Those pesky LibDems – destroying pensions

I can’t quite believe the Westminster village’s response to Thursday’s leaders’ debate and the polls that followed. I missed the first part of the show as a result of being in the last cabinet meeting before the election. I hated the format and felt that the way it was chopped up made it very un-engaging.

Up until now I have been largely happy to ignore the LibDems as an irrelevance. I did not take the time to read their manifesto before all of the excitement of the last few days. Judging by the outcome of the leaders’ debate you can only conclude that Tory leader David Cameron made the same mistake.

I have started myself to look a bit more carefully at what the LibDems are saying. I love the idea of a £10K starting rate for tax and indeed I have suggested it myself in the past, here. The way they want to pay for it though is one third fantasy and one third dangerous.

On page 100 of the manifesto, where they lay out how the £10K starting rate will be paid for, they identify £4,625 million of anti-avoidance measures. Well actually they don’t identify any they just pluck a number out of the air and stick it in a table to make their number add up. Anyone who is in business or has to deal with the tax authorities for any reason knows that this is a fantasy. For 13 years Labour has been relentlessly tightening up the tax system. Remember IR35? I get the taxman chasing me for tax on bits of interest I forgot I received.

The largest measure to pay for the £10K starting rate is an elimination of tax relief for pensions at the higher rate. This has to do £5,455 million, the largest share, of the work. This measure has to raise three times what the much talked about mansion tax has to raise.

This measure is dumb at least three times over:

  • this measure hits ordinary people and ensures that they will have a straightened old age. High rate tax payers aren’t just the “rich”. They are you and me when, hopefully, we get on in life and get promoted or do well in business. We might be struggling to pay off debt and get on the housing ladder in our twenties – pension contributions postponed. We might spend our thirties and forties raising children and paying the mortgage – pension contributions postponed again. Just when we get our heads above water and need to start seriously thinking about how we fund our retirements and along come the LibDems to further bash our already damaged pensions system. Anyone over 40 voting for this measure needs to be altruistic – it will really hurt
  • this measure will encourage consumption and reduce investment and the savings ratio. I assume that the LibDem figures imply £27.5 billion of pension contributions put in question every year. A large chunk of this is going to leak into consumption rather than savings every year as people decide to spend money now, taxed at 40%, rather than save with a 20% tax and then pay 20% income tax in the future
  • finally, are we going to see a debt funding crisis? The biggest purchaser of gilts has to be the UK pensions industry which is suddenly going to see £27.5 billion a year of contributions put at risk!

I am sure that a lot of people are going to be spending more time looking at the LibDem’s manifesto and that there will be more holes to find. More later.

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5 Responses to Those pesky LibDems – destroying pensions

  1. Colm Costello says:

    Phil,

    There was a great story in the News of the World today. Vince Cable, the man the BBC keeps telling us is a genius and should be our next chancellor, nearly had his gas turned off because he didn’t pay his bills on time.

    I’m not sure how they found this out, but he also had at least half a dozen other late payments too.

    If this is how he manages his own finances, God help us if we end up with a Lib/Lab coalition government, and find that clown as chancellor.

  2. George says:

    Phil

    My bet today is that the Liberals will not fall back down to the 19/20% which they have been getting in the polls. Perhaps they will drop back to say 25% from today’s 31%. If you listen to the LBCs of this world the person in the street talk reminds me of how we hoped for a bright new dawn in 1997 after the sleaze and the long term effects of unemployment under the Thatcher regime. They don’t know the Liberals’ policies, but probably don’t now anyone’s policies. They probably don’t care, they just want the sense of something new and that is Clegg. Your trouble is that we are, to quote Andrew Marr, all Thatcher’s children now, and the Labour problems are a bit of a deficit, a law for everything we do, and overcrowding, etc, etc. Both parties both are mired with the expenses saga which touches local councillors as well.

    Cameron must be kicking himself for having lost it.

    If you Tories in Ealing had said that you were really going to involve residents deeply in our future in a radical way, I could be interested. Hey Ho. I shall be somewhat surprised if bell weather Ealing gets a coalition but Tories in my view will not have the same majority, because the tram is history. If you win, but with less seats, scrutiny will be much more fierce.

    Wonder how much my percentage figure will be off beam. Perhaps you will let us know what you are privately betting after 6 May.

    Did you tell Colm off for speaking out of turn? Remember Tory Chancellor Norman Lamont who was late with paying his credit card bill. But later went on to put up taxes-just as Cable is proposing.

  3. Colm Costello says:

    Good one George

    If you want to compare Norman Lamont paying his credit card bill late to Vince Cables record In just one year, then fine.

    Cable was sent NINETEEN reminders or warnings from power, water and phone companies over non-payment. This included six reminders from BT, two disconnection notices from British Gas and one from Southern Electric and a £25 late payment charge from GE for a printer.

    Both his gas and electricity suppliers have threatened to cut him off. And he’s also been hit with £190 late payment fees — which he billed the taxpayer for. That means we paid for his incompetence, which is exactly what will happen if we get a LIB/LAB government.

    It gets worse

    His Commons expenses claims for his second home at Twickenham show that, as well on 2005-06, he fell behind with his bills in following years. In 2006-07 he got four reminders and a warning letter from BT, and reminders from British Gas and Southern Electric.

    He also was hit by GE with another £165 in late payment and default charges. And in 2007-08 Mr Cable was sent four reminders by from BT, a final demand from Thames Water and an “overdue bill” letter from Southern Electric.

    A Lib Dem spokesman said last night: “The Cable office has a system to pay bills in full on a quarterly basis. There is nothing improper or problematic in so doing.”

    Are you as reassured as I am George that he has a system now. There’s a queue of people in William Hills everyday who have systems. I wonder is it the same thing.

    Admit it George, It’s hilarious. If you were depending on this fella just to keep the house warm during the winter, you’d be very foolish indeed.

    Let me have my fun George

    Can I also say that as worried as I am by the Lib Dem tax rises, the tax cut of £17bn to raise the tax free allowance to £10000 to help poorer families just shows how silly this man is.

    Less than 10% of that tax cut will reach the poorer families he is aiming it at. It’s a gimmick

    If you want to compare Lamonts tax rises to what the Lib Dems are proposing, go ahead. I’d be very interested to see your take on that.

    Finally, if you are not happy with us in Ealing, who do you think should run the place. Since January we have canvassed almost two thousand people in Hobbayne and it is very rare you will find people who haven’t noticed that Ealing is cleaner, safer and cheaper than when Labour ran the place

  4. George says:

    Colm

    Would a working couple not be better off by £600? Would that not reduce the poverty trap?

    Crime stats show an increase over the last 12 months in Ealing, unlike the overall stats for London in the same period. Vlod could not disagree.

  5. Colm Costello says:

    George

    there are cheaper ways to reduce poverty than the lib dems £17bn tax cut that will benefit the same people they are so upset will benefit from increasing the inheritance tax threshold to £1m which will cost considerably less than £17bn and benefit an awful lot of residents in Ealing whose homes are worth more than the £325k current inheritance tax threshold.

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