Gordon Brown's 10 worst financial gaffes
Discussion
Timesonline said:
1. Taxing dividend payments
Before 1997, dividends issued by UK companies and paid to pension funds were tax-free - that is, the tax could be claimed back via a system of tax credits. Not any more, decided Brown. Tax relief was scrapped, reducing the amount collected by pension funds by around £5 billion a year. Pension funds holding the cash that you, me and almost everyone else in the country plan to use for our retirement have lost around £100 billion over the last 12 years. That's one hell of a stealth tax.
2. Selling our gold
In May 1999 Gordon Brown had a plan to sell some gold. There were two problems with this, which concerned his economic advisers deeply. The price of gold had slumped after a decade of stagnation, but was likely to increase in the proceeding years. Added to this, the announcement of a major sell-off would drive the price down further. Little of this worried Gordon. Experts believe that the poorly timed decision to flog our national treasure has cost us all around £3 billion. Granted, that doesn't seem much nowadays, but more of that later.
3. Tripartite financial regulation
The system of financial regulation dividing powers between the Treasury, the Bank of England and the Financial Services Authority, established by Brown as Chancellor in 2000, missed what amounted to the biggest financial crisis of our lifetime. Whoops. This has led some glass-half-empty commentators to conclude that the system set up by Brown failed and should be replaced. The Commons Treasury Select Committee’s report on the collapse of Northern Rock said that the Financial Services Authority had “systematically failed in its duty” to oversee the troubled bank’s activities. Little did it realise at the time that Northern Rock was the over-leveraged tip of the securitised iceberg.
4. Tax credits
“Gordon Brown claims the tax credits system lifts children out of poverty,” says Simon Blackmore, 38, who was pursued for £6,057 in over-paid tax credits. “Maybe it does, but only to plunge them and their families into debt two years later.” Millions of low-income families have had to pay back the Treasury after receiving too much money in tax credits, putting them under huge financial and emotional strain. Meanwhile, 40 per cent of workers and families who deserved tax credits left billions of pounds unclaimed in the 2008-09 tax year for fear of being chased for the cash later on. Introduced in 1999, reformed in 2000, tax credits have been "a complete disaster zone", according to tax experts.
5. The £10,000 corporation tax threshold
In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
6. Abolition of the 10p tax rate
Mr Brown rarely apologises. In fact, he never apologises. But occasionally he acknowledges "mistakes", albeit begrudgingly. Over the abolition of the 10p tax rate in 2007, Mr Brown told Radio 4's Today programme that "we made two mistakes. We didn't cover as well as we should that group of low-paid workers who don't get the working tax credits and we weren't able to help the 60 to 64-year-olds who didn't get the pensioner's tax allowance." Experts use stronger language to describe the Budget of 2007, which was designed to produce positive headlines for the 2p cut in income tax. Accountants calculated that the scrapping of the 10 per cent tax rate, coupled with the increase in the proportion of tax credits withdrawn from higher earners, would leave 1.8 million workers earning between £6,500 and £15,000 paying an effective tax rate of up to 70 per cent.
7. Failing to spot the housing bubble
Gordon Brown said he ended boom and bust, and in those innocent days before the collapse of the global finance system we believed him. In 1997, he outlined his plans. "Stability is necessary for our future economic success", he wisely informed an audience at the CBI. "The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management." The other components of that bedrock including a trillion-pound debt mountain and a decade of unchecked and unparalleled house price inflation presumably slipped his mind. In 2003 a mild-mannered Liberal Democrat MP by the name of Vince Cable dared to question the mantra of "the end of boom and bust". He asked Gordon Brown: "Is it not true that...the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?" Gordon replied: "The Honourable Gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the economy..." We all know what happened next.
8. 50 per cent tax rate
Robert Chote, director of the Institute for Fiscal Studies, has said the tax hike which heralded the end the new Labour may actually end up losing the Government money. "If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it, as people actually declare less income for tax," he said.
9. Cutting VAT
"It would be funny if it wasn’t so serious," said a tax accountant when asked about the Brown-Darling brainwave to cut VAT by 2.5 percentage points. As a nation of shoppers, rather than shopkeepers, a chopped down sales tax sounds like a good idea, providing a vital boost to hard-pressed families at a time of financial hardship. There were two problems. It costs £12.5 billion a year and it has made little discernable difference to those hard-pressed families because it is shopkeepers, rather than shoppers, who have pocketed much of the benefit.
