50p tax – hero to zero?
From the people who gave you a revenue raising supertax of 50p (HM Treasury – April 2010) … a new, desultory estimate of what it actually brings in (HM Treasury 2012).
The Treasury, not so long ago, said 50p would, without any avoidance/behavioural changes/ducking and diving* (*delete as applicable) bring in £6.5bn. When it estimated for avoidance/behavioural changes etc it brought that number down to £2.5b.
Now the OBR is saying in its first year of operation the 50p will have raised something, who knows exactly what, south of £1bn.
The Treasury itself is letting it be known it thinks that the 50p rate loses them so many other revenues (like VAT) that net revenue from the 50p tax would dry up pretty quickly to a big fat zero. From hero to zero in two short years.
It’s important to remember throughout today the elephant in the room.
The deficit reduction plan remains as it was set (albeit now stretched out for another two very painful years – George Osborne signalling that welfare savings of £10bn in 2015-17 on top of the £18bn planned for 2010-15). I’m told that in all the negotiations for this budget at no point was the deficit reduction plan actually challenged, although George Osborne is wondering if some fundamental shifting of the Whitehall furniture might be needed to get there.
Read more: Do 50p taxpayers have it so bad?
In the tweaking and adjusting of this benefit and that allowance, the chancellor who once dreamt of flat taxes has made allowances more complicated (though painfully harmonised for over 65s – raking back a lot of the money he said he was going to give pensioners when he announced the triple lock on state pensions).
He’s made the last big working age universal benefit – child benefit – more complicated: you can expect a form through the post asking you to re-apply with income details if you are in the 40p tax bracket. He’s been gently putting extra weights on either side of the scales in this budget and it is hard to see that as the simplification he talked of in his Budget speech.
But he wants his troops to notice a direction of travel … a £2b net tax cut funded by spending cuts, plus a cut in corporation tax to be part of a “growth strategy” and “open for business” message to the world. He wants just about everyone else to take in headlines like the one on the front of The Times today: “Super-rich to pay for Osborne’s tax cutting.”
But the truth is not much enormous changed today beyond some loud political signalling. The growth and borrowing prospects are still, objectively, eye-watering … even if there’s been no big worsening of them in this budget. They’re the big picture and they remain bleak for as far as they eye can see.
The Lib Dems say the cumulative effect of the raised tax allowance they pushed for will put nearly £1,000 in middle and lower earning individuals’ pockets by 2015.
Problem is, as the Lib Dems know well, this is a policy that doesn’t grab like some other headline policies. And the annual gain from it has been swallowed up and barely noticed by many lower and middle income earners in the wave of raised costs, not least on fuel.
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