Prime Minister Cameron proposes a retaliatory tax…

‘I’m sometimes tempted to ask the French if they would like a cheese tax’

Red Ed has made an overture to the protesters at St Paul’s, four weeks late to the prom. Some of his advisers still rooted in the reality based community have been struggling to stop Ed leaping over this latest electoral cliff, but they seem to have lost the battle. One said last week: “Not since his brother David was snapped holding a banana has a dafter Miliband photo opportunity been suggested.” It’s not very hard to see why they would be concerned: multi-millionaire Ed, who maintained his family’s wealth through some colourful inheritance arrangements, despite being on an income of £139,355 plus expenses, is in 1% denial. Meanwhile occupiers have been arrested for dealing crack and St Paul’s are outraged at a “dirty protest” defecation on their steps. Just have a look at Red Ed’s new friends:

Also jumping on the bandwagon is the privately educated son of a wealthy businessman Chuka Umunna, who will be speaking for the opposition today in response to a report published by the dwindling campers. The darling of the new Labour left will be facing some tough questions if he actually goes down to the site. Tax avoidance is the number one issue to this “movement” and Umunna’s Teflon image took a pounding this weekend. He made a name for himself  in February with a punchy attack on Barclay’s Bob Diamond at the Treasury Select Committee on the subject of tax havens, forcing the banking baddie to admit that he didn’t actually know how many offshore subsidiaries his organisation had. However, in that 1% kinda way, Chuka has his own offshore dealings to thank for those sharp suits:

“A Labour frontbencher who has led the attacks on ‘tax avoiders’ in the City is at the centre of controversy after it was revealed his £1 million family home was funded from a tax haven. Land Registry documents reveal the house’s complicated ownership structure. Its purchase was funded by Vona Limited, a company registered in Jersey, and in turn owned by companies run by the RBC Trust Company. RBC, also based on the Channel Island, boasts it is one of the ‘top ten’ largest wealth managers in the world, offering services to ‘high net worth clients’ including ‘planning for and mitigating income, capital gains or inheritance taxes’.  A tax expert said: ‘These trusts can cost thousands to run. I can’t think of any reason to do that other than to reduce a tax bill.’”

One thing Chuka won’t be repeating when he leads the charge for Labour today is an off-the-cuff quote he once gave the Standard: “I’m middle class. My struggle, in some senses, is: what struggle?” Quite…

UPDATE: Does Ed agree with his new friends that poppy sellers are “baby killers”?

There is often more truth in satire than news reporting and yesterday gave us an amusing example. The Chancellor’s vague plan for the Treasury to buy small firm’s corporate bonds was reported on by the Daily Mash thus:

Osborne’s offer of credit to thousands of small businesses will make Britain the first conservative-led communist state when the loans are inevitably defaulted and the government ends up owning and running everything.

The Chancellor seems to think the solution to the credit crisis is more debt, even though many businesses are doing the opposite and de-leveraging. Banks make money from lending and they lose money lending to bad credit risks. The government thinks the banks are being too cautious even though the markets think there is serious trouble ahead. Guido thinks the markets have it right.

When challenged to introduce growth-stimulating tax cuts the Chancellor refrains saying that he won’t because he is a “fiscal conservative”. George Osborne presumably would concede that Nigel Lawson was also a fiscal conservative, yet he managed to cut the top marginal tax rate from 60% to 40%. There is nothing fiscally conservative about maintaining a tax rate so perversely high it generates lower revenues by driving high earners out. This isn’t fiscal conservativism, it is political defeatism.

It is even less likely that fiscally conservative Nigel Lawson would countenance Osborne’s proposed socialisation of the corporate credit markets. When the government starts lending money to companies that no one else wants to lend to, you can be sure of one thing, they are going to lose a lot of taxpayers’ money. Billions.

Ed Balls claims unconvincingly…

“My instinct is that you should always try to reduce every tax if you can…”

The best policy idea to come out of LibDem conference was Danny Alexander’s call for tax thresholds to be raised to £12,500, effectively taking minimum wage earners out of income tax. Reversing Gordon Brown’s complicated tax – the – poor – and – pay – them – benefits strategy. Brown effectively and deliberately made those in work on low earnings recipients of welfare benefits. Brown wanted everyone to be on state benefits (welfare “universalism”) for purely political reasons so as to maximise buy-in from all classes into the welfare state. Hence the cynical Brown/Balls attachment to child benefit for millionaire mums and winter fuel allowances for Michael Winner.

Raising the tax threshold is simple, has popular appeal and will benefit those on low earnings proportionately more than those on higher earnings. It will take some pressure off the “squeezed middle” and won’t increase the welfare trap. It isn’t a perfect policy, prominent Orange-booker Mark Littlewood, a wonk the Institute for Economic Affairs, is wary that it will result in millions of voters being unaffected by the basic rate of income tax who therefore won’t be incentivised to vote for parties and policies that favour lower taxes. He fears that low-earners will have no reason to buy-in to tax cuts if they are taken out of the income tax bracket entirely.

