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…..

We all want this dreadful recession to end.  Many of us have friends who have been affected by this harsh recession be it, losing their job, falling into debt, having their house re-possessed, destroying their marriage/family life, through the stress of potential redundancy / working longer hours to hold their jobs.  The sooner we see ‘green shoots’ the better.  Alastair Darling has been more encouraging lately as he sees those green shoots emerging and that the UK is back into recovery mode.  He has to be positive to talk up the markets but economic data paints a darker picture and one which shows that whilst the economy is fighting to get out of recession, the dangers of a double dip recession are serious and real.  For that we must all be worried.

Politics is currently in suspended animation.  Everything on hold until the next election.  The Government are deferring key decisions until after that election.  Tough medicine the economy needs NOW is being held until post election….why?….because tough decisions are unpopular and this Government wants to win the next election.  The lack of decision making, total procrastination at the heart of Government is damaging the economy still further.  Let’s have that election today and get on with the job of getting people back to work and this great economy on its path to recovery and prosperity.

Key economic data yesterday painted a worrying position.  Government debt is far worse than expected and spiralling.  Government revenue received through tax receipts is dropping like a stone whilst benefit payments are shooting skywards.  Bank lending, seen as key to small businesses rejuvenation, is again falling.  Banks, several of which this Government now own, (ie we do as British tax payers), are failing in their duty and stated promises to push bank lending again and get the economy moving.  These stated goals are not being implemented and not evident.  Many small businesses are delaying on investment decisions because they cannot get bank funding, (we heard that story from a recent post by Russ Rec).  In the meantime, whilst banks don’t lend, they are grabbing with the other hand.  Credit card rates are rising.  Bank charges reappearing for minuscule errors.  Private household debt the highest of European nations.

Despite the abuse Gordon Brown threw at David Cameron over the Conservatives Spending plans ie branding DC Mr 10%, we now see from leaked Treasury papers that the Government are planning 10% across the board cuts.  Hypocritical is one word Mr Brown!  The politics of dishonesty is never attractive and this electorate have long memories.

Lets make no bones about it, tough spending cuts HAVE to follow.  For the sake of the economy.  Whoever wins power.  Cuts will involved public sector job losses, hence adding to the unemployment queues.  But if we don’t, we are in danger of having to go cap in hand to the IMF for a bail out by them….again!.  They will impose tough conditions to the bail out and cuts could be even more savage.  We all know that UK PLC is in danger of losing its ‘AAA’ credit rating on the world stage. 

Any public sector losses, especially job losses/pay freezes, WILL see the Unions swing into action.  A winter of discontent beckons.  The Post Office have balloted members for strike action.  The Tube Drivers have been striking this year already.  We can expect the nation grinding to a halt at various stages this winter due to Union protests, hence damaging the recovery.  Power workers have threatened walkouts, hence the return of black outs is a real possibility.

So a lot can undermine our economy.  Double dip recession is a real possibility.  But lets take a closer look at the stats……

Our debt situation is horrific.  No over word describes the cancerous, spiralling debt this country is storing up for our children.  Yesterday we learn that bankrupt Britain borrowed £6,000 every second last month.  The Government amassed a humongous £16.1 billion debt in one month…the largest on record.  This was a 63% increase borrowed in the same month last year.  The Government has borrowed £63.5bn since the beginning of the financial year in April.  Britain’s overall debt now stands at £800bn—heading for the £1 trillion mark. That is frightening.

Our nation’s finances are out of control.  This is shameful mismanagement of the economy on a criminal scale.  Quantative easing draws mixed responses from the world’s best economists and whether it is having any effect on the UK economy.  The IMF even stated that they could not assess whether any impact had been made by pumping a huge amount into the economy.  Bank of England data shows that broad money supply grew by just 0.1% in August, after a 1.3% increase in July.  This dragged the annual growth rate down to 12.6% from 14.4% a month earlier, hence demonstrating quantative easing’s limited/zero effect.

It now looks like we are on track to amass a debt of over £200bn by the end of the fiscal year, some predicting an overshoot of Govt Spending targets by £50bn.

With the economy still seeing dire unemployment figures, predictably total tax take over the first five months of the year to the end of August was 11.4% lower compared to the first 5 months of last year, while benefits spending was 9.5% higher.