10. Public-sector borrowing
If Gordon had only saved a little more in the good times, we might have had a little more to fall back on in the bad, economists sigh. Last month saw public-sector net borrowing hit £19.9 billion, the highest on record, according to the Office for National Statistics. The chancellor of the exchequer, Alistair Darling, has forecast that Government borrowing will reach £175 billion this year. It is forecast that total government debt will double to 79 per cent of GDP by 2013, the highest level since World War 2. Mr Chote recently warned that "the scale of the underlying problem that the Treasury’s detailed forecasts identify will require two full parliaments of mounting austerity to repair.”
Even after he leaves office in 2010, as is almost certain, it seems that we will all be paying for Gordon's gaffes for many years to come.
By James Charles
Written in June but not posted on here.Before 1997, dividends issued by UK companies and paid to pension funds were tax-free - that is, the tax could be claimed back via a system of tax credits. Not any more, decided Brown. Tax relief was scrapped, reducing the amount collected by pension funds by around £5 billion a year. Pension funds holding the cash that you, me and almost everyone else in the country plan to use for our retirement have lost around £100 billion over the last 12 years. That's one hell of a stealth tax.
2. Selling our gold
In May 1999 Gordon Brown had a plan to sell some gold. There were two problems with this, which concerned his economic advisers deeply. The price of gold had slumped after a decade of stagnation, but was likely to increase in the proceeding years. Added to this, the announcement of a major sell-off would drive the price down further. Little of this worried Gordon. Experts believe that the poorly timed decision to flog our national treasure has cost us all around £3 billion. Granted, that doesn't seem much nowadays, but more of that later.
3. Tripartite financial regulation
The system of financial regulation dividing powers between the Treasury, the Bank of England and the Financial Services Authority, established by Brown as Chancellor in 2000, missed what amounted to the biggest financial crisis of our lifetime. Whoops. This has led some glass-half-empty commentators to conclude that the system set up by Brown failed and should be replaced. The Commons Treasury Select Committee’s report on the collapse of Northern Rock said that the Financial Services Authority had “systematically failed in its duty” to oversee the troubled bank’s activities. Little did it realise at the time that Northern Rock was the over-leveraged tip of the securitised iceberg.
4. Tax credits
“Gordon Brown claims the tax credits system lifts children out of poverty,” says Simon Blackmore, 38, who was pursued for £6,057 in over-paid tax credits. “Maybe it does, but only to plunge them and their families into debt two years later.” Millions of low-income families have had to pay back the Treasury after receiving too much money in tax credits, putting them under huge financial and emotional strain. Meanwhile, 40 per cent of workers and families who deserved tax credits left billions of pounds unclaimed in the 2008-09 tax year for fear of being chased for the cash later on. Introduced in 1999, reformed in 2000, tax credits have been "a complete disaster zone", according to tax experts.
5. The £10,000 corporation tax threshold
In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
6. Abolition of the 10p tax rate
Mr Brown rarely apologises. In fact, he never apologises. But occasionally he acknowledges "mistakes", albeit begrudgingly. Over the abolition of the 10p tax rate in 2007, Mr Brown told Radio 4's Today programme that "we made two mistakes. We didn't cover as well as we should that group of low-paid workers who don't get the working tax credits and we weren't able to help the 60 to 64-year-olds who didn't get the pensioner's tax allowance." Experts use stronger language to describe the Budget of 2007, which was designed to produce positive headlines for the 2p cut in income tax. Accountants calculated that the scrapping of the 10 per cent tax rate, coupled with the increase in the proportion of tax credits withdrawn from higher earners, would leave 1.8 million workers earning between £6,500 and £15,000 paying an effective tax rate of up to 70 per cent.
7. Failing to spot the housing bubble
Gordon Brown said he ended boom and bust, and in those innocent days before the collapse of the global finance system we believed him. In 1997, he outlined his plans. "Stability is necessary for our future economic success", he wisely informed an audience at the CBI. "The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management." The other components of that bedrock including a trillion-pound debt mountain and a decade of unchecked and unparalleled house price inflation presumably slipped his mind. In 2003 a mild-mannered Liberal Democrat MP by the name of Vince Cable dared to question the mantra of "the end of boom and bust". He asked Gordon Brown: "Is it not true that...the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?" Gordon replied: "The Honourable Gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the economy..." We all know what happened next.
