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Chancellor announces £2.7billion tax cut

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posted on May, 13 2008 @ 02:23 PM
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Chancellor Alistair Darling has put up the personal tax allowance by £600 - meaning anyone earning up to £40,835 will gain £120 this year.

Mr Darling's £2.7bn tax cut for this year came as part of measures to help those hit by the 10p tax rate's axing.

He told MPs he would lower the level at which 40p tax is paid - so higher earners did not gain from the change.

Tory George Osborne accused Mr Darling of "cynicism". Lib Dem Vince Cable feared it was a "short-term gimmick".

The shadow chancellor said Mr Darling had been "humiliated" into coming to the Commons with "a mini-Budget to clear up the mess made by the prime minister in his last budget as chancellor".


BBC News

So, has this announcement put the 10p tax rate issue to bed? Could it be the start of the Labour fight back that we've been hearing about since the dismal local election results a couple of weeks ago? Or is this just a gimmick as the Tories and the Lib Dems say?

On the face of it, it seems to be a good thing for lower earners (those earning less that £40,835 per year). Most of those who lost out over the 10p tax rate have been compensated for their loss, with the remainder getting a large chunk of the money back. But is it enough? How will high earners react? Is this a sign that Brown is moving back to secure support amongst core Labour voters (who deserted him to some extent in the local elections).

I'm intrigued to see how this will play out in the next few days... the opinion polls in the coming weeks are going to make interesting reading.




posted on May, 13 2008 @ 02:44 PM
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This is a unfunded tax cut.

Remember that? Gordon accused the Tories and Lib Dems of supporting unfunded tax cuts and he's just introduced one


The government is borrowing £2.7 billion to pay for this, just when the public accounts are struggling to cope. You and I will pay for the borrowing from either taxation or inflation i.e why this is only in place for a year.

As someone pointed out on the BBC;



How will higher tax payers be 'unaffected' as stated by the Chancellor? If the tax allowance is lifted by £600, this means a saving of £600 x 20% = £120. However, if the higher rate band is reduced by £600 then you pay an additional £600 x 40% = £240. Higher rate tax payers are therefore worse off by £120 and not as stated 'unaffected' by the change.

Douglas Shankland, Mayfield


Also, the government faces a fine from the EU for going over the -3% budget defect rule (which is currently -3.3% and is going to increase due to this extra £2.7 billion borrowing by the government)

UK faces disciplinary action by EU



Britain will find itself alone among the 27 nations of the European Union next month in facing disciplinary action from the European Commission over the gap between its spending and borrowing.

The UK is the only member of the EU on course to breach agreed rules on the size of its budget deficit, the Commission said yesterday, pitching the Government into an embarrassing row with Brussels over its handling of the economy.


What is more tragic, even a embassement, the IMF may give the UK a very harsh public warning over the handle of its budget.

*shakes head*


[edit on 13-5-2008 by infinite]



posted on May, 13 2008 @ 03:03 PM
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At least when Ken Clarke suffered a 1993 Budget defeat on his proposals to increase VAT on fuel & power he plugged the gap by increasing taxes on cigs & alcohol ... Darling's merely borrowing the sum required. In the great scheme of things though it's not an awful lot of money ... might restore some confidence on the Labour backbenches but doesn't do an awful lot for the reputation of our unlucky Chancellor.

As to the EU fining the UK ... if they'd ever counted PFI's towards the borrowing totals we'd have been fined years ago.



posted on May, 13 2008 @ 03:03 PM
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At least when Ken Clarke suffered a 1993 Budget defeat on his proposals to increase VAT on fuel & power he plugged the gap by increasing taxes on cigs & alcohol ... Darling's merely borrowing the sum required. In the great scheme of things though it's not an awful lot of money ... might restore some confidence on the Labour backbenches but doesn't do an awful lot for the reputation of our unlucky Chancellor.

As to the EU fining the UK ... if they'd ever counted PFI's towards the borrowing totals we'd have been fined years ago.



posted on May, 13 2008 @ 03:12 PM
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Good news.

Sadly it took a row but this is the right thing to do, a Labour Gov should not be deliberately hitting the least well-off.

TBH the EU will give a mild moan (they have done this to many other member countries before other than the UK......it's a much bigger deal amongst the membership of the €) but as a % of our national income Gov borrowing is historically low.....even if the headline number itself is a record our national income has grown markedly in the last 10yrs rendering the total as a % of income as much less of a big deal than it might have been.

Wow, a UK Gov that actually responded to the clear public mood, who'd a thunk it?

(and I have to say Osbourne's 'wanting it both ways' game-saying party-political response was about as feeble and idiotic as it gets - still, if people vote that crowd in they can't say they had no idea of what to expect
)



posted on May, 13 2008 @ 03:16 PM
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reply to post by sminkeypinkey
 


I'm confused sminkey


In another post (in another thread) you were adamant that no-one would be made worse off by the abolishment of the 10p tax rate.

