison Smith]

In a funny kind of way, I think people would have had more respect for the chump if he had stuck to his guns.

Decisiveness brings respect, even if one doesn't like the decisions. Confusion brings no friends.

He's made yet another U-turn and looks tragically feeble.

He's in a hole and anything he does will make it deeper.

The ship has sailed. The horse has already bolted. It's game over for Brown.

[Saltmaker]

Matthew, you need to brush up on your maths. James Burdett, there are extra higher rate payers but they currently pay no more.

		Before	After
Income		41435	41435
Allowance		5435	6035
Taxable		36000	35400

20% band		36000	34800
40% band		0	600

20% tax		7200	6960
40% tax		0	240

Total tax		7200	7200

[Mick B]

Pity the 1.1m 10% losers, still paying in higher taxes this year under a labour govt. to fund the better off (to enjoy the extra cash) with this blunderbuss approach to tax policy. Really, the labour 'left' are being fobbed off with this bit part climb down and people should be surprised that FF and Co were so easy to tame. Presumably they (FF & Co) were 'angry' that there were originally 5m 10% losers but they are now 'happy' that there are only 1m 10% losers. Where's the red flag now boyyos?

Oh and I almost forgot another earlier U turn: CGT was dropped to 18% (for our PE and other speculative chums) and the lowly cleaner is now paying 20% not 10%? GB has gone so far to the right he makes TB look like a hero of the workers!

[Don Hoyle]

I understand there are another couple of things which may not be uppermost in the 'workers' minds but hurt, nevertheless:

Nat. Ins stamp ceiling has been raised

Capital allowances have been reduced from 50% in the first year to 20% (source: an accountant friend)

Luckily for me, my new van was bought within the last tax year (8th March '08) so just scraped in - but I had no idea about the changes to the capital allowance. That's obviously been kept under wraps.

[matthew]

why do you say I need to brush up on my maths saltmaker?

a-tracy's numbers were wrong, assuming a £35400 band rather than the actual £34800 band, and I said "This means anyone already in the higher rate band is no better off than when it was 0-£36,000".

Which you agree with: "there are extra higher rate payers but they currently pay no more."

Not sure what you are talking about?

[Oberon Houston]

Gordon Brown speech, Sept 2000:

And by 1997 with the deficit nearly 30 billion, the national debt doubled, debt payments bigger than the schools budget, inflation rising, and the economy on the way back to the old familiar cycle of boom and bust, we resolved to, and under Tony Blair had the strength to, take difficult long term decisions

Bank of England independence. Tough controls on public spending. The difficult decision to raise fuel taxes. The decision to pay back debt and cut the costs of debt.

Breaking from the chronic and flawed Conservative short-termism and implementing Labour values; planning for the long-term; economic responsibility; building from strong foundations. Determined to protect hard working families from a return to boom and bust.

1. National Debt now sits at £600bn and rising by £10bn/month. The Conservatives were set to balance the books with their budget within a year.
2. Inflation in 1997 was 2.6% and falling steadily - its now 3.0% and rising rapidly
3. The average family tax-bill has increased £7800 under Labour
4. Things are about to get much much worse (bust)

It took a few years for Gordon to wreck the British economy, and despite a global boom and unprecedented reductions in the cost of goods from countries like China, he has managed it. I've been saying this for years, Gordon Brown has been a disaster both as a Chancellor and Prime Minister.

[Letters From A Tory]

Even the people who have now been compensated by Darling will not forgive me for this spectacular mess.

[James]

On the Today programme this morning, Darling was asked whether pumping £2.7bn into the economy at a time of rising inflation might be dodgy. He replied that inflatuno was the result of higher oil and food prices, and that at a time of a slowing economy giving people more money to spend was the right thing to do, and not inflationary.

So that completely blows out the water his argument for not giving the police their full pay rise. Labour claimed it would be inflationary and therefore wrong to put more money into the pockets of police officers. But it's ok to put even more money into the pockets of even more people because...er..it's not inflationary.

[Saltmaker]

Not sure what you are talking about?

Nor am I. I misunderstood your post -- sorry.

[Iain]

"So that completely blows out the water his argument for not giving the police their full pay rise."

Yes it also shows up the Labour Governments priorities, for they will employ any disreputable argument to avoid honouring the police pay award, which I think would have cost them £50 million, but to save Gordon Brown's miserable hide they will stump up £2.7 billion.

[a-tracy]

Thanks Matthew for your correction, I was working on the following information:

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

Point 24:
http://www.hm-treasury.gov.uk/newsroom_and_speeches/speeches/statement/Speech_statement_130508.cfm

As Posted by: NorthernEconomist | May 13, 2008 at 16:24 on the Darling raises tax allowance blog.

[Daniel Furr]

No one in the media has praised this "tax cut". Skynews call it a U-turn, BBC said it was unfunded and Channel 4 called it a bribe.

The government has lost the media. Playing politics with the economy, during the start of a downturn, is not a wise thing.

[Julian Melford]

While all the attention is on the 10p / £120 / £240 fiasco, people do not seem to realise how Labour is pushing through its Enabling Act for the next steath tax - road pricing.

The Local Transport Bill allows the government to set up a quango that can introduce road pricing in a local authority area - over the heads of local people and their elected representatives, most of whom are now very cool on the idea.

Once the dirty deal is done, perhaps in the name of 'transport improvements', local communities can be saddled with capital and interest repayments for years. The socialist dogma of road pricing will hit businesses and consumers alike.

[Iain]

"The government has lost the media."

And Brown's re-launch and pre-Queen's speach got tucked away at the back end of the news. It would seem that Brown’s re-launche is just a boring sequel that's got a tired story line.

[Nick Drew]

Man in a Shed @ 21:31 (13 May) is right, we at C@W have been looking at the "scorched earth" strategy for a while, starting in fact last November, here

[Nick Drew]

Man in a Shed @ 21:31 (13 May) is right, we at C@W have been looking at the "scorched earth" strategy for a while, starting in fact last November, here