8. 50 per cent tax rate
Robert Chote, director of the Institute for Fiscal Studies, has said the tax hike which heralded the end the new Labour may actually end up losing the Government money. "If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it, as people actually declare less income for tax," he said.
9. Cutting VAT
"It would be funny if it wasn’t so serious," said a tax accountant when asked about the Brown-Darling brainwave to cut VAT by 2.5 percentage points. As a nation of shoppers, rather than shopkeepers, a chopped down sales tax sounds like a good idea, providing a vital boost to hard-pressed families at a time of financial hardship. There were two problems. It costs £12.5 billion a year and it has made little discernable difference to those hard-pressed families because it is shopkeepers, rather than shoppers, who have pocketed much of the benefit.
10. Public-sector borrowing
If Gordon had only saved a little more in the good times, we might have had a little more to fall back on in the bad, economists sigh. Last month saw public-sector net borrowing hit £19.9 billion, the highest on record, according to the Office for National Statistics. The chancellor of the exchequer, Alistair Darling, has forecast that Government borrowing will reach £175 billion this year. It is forecast that total government debt will double to 79 per cent of GDP by 2013, the highest level since World War 2. Mr Chote recently warned that "the scale of the underlying problem that the Treasury’s detailed forecasts identify will require two full parliaments of mounting austerity to repair.”
Even after he leaves office in 2010, as is almost certain, it seems that we will all be paying for Gordon's gaffes for many years to come.
By James Charles
I'm surprised he managed to limit it to only 10.
FourWheelDrift said:
I'm surprised he managed to limit it to only 10.
Someone has previously posted a list of near enough every one of Gordon's decisions as Chancellor. It was probably two pages of A4. As far as I could tell every single f
king one of them had been bad for the country's finances. It really does seem that he has some form of inverse Midas touch.
Brown's greatest failure?...Possibley not all Browns fault, Blair was along the same lines as well, Labour never won an election in '97
said:
But the evidence suggests that, as usual, the politicians are lying. Productivity is rising constantly and some people are getting much, much richer than they were, but most of us are not better off than we were five, ten, fifteen or even thirty years ago. In fact, however you measure things, most of us are worse off. If you adjust incomes for real levels of inflation, the average wage is less now than it was decades ago. A few people are getting very, very rich. But most of us are getting poorer. According to the International Monetary Fund, the percentage of Gross Domestic Product (GDP) going to workers in the G7 countries has fallen over the last 20 years. Instead of being shared out among the workers, the profits have been distributed among a very small number of super-rich people.
It is perhaps not surprising that the Financial Times now produces a supplement called How To Spend It. Nor is it much a surprise that an index of `bling' and luxury companies has shown a massive rise in the last few years...
The people getting rich are the ones working in the financial services industry - private equity and hedge funds. Ten years ago graduates all wanted to be dot com millionaires. A survey of American college graduates in 1999 showed that 60% had decided that they would retire within five years as multi-millionaires. Becoming obscenely rich had become a career plan.
Now, thanks to Gordon Brown, young British graduates are all keen to work for hedge funds or private equity houses. That's where the billions are waiting to be collected these days.
Young graduates don't want to create wealth - they just want to redistribute it, taking it from widows and orphans and stuffing it into their own pockets.
The modern, successful man (or woman) in Brown's Britain doesn't produce anything you can see. He doesn't make anything you can eat, or read or sit on. He doesn't sell tea or make toothpaste. He doesn't edit a newspaper or make films. All these activities involve red tape, endless legislation and high taxes.
Thanks to Gordon Brown, today's successful citizens are money magicians. They move money from A to B and take a huge cut for their labours. They borrow money from C and lend it to D. They borrow from E to buy F which they then sell to G for a huge profit. This isn't just usury. It's gone far past moneylending. It's a huge game of pass the parcel. Along the way everyone who plays is a winner and everyone takes a cut. And, thanks to the special deal they've cut with Gordon, all the winners pay tax at just 10%.
