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National politics

Next week’s tax swindle

The Business Secretary, Peter Mandelson, used his first sentence on this morning’s BBC Radio 4 Today Programme to tell a direct lie. This guy has previous as we all know but we can be sure that he will have prepared very well for this interview and that the first thing he said was the main thing he wanted to convey. Although the 7.50am slot is not quite as prestigious in news terms as the 8.10am slot it has got to be the next best thing. Peter the Porkie Pie teller wanted us to hear this message:

Well I think every government now recognises, and we saw this at the international conference in Washington, that governments now around the world have got to provide a much needed stimulus to their economies.

Mandelson and Brown are using the G20 meeting in Washington on Saturday as a cover for their plan to spring pre-Christmas tax cuts on the British public one week from today when Alistair Darling presents his Pre-Budget Report. The speculation in the Sunday papers over the weekend (see Telegraph story here) was that the government would use the complex, bureaucratic and fraud prone tax credit system to achieve this. See the 36 page guide to filling in the form for a tax credit application here. Don’t forget who invented the tax credit system introduced in 2003, Gordon Brown of course. It is telling that fraud and overpayment loses in the tax credit system to-date are of the same order of magnitude as the 1-2% or £15-30 billion fiscal stimulus currently being mooted. Oh yes.

George Osborne’s combative performance on the Andrew Marr Show yesterday sent me in search of the G20 communiqué. If you cut and paste the G20 communiqué into your word processor and run a word count over it, it will come out at something like 3,636 words long. Only 21 words were devoted to fiscal stimulus:

Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conducive to fiscal sustainability.

There are certainly some countries that could afford to stimulate domestic demand while maintaining a policy framework conducive to fiscal sustainability. Unfortunately, the UK isn’t one of them.

Osborne did well to nail the government’s spinning of this communiqué at the get go but from Mendelson’s performance this morning we know they think that this is a good line and they are sticking with it even if it is a porkie.

There is one tax cut we should all be entitled to next week. That is a 5% uprating of tax thresholds in line with September’s RPI of 5%. This does not fit into Brown’s fairness agenda so next week’s tax swindle will almost certainly be a headline grabbing tax credit gift to the lower paid and those with children, some 6 million households, and a another stealth tax rise as Brown uses good old fiscal drag to raise thresholds by something rather less than 5%. Just wait.