Osbornes budget

[johnb]

... Incidentally, Stephanie Flanders provides part of the answer to johnb's question on how much that cut 'costs'. Tax cuts change 'behaviour' and a fair amount of tax avoidance at the top comes from people working fewer hours/paying themselves less or even retiring earlier than they might otherwise have done, rather than dodgy 'tax dodges'. One could hypothesise that a cut from 50p to 45p is psychological - you still take more than you give to the government.

.... According to Flanders the theory is that behaviour changes will result in more tax being collected from the very rich. But this is where numbers are impossible to calculate.

Stephanie Flanders is merely relaying what is in the HMRC assessment (available here) rather than giving an independent view.

The HMRC assessment is based on complex theoretical modelling of how much the tax take is offset by avoidance and behavioural changes, but much of the evidence is taken from the US where the opportunities for tax avoidance are much greater than in the UK. So whether their assessment is correct or not we will never know, but we all know that statistics and models can be slanted one way or the other, depending on what the desired outcome is.

I still find it difficult to believe that the net effect of the 50p tax rate would be £100.

Has everyone already forgotten the government's 'Triple Guarantee' from last year? "Under its ‘triple guarantee’, the Government is committed to increasing the [Basic State Pension in line] with earnings, CPI inflation or 2.5 per cent, whichever is highest."

As a result of this, pensioners will be getting an increase next month of just over 5% on the BSP, plus added increases on any of the bits and pieces that many pensioners get (pre 97 ASP, graduated Retirement Benefit), typically amounting to something like 5.5%.

Forgive me if I am mistaken but I believe that the 5% increase in BSP is due to the element of your 'Triple Guarantee' that was in place long before the Coalition took power. So it is a bit rich to claim this as something resulting from the current government's actions.

Lastly I find it totally unbelievable that Glaxo made an important investment decision because of a budget speech and made it within within 24 hours of that speech. These decisions are the result of months of planning and are certainly not taken on the spur of the moment.

Actually one of the main reasons for Glaxo's investment is the change in the patent laws that were put in train by the Labour government and have been carried forward by the Coalition. I don't doubt that the direction of travel for corporation tax was also a factor but to suggest that the decision was solely due to this specific budget is engaging in crude politics IMO.

[french frank]

Stephanie Flanders is merely relaying what is in the HMRC assessment (available here) rather than giving an independent view.

I'm not sure where you think she would get her information from, other than the most 'official' figures that exist.

The HMRC assessment is based on complex theoretical modelling of how much the tax take is offset by avoidance and behavioural changes, but much of the evidence is taken from the US where the opportunities for tax avoidance are much greater than in the UK. So whether their assessment is correct or not we will never know, but we all know that statistics and models can be slanted one way or the other, depending on what the desired outcome is.

Well, here's a really funny joke - or an original way of looking at the matter - depending on where your starting point is.

I think the Chancellor (that's any Chancellor) sees his job as optimising the tax system, at any point in time, as best benefits the Exchequer, which is to say the country's finances. If you think the HMRC are in some kind of conspiracy with Mr Osborne to cook up some figures to benefit his rich friends, you are entitled to that view. I don't share it - regardless of which party is in power or who is Chancellor. However, moving on ...

I still find it difficult to believe that the net effect of the 50p tax rate would be £100.

Or even £100m, rather than, say, £350 million which is a ball-park figure (based on the £700m which the tax was raising), given that the higher rate of tax is not being abolished and the tax therefore still benefits from a rise from the original 40p to the proposed 45p.

Forgive me if I am mistaken but I believe that the 5% increase in BSP is due to the element of your 'Triple Guarantee' that was in place long before the Coalition took power. So it is a bit rich to claim this as something resulting from the current government's actions.

No. The new ruling shored up the pension increases by ensuring that the figure that was most financially beneficial should be used - whichever one it was. Neither can you disregard the fact that in this coming year the personal allowance for the over 65s has been increased by 5.6% (my figure, hence E&OE ), in addition to the BSP itself being increased by over 5%.

Lastly I find it totally unbelievable that Glaxo made an important investment decision because of a budget speech and made it within within 24 hours of that speech. These decisions are the result of months of planning and are certainly not taken on the spur of the moment.

Well, I suggested otherwise too - that the government did indeed consult with business and would be very grateful to have a bit of good PR at this moment. The important point will be whether the factory is built and the jobs created. Surely?

Actually one of the main reasons for Glaxo's investment is the change in the patent laws that were put in train by the Labour government and have been carried forward by the Coalition. I don't doubt that the direction of travel for corporation tax was also a factor but to suggest that the decision was solely due to this specific budget is engaging in crude politics IMO.

Yes. And I didn't do that. I didn't introduce the Glaxo into the debate - I merely queried whether creating 1,000 new jobs would be such a bad thing (were it to happen, of course).

[aka Calum Da Jazbo]

I merely queried whether creating 1,000 new jobs would be such a bad thing

... it depends on the context does it not .... and the announcement was a clear political move ...

[french frank]

... it depends on the context does it not .... and the announcement was a clear political move ...

As I said: I agree that it was some, possibly prearranged, PR for an unpopular government. Than in itself is not unforgiveable. Will the factory be built? Will the jobs be created? That's what matters. (No criticism of the issue being raised. I was just sensitive to the possible suggestion that I was 'engaging in crude politics'.)

That said, there is no shortage of 'engaging in crude politics' around here , in my opinion!