Net lending to British businesses also fell in July, (by the largest amount since records began).  it fell by £15.5bn, even more sharply than the £3.6bn drop in June.  Why?  Companies paid back more than banks lent.  The figures for August are projected to worsen.

We cannot gamble our nation’’s future any more….for the sake of our children let’s have that election now and let the people decide.

Earlier today, Tim Montgomerie carried a story on ConservativeHome stating, ‘A senior source at CCHQ tells me that John Bercow will not be an official Conservative candidate at the General Election and party members will not therefore be required to vote for him. The party does, however, regard the whole Farage versus Bercow clash as a big headache.  They worry that it will give UKIP a big publicity boost (it already has) and that this could undermine the chances of Tory candidates in seats where leakage to UKIP could be the difference between victory and defeat’.  Please read Tim’s article here.  http://tinyurl.com/mfdscy

CCHQ have since issued a statement stating:  “The Conservative Party supports the Speaker. We support the convention that the Speaker stands without a party label and is unopposed. We urge other parties to hold to this convention. We hope the Speaker will be re-elected, and we urge voters in Buckingham to support him.”

Obviously the Party had to issue such a statement.  They have no choice.  They have to abide by convention.  We would expect nothing else from our Party.  I support their stance 100 per cent.

However, it is clear that Farage has played a PR masterclass here.  Many Conservatives will be tempted by Farage, especially when he gets his slick PR machine in action in Buckingham.  His public speaking, (brilliant orator), and a strong likability factor will come across well.  Bercow won’t be able to say a word or campaign at all.  How can he?  He is neutral.  So Farage will be able to dominate the media, with no reply from Bercow. 

It is fascinating reading the leading Conservative blogs these past 2 days.  Be it the comments threads on Conservative Home, Iain Dale, Dizzy, Tory Bear, all show a lot of anger towards Bercow and many say they would not only vote for UKIP and Farage, (if they had the vote), but they would actually help campaign for him.  Conservatives campaign for UKIP?!!!!  Dizzy even says as his lead ‘Go Nigel, Go’.

Tim is right to state that this would cause the Conservative Leadership a headache, especially should Farage win.  I don’t know about you but as a Conservative through and through, I don’t want to see our votes naturally go elsewhere.  I don’t want to see our supporters campaign for opposition parties.  That feels alien for a lifelong Conservative.

So what option?  Well, given the Conservative Leadership cannot endorse anyone apart from a Bercow win,  should the grassroots consider an Independent Conservative Candidate to stand in Buckingham?  Bercow is now an independent.  Buckingham needs a Conservative voice and a choice.  The furore over MP’s expenses still hurts.  The people of Buckingham, despite electing Bercow with a large majority, will be angry that he was caught up and central in the expenses scandal.  How can they vent their voice?  It is fine for Bercow to be holier than vow now and claim to be the man to clean up politics….but he was ‘flipping’ homes and claiming maximum home allowance.  Yes he repaid money.  But just because the school bully smashes you in the face and then later says sorry, does not lessen the offence and the original motives.  Bercow’s gut reaction was to maximise his expense claims.  That was his inclination.  He was taking tax payers money.  Do the people of Buckingham appreciate that?  Do they have a voice? 

Hence Nigel Farage will exploit Bercow and his past for all it’s worth.  We know that natural Conservative supporters feel little respect for Bercow. He gained the speakership by the wholesome support of a vindictive Labour Party.  Few Conservatives voted for him.  It was a well known rumour he had switched faster than a Mike Tyson uppercut from Thatcherite to close to defecting to Labour.  How can we be loyal to a figure that showed no loyalty to us? 

So whats the best action?  Is it for an Independent Conservative Candidate to stand in Buckingham?  Now some will say this could split the Conservative vote between Bercow and the Independent and allow Farage through.  However, this is a slim chance.  Also it plays to Cameron’s belief in democracy and local people taking a decision.  Buckingham deserves the choice of a Conservative and a Conservative free from the baggage of expenses and defection claims.

So….what do you think? Do we need an Independent Conservative to stand?  We cannot see Conservative supporters vote for other parties.  It is not right.  Agree?  Or am I barking up the wrong tree?