Are you further emulating brown by taking up his sudden penchant for U-Turns?

Here it is!



[edit on 13/5/2008 by budski]



posted on May, 13 2008 @ 03:31 PM
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Originally posted by sminkeypinkey
but as a % of our national income Gov borrowing is historically low.....even if the headline number itself is a record our national income has grown markedly in the last 10yrs rendering the total as a % of income as much less of a big deal than it might have been


I beg to differ. If it weren't for some clever sleight of hand when it comes to PFI, public borrowing would be standing at an all time post war high. PFI effectively transfers government borrowing to the private sector, showing only as expenditure on the nations account rather than as debt.

How much debt has been transferred to the private sector since the Tories first experimented with PFI ? Don't bother even asking. "Commercial confidentiality applies".

Come on, Sminkey, where do you think all the money for these new hospitals and schools is coming from ? It's borrowed. It just doesn't show on the books.



posted on May, 13 2008 @ 04:07 PM
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reply to post by budski
 


You act surprised?



posted on May, 13 2008 @ 04:14 PM
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Nah, I was just being nice.

I've been practising my diplomatic skills - I needed to



posted on May, 13 2008 @ 04:19 PM
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Originally posted by budski
In another post (in another thread) you were adamant that no-one would be made worse off by the abolishment of the 10p tax rate.

Are you further emulating brown by taking up his sudden penchant for U-Turns?

Here it is!


- I suggest you read what I said.

I did not say that "no-one would be made worse off by the abolishment of the 10p tax rate".

I did say that the vast majority would have had the loss taken care of by adjustments to the Tax credit system.

There's nothing contradictory or a U-turn about that.


Originally posted by Charity
I beg to differ. If it weren't for some clever sleight of hand when it comes to PFI, public borrowing would be standing at an all time post war high. PFI effectively transfers government borrowing to the private sector, showing only as expenditure on the nations account rather than as debt.


- You talk as if PFI were some unique invention by this Labourt Gov.

It isn't.

You might not like the stats but they are the only fairly constant comparison we have and the record of this Gov on Gov finances compares very very well to the last.

IIRC instead of borrowing around £43 billions (presumably that will rise to around £45.5 billions now) the adjusted numbers from the last tory Gov turn out to £110 billions in todays money.
www.hm-treasury.gov.uk..../budget/budget_08/bud_bud08_speech.cfm

(and of course the costs of the tory Gov's PFI program would also not show up on the books either, right?)



posted on May, 13 2008 @ 04:34 PM
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Originally posted by Charity
As to the EU fining the UK ... if they'd ever counted PFI's towards the borrowing totals we'd have been fined years ago.


Heh, true. I'm not sure how hard the EU will push Britain, though - support for Europe is in choppy waters in the UK at present, and a fine would add fuel to the Eurosceptic cause. Remember, even though the UK is not a member of the Euro it is nevertheless an important part of the EU (second largest economy after Germany, best military, security and intelligence agencies second to none in the EU, €9.8billion contribution to the EU budget last year). I suspect a little political wrangling could get us off with a 'warning' or something.



posted on May, 13 2008 @ 04:37 PM
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Originally posted by sminkeypinkey
This despite the fact that, for the vast majority, the net effect of the new lower standard of rate of income tax dropping from 22% to 20% and more generous tax-credits off-setting the removal of the 10p starting rate meant most would be better off.

A prime example of 'giving a dog a bad name' if ever there were and the UK tory press running with it relentlessly.


Your exact words

And then the U-Turn

Originally posted by sminkeypinkey
Good news.

Sadly it took a row but this is the right thing to do, a Labour Gov should not be deliberately hitting the least well-off.


For my part, I'd suggest that defending anything and everything that brown/blair and labour do has led you down a cul de sac.

Spin your way out of that one.



posted on May, 13 2008 @ 06:01 PM
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Forgive my ignorance, I'm not British, so can someone please explain what the "10p tax rate is?" None of this really makes sense without that context.



posted on May, 13 2008 @ 06:03 PM
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This link should help explain things:
news.bbc.co.uk...

Be sure to read the whole thing - it gives the history of what happened.

It's been quite a political mess for the government.



posted on May, 13 2008 @ 07:21 PM
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Originally posted by budski

Your exact words

And then the U-Turn


- You seem to have decided that the term "for the vast majority" means 'all'.

Sorry but it doesn't.

If you insist it does then that's your own little issue.

The only person engaging in spin and linguistic contortions is you.

"the vast majority" does not mean everyone or all the people.
You can try and work your way out of that 1 if you like.

If you really wanted to be clever and accurate you could go & find old posts of mine at the time of the last budget when this measure was first announced......

......but then you'd find that there I had said that I expected the years delay in implementing the 10p rate abolition to mean that this would be corrected at the following (2008) budget and that the net result would be that by the time the original 10p rate abolition was supposed to take effect no-one would end up losing out.