In the current financial year there are expected to be 30,000 individuals in Britain earning more than £500,000. Nearly all of them work in London. Most of them work in the `financial services' industry. A good chunk are lawyers. Naturally, a few are retired politicians. The salaries of business bosses have been dragged up by these absurd salaries. The average Chief Executive Officer in the UK now earns 100 times as much as the average worker.
Brown's policies have made London the most expensive city on the planet. It's officially the most expensive city in which to buy property, the most expensive city in which to live and the most expensive city to visit.
Brown's Britain is a curious mixture of fascism and conspicuous spending by the elite. Greed and waste among the rich are now commonplace. In 2007, Prince William, heir to the English throne and an example to the young, was reported to have spent £5,000 on booze in a single night in a nightclub.
The three most popular countries for rich sportsmen to choose as home are Monaco, Switzerland and Britain. Of the three the most tax advantageous (for non-British sportsmen) is Britain. Thanks to a bizarre tax system which punishes those Britons who work for their money and encourages non-domiciled foreign residents to regard the UK as a tax haven, Britain has become two nations.
http://www.vernoncoleman.com/pips.htmIt is perhaps not surprising that the Financial Times now produces a supplement called How To Spend It. Nor is it much a surprise that an index of `bling' and luxury companies has shown a massive rise in the last few years...
The people getting rich are the ones working in the financial services industry - private equity and hedge funds. Ten years ago graduates all wanted to be dot com millionaires. A survey of American college graduates in 1999 showed that 60% had decided that they would retire within five years as multi-millionaires. Becoming obscenely rich had become a career plan.
Now, thanks to Gordon Brown, young British graduates are all keen to work for hedge funds or private equity houses. That's where the billions are waiting to be collected these days.
Young graduates don't want to create wealth - they just want to redistribute it, taking it from widows and orphans and stuffing it into their own pockets.
The modern, successful man (or woman) in Brown's Britain doesn't produce anything you can see. He doesn't make anything you can eat, or read or sit on. He doesn't sell tea or make toothpaste. He doesn't edit a newspaper or make films. All these activities involve red tape, endless legislation and high taxes.
Thanks to Gordon Brown, today's successful citizens are money magicians. They move money from A to B and take a huge cut for their labours. They borrow money from C and lend it to D. They borrow from E to buy F which they then sell to G for a huge profit. This isn't just usury. It's gone far past moneylending. It's a huge game of pass the parcel. Along the way everyone who plays is a winner and everyone takes a cut. And, thanks to the special deal they've cut with Gordon, all the winners pay tax at just 10%.
In the current financial year there are expected to be 30,000 individuals in Britain earning more than £500,000. Nearly all of them work in London. Most of them work in the `financial services' industry. A good chunk are lawyers. Naturally, a few are retired politicians. The salaries of business bosses have been dragged up by these absurd salaries. The average Chief Executive Officer in the UK now earns 100 times as much as the average worker.
Brown's policies have made London the most expensive city on the planet. It's officially the most expensive city in which to buy property, the most expensive city in which to live and the most expensive city to visit.
Brown's Britain is a curious mixture of fascism and conspicuous spending by the elite. Greed and waste among the rich are now commonplace. In 2007, Prince William, heir to the English throne and an example to the young, was reported to have spent £5,000 on booze in a single night in a nightclub.
The three most popular countries for rich sportsmen to choose as home are Monaco, Switzerland and Britain. Of the three the most tax advantageous (for non-British sportsmen) is Britain. Thanks to a bizarre tax system which punishes those Britons who work for their money and encourages non-domiciled foreign residents to regard the UK as a tax haven, Britain has become two nations.
Timesonline said:
5. The £10,000 corporation tax threshold
In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
I'm lost on this one. A company dividend (eg part of the profits) is still treated as personal income when paid to the shareholder, and therefore taxed as income tax. Why should the £10k limit ever change anything if the companies weren't limited in the first place?In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
IIRC there was a £5k limit long before Gordon Brown made the £10k limit, but by abolishing the limit altogether, small companies ceased to make a profit, preferring to pay the profits as director salaries to the shareholders.
Zod said:
I cannot (and I have tried) think of a single good economic decision taken by Brown. If he had done absolutely nothing for the last twelve years, the economy would be in a healthier state.
Yet,He's still PM. We can't get him out, despite it being the best course of action this country could take at the moment.
