Writing for Politics.co.uk, Robert Oxley explains how taxpayers got a terrible deal from bailing out the banks and would get another bad one for bailing out politicians.
The allegation that Tory donors were able to effectively buy access to the Prime Minister have intensified the debate over how we fund politics in Britain. Following a week of political scandal it was hardly surprising to see the collective poll ratings of the party leaders fall to their lowest levels ever recorded.
I have written a follow up letter to HRMC today, following the re-classification of donations made to Ken Livingstone’s campaign in light of the questions relating to his tax affairs. The letter is reproduced below, and you can read my original letter to HMRC here. The letter from the Electoral Commission to Greg Hands MP (which prompted my second letter) is here (pdf).
I write further to my letter of Saturday 17 March 2012 (attached) in which I sought an urgent investigation into the tax arrangements of Mr Ken Livingstone with respect to his company Silveta Ltd, through which he has been channelling his earnings and seemingly paying those involved in his election campaign for the London Mayoralty.
I reiterate my belief that the employment of an economist to come up with policies and of “people handling the media” for Mr Livingstone’s campaign cannot be defined as expenses incurred “wholly and exclusively” for the purposes of Silveta’s trade, as HMRC rules state they should be.
However, the matter has become all the more pressing since my attention has today been drawn to a letter (also attached) from Lisa Klein, Director of Party and Election Finance at the Electoral Commission, to Greg Hands MP, dated 23 March 2012.
Regarding the donation-in-kind from Mr Ken Livingstone of “staff costs” to the value of £19,202 (Electoral Commission Ref. No. NC0077078) and accepted by the Labour Party in December 2011, Ms Klein states:
“As a result of our discussions, the party have now requested a change to the register to show that the donation was actually from Silveta Ltd.”
There therefore now appears to be prima facie evidence that Mr Livingstone was channelling untaxed income paid to Silveta Ltd directly to the Labour Party as a political donation-in-kind, which I understand to be a stark breach of HMRC rules.
I trust that you will investigate this matter with the greatest seriousness and urgency, not least because with the election only five weeks away, it would only seem right and proper that voters should have the full facts before them when they cast their ballots on Thursday 3 May.
The Office for National Statistics (ONS) has today published a report showing the difference in the average hourly pay of public and private sector workers. It shows that the pay gap was around 8 per cent in 2011, with the public sector coming off better. It is staggering that, despite the desperate need to reduce public spending, this is the widest the gap has been in a decade.
As they do each year when these figures are released, Unions have cried foul, claiming that the numbers are being ‘misused’. They are desperate, because the ONS findings discredit their repeated attempts to mislead the taxpaying public over the existence of a substantial public sector pay premium. It shows how selfish it to organise strikes and protests, resisting necessary reforms to pay, pensions and working conditions.
There are often challenges in comparing the differences in public and private sector pay because of the different characteristics of these sectors. After adjustments to account for the factors that vary between the sectors (like gender, age, occupation, location of job) public sector workers still come off better. Whilst these sorts of comparisons are difficult to make, the ONS report (which mainly uses data from the ASHE, the Annual Survey of Hours and Earnings) is a good, conservative estimate for the public-private pay gap. In fact the adjustment could even be too favourable to the public sector.
For example, there are a lot more skilled tradesmen in the private sector, which won’t necessarily be reflected in the ASHE data on ‘qualifications’.
Finally, ONS statistics do not account for relatively generous public sector pensions, which the Institute for Fiscal Studies (IFS) estimate mean that a public sector worker is on average around 12 per cent better off than a private sector worker on the same basic salary. In November last year we released an online calculator that allows private sector workers to assess how their total remuneration compares to that enjoyed by public sector workers:
Back in 2010, I posted a blog on the fact that ebooks are taxed at the normal VAT rate while regular books are VAT free. Since that post VAT has risen to 20% and, disappointingly, the Chancellor of the Exchequer has yet to remove VAT on eBooks. It is still ridiculous that the UK treats the taxation of physical books and ebooks differently.
VAT charging amounts to a stealth tax on reading. A recent market study shows that UK based readers are buying more ebooks year on year. And much like the digital music industry, though the price of an ebook is less than the price of a physical copy of the same book, the volume of sales is rising. Twenty pence adds a significant amount to the price that consumers will pay. Ebook vendors won’t absorb that price as they can’t afford to at the moment since the market is still emerging. Why should the Treasury impact a growing industry which is, in part, accounting for the growth of the UK digital economy?