The organised opposition to this policy however is coming from the left-wing, EU-funded think-tank IPPR. The IPPR was founded and funded by the unions back in the Kinnock era to drag the Labour Party to the centre, in the post New Labour era and under new management it is dragging the Labour Party away from the centre towards the left. IPPR is arguing against raising tax thresholds because it won’t help the poorest who are on benefits and not working. This criticism cuts no ice because tax cuts, by definition, are designed to help taxpayers. IPPR argues that targeting benefits, sprecifically towards childcare, would be more effective and cheaper. It is as if they are speaking a different language, the problem of welfare dependency won’t be solved by paying out more benefits.

Nevertheless Guido wishes IPPR well, their wonkish sophistry may well appeal to Ed Miliband. If in 2015 the coalition parties are standing on a platform of reducing taxes on the working poor with the Labour Party standing on a platform of taxing the poor, Miliband will be on the wrong side of the dividing line. “Vote Labour and tax the poor” is a winning campaign slogan – for the coalition parties.

The FT’s cerebral editor Lionel Barber gave the Fulbright Lecture last night about media matters of concern to the chatterati (“The Future of News and Newspapers in the Digital Revolution“). Barber joins the chorus for a Media Standards Commission, with teeth, to replace the discredited Press Complaints Commission.

Of interest to Guido was that he wants the regulator’s remit to cover blogs:

Should the new system embrace new media such as the Huffington Post UK or individual political bloggers such as Guido Fawkes?  My answer is Yes, not simply in the interests of a level playing field but also because the distinction between old and new media are rapidly becoming meaningless in the new digital eco-system.  New media is moving into reporting. Old media is blogging and tweeting, and using social media to promote and distribute news and analysis around the world.

If bloggers don’t cooperate he wants “a statutory levy on advertising revenues for non-participants, with such levies being used to fund the new body”. Good luck with that, because it will require some extra-territorial innovations in international law. It is never going to happen, you’ll have to prise the keyboard out of Guido’s cold dead hands…

Tomorrow VAT in Ireland will be slashed to 9% on discretionary spending and the tourist industry. When they did this for restaurants and hotels in France at the beginning of 2009, it’s reckoned that around 29,500 jobs were created in the entertainment industry. The British Beer & Pub Association are putting the pressure on for a similar move to take place in the UK:

“Cutting VAT could create thousands of jobs in British pubs, bars and restaurants, boosting tax revenues, and helping out consumers. It’s time for the UK to catch up. With this sensible, job-creating move, Ireland is just the latest in a long line of EU countries to cut VAT on food in the hospitality sector, with the UK looking increasingly like the ‘odd one out’”

Guido won’t say this very often, but, Balls is right on this one, a nice summer VAT cut would do wonders for consumer spending, confidence and growth.

The pen-pushers at IPSA are meant to restore confidence in the expenses system and avoid the pitfalls of paperwork cock-ups, deliberate or not, that have blighted Parliament for so long. Red faces all round then as it seems thousands of MPs staff will get a bit of a shock when they open their annual P60 certificate.

When IPSA was founded, they  hammered home the fact that Members would remain the legal employer of their staff. Their contracts make this very clear:

Staff pay-slips back this up. However, the P60 end of year tax certificates, sent to every staffer, state that the employer is “IPSA 7th floor, Portland House, Bressenden Place, London, SW1E 5BH”:

Simply not the case.

A P60 is proof that tax has been paid and the details are meant to be watertight. Guido understands this is what is known technically as “a massive cock-up” rather than a deliberate shift in the employment rules. IPSA have made clear they will replace the P60 with a correct one if staff complain, but it seems they weren’t going to announce the blunder publicly. MPs will be chortling into their subsidised pints that IPSA has messed up their own paperwork. The fact that IPSA can’t get something as basic  as Parliament’s P60′s right, doesn’t bode well for the rest of their duties…

Data released today by the Office for National Statistics showed UK retail sales slumped during May. Including fuel, sales volumes fell by 1.4% last month, while excluding automotive fuel volumes decreased by 1.6%. George Osborne believes that lower tax economies are higher growth economies, he told us so many times in opposition. Just because Ed Balls advocates it today doesn’t automatically make it wrong to cut VAT. Balls is calling for a temporary suspension of the VAT hike to boost consumer spending and growth. Why not?

Douglas Carswell has spotted a Statutory Instrument slipped in before parliament without prior debate, two pages of legislation which will cost the British taxpayer £9 billion, the equivalent of adding some 1½p to the basic rate of income tax. No debate, no big announcement, just another day of propping up the Eurozone on the backs of UK taxpayers.

The Chancellor was at the Bilderberg conference this weekend, where the global elite discuss important matters without tiresome worries like democracy or transparency, among the attendees were central bankers, financiers and investment bankers – the guilty men of the financial crisis. The Chancellor has clearly fallen in with a bad crowd…

UPDATE: Osborne’s PPS Greg Hands has been rolled out to defend the £9 billion loan. The crucial point he makes is that “Because this is a loan, it has no impact on our borrowing – it is a financial asset that will be repaid.” All being well, however all is not well. Institutions like the ECB itself are in trouble, the US Treasury is on credit watch. We may be approaching the financial equivalent of the rapture, when all the reckoning for decades of loose credit will be made. One only has to look at the price of gold to see that people are losing faith in the paper-money financial system.