Why do reporters and analysts not make more noise over this!! All you hear about is some pathetic non-issues, when the proper stories out there need to be heard!
This guy needs outing....and outing NOW!
FourWheelDrift said:
Timesonline said:
1. Taxing dividend payments
Before 1997, dividends issued by UK companies and paid to pension funds were tax-free - that is, the tax could be claimed back via a system of tax credits. Not any more, decided Brown. Tax relief was scrapped, reducing the amount collected by pension funds by around £5 billion a year. Pension funds holding the cash that you, me and almost everyone else in the country plan to use for our retirement have lost around £100 billion over the last 12 years. That's one hell of a stealth tax.
2. Selling our gold
In May 1999 Gordon Brown had a plan to sell some gold. There were two problems with this, which concerned his economic advisers deeply. The price of gold had slumped after a decade of stagnation, but was likely to increase in the proceeding years. Added to this, the announcement of a major sell-off would drive the price down further. Little of this worried Gordon. Experts believe that the poorly timed decision to flog our national treasure has cost us all around £3 billion. Granted, that doesn't seem much nowadays, but more of that later.
3. Tripartite financial regulation
The system of financial regulation dividing powers between the Treasury, the Bank of England and the Financial Services Authority, established by Brown as Chancellor in 2000, missed what amounted to the biggest financial crisis of our lifetime. Whoops. This has led some glass-half-empty commentators to conclude that the system set up by Brown failed and should be replaced. The Commons Treasury Select Committee’s report on the collapse of Northern Rock said that the Financial Services Authority had “systematically failed in its duty” to oversee the troubled bank’s activities. Little did it realise at the time that Northern Rock was the over-leveraged tip of the securitised iceberg.
4. Tax credits
“Gordon Brown claims the tax credits system lifts children out of poverty,” says Simon Blackmore, 38, who was pursued for £6,057 in over-paid tax credits. “Maybe it does, but only to plunge them and their families into debt two years later.” Millions of low-income families have had to pay back the Treasury after receiving too much money in tax credits, putting them under huge financial and emotional strain. Meanwhile, 40 per cent of workers and families who deserved tax credits left billions of pounds unclaimed in the 2008-09 tax year for fear of being chased for the cash later on. Introduced in 1999, reformed in 2000, tax credits have been "a complete disaster zone", according to tax experts.
5. The £10,000 corporation tax threshold
In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
6. Abolition of the 10p tax rate
Mr Brown rarely apologises. In fact, he never apologises. But occasionally he acknowledges "mistakes", albeit begrudgingly. Over the abolition of the 10p tax rate in 2007, Mr Brown told Radio 4's Today programme that "we made two mistakes. We didn't cover as well as we should that group of low-paid workers who don't get the working tax credits and we weren't able to help the 60 to 64-year-olds who didn't get the pensioner's tax allowance." Experts use stronger language to describe the Budget of 2007, which was designed to produce positive headlines for the 2p cut in income tax. Accountants calculated that the scrapping of the 10 per cent tax rate, coupled with the increase in the proportion of tax credits withdrawn from higher earners, would leave 1.8 million workers earning between £6,500 and £15,000 paying an effective tax rate of up to 70 per cent.
7. Failing to spot the housing bubble
Gordon Brown said he ended boom and bust, and in those innocent days before the collapse of the global finance system we believed him. In 1997, he outlined his plans. "Stability is necessary for our future economic success", he wisely informed an audience at the CBI. "The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management." The other components of that bedrock including a trillion-pound debt mountain and a decade of unchecked and unparalleled house price inflation presumably slipped his mind. In 2003 a mild-mannered Liberal Democrat MP by the name of Vince Cable dared to question the mantra of "the end of boom and bust". He asked Gordon Brown: "Is it not true that...the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?" Gordon replied: "The Honourable Gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the economy..." We all know what happened next.
8. 50 per cent tax rate
Robert Chote, director of the Institute for Fiscal Studies, has said the tax hike which heralded the end the new Labour may actually end up losing the Government money. "If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it, as people actually declare less income for tax," he said.
9. Cutting VAT
"It would be funny if it wasn’t so serious," said a tax accountant when asked about the Brown-Darling brainwave to cut VAT by 2.5 percentage points. As a nation of shoppers, rather than shopkeepers, a chopped down sales tax sounds like a good idea, providing a vital boost to hard-pressed families at a time of financial hardship. There were two problems. It costs £12.5 billion a year and it has made little discernable difference to those hard-pressed families because it is shopkeepers, rather than shoppers, who have pocketed much of the benefit.