[Lateralthinking1]

So according to the Government and its supporters, the difference between a 40% rate and the higher 50% rate has been "negligible" but the difference between a 50% rate and a lower 45% rate could be "very considerable".

What chapter of the Great Book of Logic did I forget to read?

[John Skelton]

Will the factory be built? Will the jobs be created? That's what matters.

Surely in this context what matters is whether the factory wouldn't have been built without the measures in the Budget? Unless we've dispensed with goalposts altogether?

I think the Chancellor (that's any Chancellor) sees his job as optimising the tax system, at any point in time, as best benefits the Exchequer, which is to say the country's finances.

He missed this one http://www.taxjustice.net/cms/front_...atart=2&lang=1 ("seven out of the fourteen non-sovereign tax havens belong to the British Crown").

Or perhaps he didn't

http://www.telegraph.co.uk/news/politics/conservative/8069854/Cabinet-minister-has-investments-in-offshore-tax-haven.html

"He has an estimated personal fortune of around £4 million, as the beneficiary of a trust fund that owns a 15-per-cent stake in Osborne & Little, the wallpaper-and-fabrics company co-founded by his father, Sir Peter Osborne, Bt." http://en.wikipedia.org/wiki/George_Osborne

[Lateralthinking1]

News just in.

Lords and Baronesses -

Boswell, Byford, Carrington, Eccles, Glendonbrook, James, Lloyd-Webber, Noakes and Taverne -

alleged to hold shares in Glaxo SmithKlein.

Chief Exec of GSK, Andrew Witty, got a knighthood in the last New Years Honours.

62 Conservative Lords with shares and direct interests in health companies. The list includes Coe and Patten -

http://socialinvestigations.blogspot.co.uk/2012/03/conservative-lords-and-their-financial.html

But the announcement today was a coincidence.

[Lateralthinking1]

......James Murdoch announces on 27 January 2012 he will leave the Glaxo board. Quote - "Purely his own decision".

Be clear about this. There was nothing whatsoever planned by HMG in the next two months over which his presence could be an embarrassment.

Repeat - nothing. Anything happening in March 2012 is pure coincidence.

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/9044015/James-Murdoch-quits-GlaxoSmithKline-board.html

[Anna]

Perhaps that's the problem. When you can have filet mignon for lunch for about £2.80, you forget that real people have to pay real prices for their grub.

Who ate all the pies? And, buried away in the detail, 20% VAT will be added onto hot food (legalese speak is above ambient temperature) from bakeries and supermarkets - so your £1.49 pasty from Greggs will have an extra 30p added to it and a £5 Tesco rotisserie chicken will cost another £1. OK, not major compared to other things, but who buys Greggs pasties and pre-cooked chicken? The less well off of course.

[Dave2002]

Note another of his Budget Speech comments re the transfer of the Royal Mail Pension Fund to the Treasury. He bragged about using it to help others. Not a word about the fact that he has now spent it and will have to fund the pesions from taxation in the future - the same trick that has been played on nurses, teachers, civil servants, etc., whose pensions he wrongly claims are unsustainable. However you look at it, this is theft.

Although it is claimed to be legitimate, surely in the long run it's the same kind of scam that Robert Maxwell tried. I'm not even sure that Maxwell actually broke the rules either, though clearly the intent was a total rip off.

[amateur51]

......James Murdoch announces on 27 January 2012 he will leave the Glaxo board. Quote - "Purely his own decision".

Be clear about this. There was nothing whatsoever planned by HMG in the next two months over which his presence could be an embarrassment.

Repeat - nothing. Anything happening in March 2012 is pure coincidence.

http://www.telegraph.co.uk/finance/n...ine-board.html

Storming stuff, Lat

[Eine Alpensinfonie]

Although it is claimed to be legitimate, surely in the long run it's the same kind of scam that Robert Maxwell tried. I'm not even sure that Maxwell actually broke the rules either, though clearly the intent was a total rip off.

It's exactly the same, but because it's the government, it's OK.

[Eine Alpensinfonie]

Q: Why is the Tory Party like Devon Cream?

A: Because it's thick and full of clots.

[french frank]

So according to the Government and its supporters, the difference between a 40% rate and the higher 50% rate has been "negligible" but the difference between a 50% rate and a lower 45% rate could be "very considerable".

What chapter of the Great Book of Logic did I forget to read?

I'm not sure where the 'very considerable' quote came from, nor whether it means the difference in terms of direct revenue from the 45p would be 'very considerable'. I assume it doesn't. But if it was brought in as a 'temporary measure' (which is was) and seems clearly not to have achieved anything like its aim, then reducing that level of tax can be offset by introducing new taxes, with the overall difference (including less avoidance on the 45p tax) which could be significant.

JS

Surely in this context what matters is whether the factory wouldn't have been built without the measures in the Budget? Unless we've dispensed with goalposts altogether?

I suppose they both matter

Btw, I did say 'optimising' not 'maximising' . But tax havens are nothing new. I think there should be a crackdown on all sorts of tax avoidance schemes like that, but there seems to be undue flak being given to the coalition for doing no better than Labour did, and indeed doing nothing worse than Labour did in a considerably easier economic situation.

By 'rich' standards £4m isn't a great deal... surely it must be more than that? No wonder he didn't go to Eton

[french frank]

It's exactly the same, but because it's the government, it's OK.

In a way that's right. But there was a far higher chance that Maxwell would go bust and lose all his pensioners' savings than that a government would.