George Osborne, balancing the budget on the backs of the rich (The Spectator)

Michael Johnson’s CPS Pointmaker ‘Bring Back the 10p Rebate‘ received a mention in David Blackburn’s Spectator Coffee House blog. 

To read the full article, visit Coffee House

“Will Osborne’s alleged plan prove sufficient politically? The first Osborne budget cut tax relief on pensions from £255,000 to £50,000. This enormous drop did not stop the Tories being susceptible to the charge of being ‘the party of the rich’. On the basis of this record and the strategic mistakes made in the 2012 budget, I doubt that the proposed change, should it be realised, will alter the perception unless the Tories convince the public that their policy will make pensions fairer. Selective quotation of a Centre for Policy Studies briefing note suggests how this might be done. The CPS notes:

‘Before savaging tax relief, its purpose should be considered. Many would accept that it should be, ultimately, to reduce pensioner poverty, by encouraging more long-term saving. But the current distribution of tax relief is heavily skewed towards the well-off: the 8% of taxpayers who earn more than £50,000 a year receive almost 50% of all pension tax relief. Clearly, reducing pensioner poverty is not the result. Indeed, one could conclude that tax relief serves as a reverse form of wealth redistribution (the conventional approach being to favour the poor). Arguably, the wealthy do not need such an incentive to save.’

It may be that Osborne would need to introduce a further tax cut for the poor to make this argument stick (or, indeed, he might follow the CPS’ advice and restore the 10p rebate on pension dividends, abolished by Gordon Brown in 1997, and therefore re-incentivise long-term saving and investment). But the increased income tax threshold might easily serve this purpose if Osborne, and perhaps more importantly the Treasury, is reluctant to make substantial changes to the tax system.”

To read the full article, visit Coffee House

Date Added: Tuesday 20th November 2012