Tuesday, January 06, 2009
A tax cut?
All this morning's papers give some prominence to David Cameron's promise of a tax cut for basic rate savers if the Tories get into power and for once it is a proposal worth looking at. After all many pensioners, who rely on their savings to maintain a decent standard of living, have found themselves struggling in the face of the recession and the impact it is having on the value of their investments.
However, as Nick Clegg points out the impact of this so-called cut will be negligible. It only amounts at today interest rates to an extra 40p a year for someone saving £100. Far better would be the sort of big, permanent, fair tax cuts proposed by the Liberal Democrats and which will take many of the poorest pensioners out of paying tax altogether.
The other problem with Mr. Cameron's proposal is how it is to be paid for. Although he plans to keep spending on schools, health, defence and international development at Labour's planned levels, projected spending in other departments could grow by only 1% in real terms, instead of the 4.1% planned by Labour. That means restrictions on spending by the Home Office, Ministry of Justice, business department, and communities department.
In other words the Tories will effectively allow spending on the police, prisons, the court system, investment in small business, local government and regneration projects to fall behind other departments, despite the increased demand on their resources. That is a matter of judgement on their part of course and it does matter how this expenditure will be managed. We have yet to see the details of that but once we do at least the electorate will now have something to consider when they look to cast their vote at the next general election.
However, as Nick Clegg points out the impact of this so-called cut will be negligible. It only amounts at today interest rates to an extra 40p a year for someone saving £100. Far better would be the sort of big, permanent, fair tax cuts proposed by the Liberal Democrats and which will take many of the poorest pensioners out of paying tax altogether.
The other problem with Mr. Cameron's proposal is how it is to be paid for. Although he plans to keep spending on schools, health, defence and international development at Labour's planned levels, projected spending in other departments could grow by only 1% in real terms, instead of the 4.1% planned by Labour. That means restrictions on spending by the Home Office, Ministry of Justice, business department, and communities department.
In other words the Tories will effectively allow spending on the police, prisons, the court system, investment in small business, local government and regneration projects to fall behind other departments, despite the increased demand on their resources. That is a matter of judgement on their part of course and it does matter how this expenditure will be managed. We have yet to see the details of that but once we do at least the electorate will now have something to consider when they look to cast their vote at the next general election.