10. Public-sector borrowing
If Gordon had only saved a little more in the good times, we might have had a little more to fall back on in the bad, economists sigh. Last month saw public-sector net borrowing hit £19.9 billion, the highest on record, according to the Office for National Statistics. The chancellor of the exchequer, Alistair Darling, has forecast that Government borrowing will reach £175 billion this year. It is forecast that total government debt will double to 79 per cent of GDP by 2013, the highest level since World War 2. Mr Chote recently warned that "the scale of the underlying problem that the Treasury’s detailed forecasts identify will require two full parliaments of mounting austerity to repair.”
Even after he leaves office in 2010, as is almost certain, it seems that we will all be paying for Gordon's gaffes for many years to come.
By James Charles
Written in June but not posted on here.Before 1997, dividends issued by UK companies and paid to pension funds were tax-free - that is, the tax could be claimed back via a system of tax credits. Not any more, decided Brown. Tax relief was scrapped, reducing the amount collected by pension funds by around £5 billion a year. Pension funds holding the cash that you, me and almost everyone else in the country plan to use for our retirement have lost around £100 billion over the last 12 years. That's one hell of a stealth tax.
2. Selling our gold
In May 1999 Gordon Brown had a plan to sell some gold. There were two problems with this, which concerned his economic advisers deeply. The price of gold had slumped after a decade of stagnation, but was likely to increase in the proceeding years. Added to this, the announcement of a major sell-off would drive the price down further. Little of this worried Gordon. Experts believe that the poorly timed decision to flog our national treasure has cost us all around £3 billion. Granted, that doesn't seem much nowadays, but more of that later.
3. Tripartite financial regulation
The system of financial regulation dividing powers between the Treasury, the Bank of England and the Financial Services Authority, established by Brown as Chancellor in 2000, missed what amounted to the biggest financial crisis of our lifetime. Whoops. This has led some glass-half-empty commentators to conclude that the system set up by Brown failed and should be replaced. The Commons Treasury Select Committee’s report on the collapse of Northern Rock said that the Financial Services Authority had “systematically failed in its duty” to oversee the troubled bank’s activities. Little did it realise at the time that Northern Rock was the over-leveraged tip of the securitised iceberg.
4. Tax credits
“Gordon Brown claims the tax credits system lifts children out of poverty,” says Simon Blackmore, 38, who was pursued for £6,057 in over-paid tax credits. “Maybe it does, but only to plunge them and their families into debt two years later.” Millions of low-income families have had to pay back the Treasury after receiving too much money in tax credits, putting them under huge financial and emotional strain. Meanwhile, 40 per cent of workers and families who deserved tax credits left billions of pounds unclaimed in the 2008-09 tax year for fear of being chased for the cash later on. Introduced in 1999, reformed in 2000, tax credits have been "a complete disaster zone", according to tax experts.
5. The £10,000 corporation tax threshold
In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
6. Abolition of the 10p tax rate
Mr Brown rarely apologises. In fact, he never apologises. But occasionally he acknowledges "mistakes", albeit begrudgingly. Over the abolition of the 10p tax rate in 2007, Mr Brown told Radio 4's Today programme that "we made two mistakes. We didn't cover as well as we should that group of low-paid workers who don't get the working tax credits and we weren't able to help the 60 to 64-year-olds who didn't get the pensioner's tax allowance." Experts use stronger language to describe the Budget of 2007, which was designed to produce positive headlines for the 2p cut in income tax. Accountants calculated that the scrapping of the 10 per cent tax rate, coupled with the increase in the proportion of tax credits withdrawn from higher earners, would leave 1.8 million workers earning between £6,500 and £15,000 paying an effective tax rate of up to 70 per cent.
7. Failing to spot the housing bubble
Gordon Brown said he ended boom and bust, and in those innocent days before the collapse of the global finance system we believed him. In 1997, he outlined his plans. "Stability is necessary for our future economic success", he wisely informed an audience at the CBI. "The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management." The other components of that bedrock including a trillion-pound debt mountain and a decade of unchecked and unparalleled house price inflation presumably slipped his mind. In 2003 a mild-mannered Liberal Democrat MP by the name of Vince Cable dared to question the mantra of "the end of boom and bust". He asked Gordon Brown: "Is it not true that...the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?" Gordon replied: "The Honourable Gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the economy..." We all know what happened next.
