In a recent comment to Scott Newton’s guest blog, “Why Cutting Income Tax, Cutting Red Tape and Deregulating Business is essential for the UK’s Future.” I promised to write more on UK Tax Policy.

I must add that these are my personal observations and are not intended to upset anyone…

…Including Scott who’s piece is right on the mark. (Well done Scott!)

For the past 4 years my company (www.ditg.org.uk) has been funded by the worlds largest ICT brands to establish a replacement for the Government’s Home Computing Initiative (HCI).

HCI was budget measure implemented by Gordon Brown as a Tax Incentive for employees. Under Section 320 of the Finance Act, employees could acquire up to £2500 worth computer equipment from their employer Income Tax exempt. In turn, employers enjoyed an exemption on Class 1A National Insurance on the amounts salary sacrificed by the employee.

This created an industry worth £450 Million to the UK and about 2500 related employment opportunities.

Unfortunately, the exemption was removed in Budget 2006. (It was proving too successful?)

This resulted in one of the longest cross-examinations during the reading for a finance bill in recent times. (Well worth a read on Hanson – see the below link).

The Government cited “abuse” as the reason for removing the benefit and pledged to “refocus efforts on those most in need”. Check out the written evidence taken at the time:

http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtreasy/994/994we14.htm

http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtreasy/994/994we08.htm

http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtreasy/994/994we06.htm

YOU MUST READ THIS NEXT ONE, IT IS NOT SPECIFICALLY HCI, BUT IS A GREAT READ.

IT ALSO SHOW THAT INSPITE OF WHAT YOU MAY THINK, WE DO RETAIN A AN OPEN AN UNBVIASED RECORD OF PUBLIC COMMENT AS PART OF UK POLITICS.

IT IS ALSO HILARIOUS:

http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtreasy/994/994we07.htm

Just in case you don’t want to click off the blog – here is a taster:

“The rhetoric of “transformation”, “reform”, “investment”, “transparency”, “devolution”, “prudent”, “cautious”, “audited” and “world class” is so indulgent and self-congratulatory that one wonders if some drafters inside the Treasury are parodying ministers.”

Professor David Heald, Comments on Budget 2006

Ouch!

At the time the Conservative Party and Liberal Democrats both lobbied against the decision and the recorded debate on Hansard is a fantastic read. It is also a good introduction to political punditry and how Politician’s really debate:

http://www.publications.parliament.uk/pa/cm200506/cmhansrd/vo060502/debtext/60502-22.htm

(The unanswered question for me was always how you can abuse a taxation system that assesses individual taxation in arrears…but then I am bias and this blog isn’t about HCI!)

So with this background you would think that it would be easy to gain Parliamentary support for a refocused replacement scheme developed over 4 years at a cost to the IT Industry (not the tax payer!) of over £2.6 Million.

Not so…

In practice the differentiation between the Parties on the issue of supporting a tax incentives is in practice not all that large. (Sorry Scott)

ALL Ministers (despite what the expenses scandal suggests) are concerned as to how to pay for any incentive, will it fit with policy…

So why post this blog at all?

Well my personal concern is not about the detail of Tax Policies, nor believe it or not HCI.

My concern is the Conservative approach. Will it win us the election?

Have a look at the following comparison of Labor and Tax summary statements.

John questions whether there is enough clear blue water between Labour & Conservatives on Tax policy……you decide!

Treat yourself and see if you can spot the difference!

Conservatives:

“We will freeze council tax for two years by reducing wasteful spending on advertising and consultancy in central government.”

Labour:

“We are reducing the amount of central prescription so that local authorities and their partners are better able to respond to local needs and demands.”

Conservatives:

“We will introduce a £50bn National Loan Guarantee Scheme to underwrite
bank lending to businesses and get credit flowing again.”

Labour (DirectGov):

“The government is announcing that it will offer capital and asset protection on those assets most affected by the current economic conditions. This will reduce banks’ uncertainty about the value of past investments, so providing them with greater confidence to lend in the future to creditworthy businesses, homeowners and consumers.”

Labour (Policy):

“Working with banks, Labour is providing loan guarantees to businesses to help them get the credit they need.”

Conservatives:

“We will provide tax cuts for new jobs with a £2.6bn package of tax breaks to get people into work, funded by money that would otherwise go on unemployment benefit.”

Labour:

“Extra cash to encourage employers to recruit people without jobs.”

“Stepping up the training and support people need to get back to work.”

Conservatives:

“We will cut the main rate of corporation tax to 25p and the small companies’ rate to 20p, paid for by scrapping complex reliefs and allowances”

Labour:

“Allowing businesses facing difficulties to spread their tax payments on a timetable they can afford.”

Conservatives:

“We will give small and medium-sized businesses a six-month VAT holiday, funded by a 7.5% interest rate on delayed payments.”

Labour:

“We have reduce VAT to 15%”

Conservatives:

“We will cut National Insurance by 1% for six months for firms with fewer than five employees, paid for from the above changes to the company tax regime.”  

Labour:

“When it is affordable, we will re-link the basic state pension to earnings.  We aim to do this by 2012 or by the end of the next parliament at the latest.”

Conservatives:

“We will abolish Stamp Duty for nine out of ten first-time buyers and raise the Inheritance Tax threshold to £1 million. Both of these changes will be funded by a flat-rate charge on non-domiciles.”

Labour:

“Extending the Stamp Duty holiday for properties under £175,000”

“Extra mortgage protection to help families stay in their homes”

“Helping savers by increasing the threshold of Individual Savings Accounts to over £10,000”

Now hopefully some clever contributors will now explain to me the differences in the comments…WAIT, some I can see! (And before you comment, I know that the Conservatives have shown how they will pay for it !!)

But you know it all does kind of sound the same to me…and taxation detail is part of my day job…

…So what hope does the deciding electorate have?

I do sincerely hope the Tory manifesto has some really clear taxation differentiators in it.

Otherwise I might get confused and vote for the wrong Party.

Here is a thought…committing to bring back s320 income tax benefits for computers would be a start.

Hey look, it is my daily bread…      

John Laity…..