OK, so it took a damaging row, a mini-budget (which this, kind of, is) and a very convoluted route to get there but it looks as if I ended up being right afterall.

Maybe that wouldn't have suited your purpose tho, eh?


Whatever points you want to score over this the result is that Labour once again reduced taxes, particularly for the least well off
(and it sounds like a very small hike is going on the tax bill most well off too).
Happy days.


Originally posted by Ste2652
I'm not sure how hard the EU will push Britain


- They'll do what they have done previously when Euro-member countrys exceeded the criteria, a little disapproval or at worst a verbal slap on the wrists.

But in reality it might not even be much of that.

The whole point of the convergence criteria is the stability and credibility of the Euro currency, the fact that the UK is not a member of the Euro means that we are of far less concern to the others.

It's really about us and the impression we create.
Maintaining within the convergence criteria is nice and all (something the UK has done when others have not and for years) but if we have cause now to occasionally stray from the line(s) drawn then we only make problems for ourselves if we later wish to join.
But even then the example of Italy alone shows that it is hardly a matter of rigid 'law'.

I also think there's something else to consider here.

This (reportedly) £2.7 billion that this measure effectively injects into the UK economy might just turn out to have been part of a fortunate convergence of events.

The US has decided things are so serious that they have just done something similar (albeit to the tune of around £80 billion) but nevertheless this might turn out to have been the most helpful & sensible thing to do in view of the current economic climate.

Naturally it's been very badly handled in political terms but economically it could be the start of a drastic fiscal easing which must be carried through if we are to escape financial problems some have likened to the 1930s.

Perhaps this has been a convenient way of doing something fairly drastic without frightening too many people or causing a collapse in economic confidence?

.......and despite the party-political jibes of some that is nothing like the reality of todays UK 'market'.

[edit on 13-5-2008 by sminkeypinkey]



posted on May, 13 2008 @ 08:13 PM
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reply to post by sminkeypinkey
 


Can you EVER answer something without resorting to distortion, spin and outright lies?

A true blairite.

But without even a semblance of charm as a redeeming feature.




posted on May, 14 2008 @ 03:28 AM
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reply to post by Merle8
 


It's complicated... in fact, I'm not sure many people in the UK understand it properly. All they understand is that they'd lose money and (obviously) want it back


The BBC link that budski provided seems to be a decent summary, but if you have any extra questions then feel free to post them and we'll do our best to answer them.

Back on topic.

Apparently people who earn under £40,835 can expect to get £60 tax back in their September pay packet, with £10 each month thereafter until the end of the tax year in April 2009.

I've seen people say this is 'buying votes', and maybe it is - but surely every tax cut is?

[edit on 14/5/08 by Ste2652]



posted on May, 14 2008 @ 05:45 AM
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Originally posted by budski
Can you EVER answer something without resorting to distortion, spin and outright lies?


- Er, you're the one trying to claim something that is clearly not true and trying to twist what I actually said.



Originally posted by budski
A true blairite.

But without even a semblance of charm as a redeeming feature.



- Oh, there it is, you just can't help it can you?

There's the typical little weak personal dig that has come to typify so many of your exchanges.



posted on May, 14 2008 @ 06:13 AM
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Sminkey,
I posted your exact words - you're the one trying to twist them so you don't appear to have been wrong in your original assessment.

Unfortunately for you, people can actually read and see what you posted.

I find it a little sad that a person of such intelligence is unable to own up and say they were wrong.

As for personal attacks - every time someone says they don't like what brown (or previously blair) has done, you launch into an attck, accusing them of being a screaming right wing nutter.

When it fact you have shown that your attacks are more about your own perceptions, and could more properly be said of you, by simply substituting right wing for loony lefty.

Go back to reading your guardianista propaganda - you might be able to bully other people, but it ain't gonna work on me.



posted on May, 14 2008 @ 08:40 AM
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Originally posted by budski
I posted your exact words


- ....and yet still you seem incapable of distinguishing that "vast majority" still does not actually mean 'absolutely everyone'.


Originally posted by budskiI find it a little sad that a person of such intelligence is unable to own up and say they were wrong.


- Actually when I'm wrong I have no hang-ups about admitting it.


Originally posted by budski
As for personal attacks - every time someone says they don't like what brown (or previously blair) has done, you launch into an attck


- Unfortunately for you a counter arguement (even one put strongly) is not an "attack".


Originally posted by budski
accusing them of being a screaming right wing nutter.


- OK, so go & prove that I have (seriously) labelled posters here as
"screaming right wing nutters".

Frankly I think it's just your own paranoia that is showing.

You'll not find me resorting to the sort of repeated personal digs you can't seem to help yourself making.


Originally posted by budski
you might be able to bully other people, but it ain't gonna work on me.


- LMAO

It's a blog, on the internet.

Try winding it down a tad and taking things a little less seriously, eh?



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