8. 50 per cent tax rate
Robert Chote, director of the Institute for Fiscal Studies, has said the tax hike which heralded the end the new Labour may actually end up losing the Government money. "If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it, as people actually declare less income for tax," he said.
9. Cutting VAT
"It would be funny if it wasn’t so serious," said a tax accountant when asked about the Brown-Darling brainwave to cut VAT by 2.5 percentage points. As a nation of shoppers, rather than shopkeepers, a chopped down sales tax sounds like a good idea, providing a vital boost to hard-pressed families at a time of financial hardship. There were two problems. It costs £12.5 billion a year and it has made little discernable difference to those hard-pressed families because it is shopkeepers, rather than shoppers, who have pocketed much of the benefit.
10. Public-sector borrowing
If Gordon had only saved a little more in the good times, we might have had a little more to fall back on in the bad, economists sigh. Last month saw public-sector net borrowing hit £19.9 billion, the highest on record, according to the Office for National Statistics. The chancellor of the exchequer, Alistair Darling, has forecast that Government borrowing will reach £175 billion this year. It is forecast that total government debt will double to 79 per cent of GDP by 2013, the highest level since World War 2. Mr Chote recently warned that "the scale of the underlying problem that the Treasury’s detailed forecasts identify will require two full parliaments of mounting austerity to repair.”
Even after he leaves office in 2010, as is almost certain, it seems that we will all be paying for Gordon's gaffes for many years to come.
By James Charles
I'm surprised he managed to limit it to only 10.
IanMorewood said:
NoelWatson said:
Is #2 a fair criticism?
Yep, the old saying of buy low sell high applies, he sold at an all time low.Total idiocy
tinman0 said:
Timesonline said:
5. The £10,000 corporation tax threshold
In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
I'm lost on this one. A company dividend (eg part of the profits) is still treated as personal income when paid to the shareholder, and therefore taxed as income tax. Why should the £10k limit ever change anything if the companies weren't limited in the first place?In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.
IIRC there was a £5k limit long before Gordon Brown made the £10k limit, but by abolishing the limit altogether, small companies ceased to make a profit, preferring to pay the profits as director salaries to the shareholders.
The old dividend rules stated that dividends had 20% tax taken out of them at source. This tax was paid over to the Revenue by the company but they could use the tax paid as a credit against their mainstream Corporation Tax liability. It was referred to as Advance Corporation tax.
In the individual's hands, tax at 20% had already been deducted at source. They only paid additional tax on the grossed up value of the dividend if they weere higher rate tax payers,
Financial institutions such as pension providers could reclaim the 20% tax deducted on these dividends as well.
Brown abolished all this.
Now, NO tax is deducted at source on a dividend - therfeore there is no deemed advance payment of the mainstream Corporation Tax liability.
A NOTIONAL tax credit set at 10% is attached to the dividend. An individual who only pays basic rate tax will not suffer any tax liability on the dividend received.
If the individual is a higher rate tax payer they pay income tax at a special rate of 32.5% on the dividend.
Pension companies cannot make any sort of claim based on the 10% Notional Tax Credit as it was never deducted and paid over by the dcompany generating the dividend in the first place. THIS single factor had a devastating effect on private personal pension schemes.
NoelWatson said:
IanMorewood said:
NoelWatson said:
Is #2 a fair criticism?
Yep, the old saying of buy low sell high applies, he sold at an all time low.^ Is that not how it works? Sure it might keep going down, but that doesn't stop you knowing it is low.
Is the problem that there are some very clever lobbyists, lobbying some very dumb politicians to bring in these kinds of legislation?
Don't get me wrong, I'm not defending the man, just trying to understand why such things can happen so many times. To the clear benefit of the already very wealthy (and generally very clever).
Don't get me wrong, I'm not defending the man, just trying to understand why such things can happen so many times. To the clear benefit of the already very wealthy (and generally very clever).
NoelWatson said:
TonyToniTone said:
NoelWatson said:
How do you know in advance that it is an all time low?
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