It would be an easy way to simplify the tax system to scrap VAT on ebooks . In taxing ebooks the Treasury picks winners in the overall book market. But it also does another thing – it discourages the use of ebooks in educations, charities and small businesses. It is in these organisations that we will continue to see lower adoption rates of ebooks even though using ebooks would be an easier and cheaper way to use digital publications. In a country that is already behind in integrating ICT to schools it is unreasonable to keep in place yet another barrier.
Writing for Politics.co.uk, Emma explains how George Osborne is now casting the net wider and wider to tax more of the things we all enjoy with his Big Fat Gypsy Budget.
Unlikely as it sounds, the Budget has two things in common with popular television programme My Big Fat Gypsy Wedding: controversy and caravans. Perhaps he has been watching too much Channel 4, but among big changes, like an increase in the personal allowance and a corporation tax cut, George Osborne made a very specific announcement about caravans in Wednesday’s Budget: from October 1st static caravans, and touring caravans longer than seven metres, will pay the standard 20% rate of VAT. Previously, the static variety were exempt.
At the Budget, George Osborne announced that, as well as increasing the personal allowance, he would freeze and over time work to remove the age-related allowances as a way of simplifying the tax code. Since then those changes have become known as the “granny tax” and it appears they may be the most controversial measure announced today.
But many of the figures that are being thrown around are a little nebulous and don’t really make clear how different people are going to be affected. I’ve tried to get the facts straight, though we will keep trying to exactly nail this down further and any corrections would be appreciated. Two groups are affected quite differently, those who are 65 already or turn 65 in 2012-13, and those who turn 65 in 2013-14 or later:
Those who are 65 already, or turning 65 in 2012-13
Those born on or before 5 April 1948 will still get a special age-related personal allowance. It will be frozen at £10,500 for those born between 6 April 1938 and 5 April 1948. And £10,660 for those born before 6 April 1938. Those people are worse off than they might have expected to be, in that the allowance won’t rise with inflation. That is unfortunate given the pressure on savers already but they aren’t actually having their allowance cut from the existing rate.
Those turning 65 in 2013-14 or later
Those born on 6 April 1948 or later won’t get an age-related personal allowance. In 2013-14, they will get the same personal allowance as everybody else – £9,205 – instead of £10,500 if they had been born earlier. That implies they will get £1,295 less in personal allowance than they would under the current rules, which means they are about £259 worse off at the basic rate of tax.
They will only receive the same treatment as those who have already reached 65 when the personal allowance, which the Government are expected to keep increasing, catches up with the frozen age-related allowances.
The Chancellor of the Exchequer made a powerful case in his Budget speech, which I’ve copied below, that removing the age-related allowances would produce a simpler tax system. But, particularly for that group now not getting an age-related allowance who expected to get it, that simplicity is being achieved at the expense of a substantial rise in taxes for many struggling elderly people, from what they would have expected to pay.
That won’t affect the many pensioners who don’t earn enough to exceed the Personal Allowance anyway. But for some it will be quite tough. It might have been fairer to either keep increasing the age-related allowances in line with inflation, and let the working age Personal Allowance catch up because it is increasing above inflation. Or just freeze the age-related allowance and let the increase in the working age Personal Allowance erode the difference without cutting it off for new entrants.
“We should also simplify the age related allowances – which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system.
The NAO points out that many pensioners don’t understand them.
These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded away.
So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6th April 2013 and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.
This will protect the existing level of allowance pensioners have, while introducing a single personal allowance for all.
It is a major simplification.
It saves money.
And no pensioner will lose in cash terms.”
Under this Government, pensioners next month will receive the largest ever cash increase in the Basic State Pension of £5.30 a week.
When details of Ken Livingstone’s tax arrangements first emerged, I wrote about my concerns on my blog. I said that “…for Ken Livingstone to throw around accusations of tax dodging one minute then rely on his accountants to minimise his own burden the next is clearly hypocritical.”
Following further revelations, we have decided that it is only appropriate to report Mr Livingstone’s tax irregularities to HMRC for them investigate formally. Hopefully this investigation will be swift, so voters in London’s Mayoral election can know the full facts when they cast their ballot in May.
Here is the text of the letter I sent to HMRC today:
I write to request that HMRC conduct an investigation into whether Mr Ken Livingstone, through his company Silveta Ltd, has been setting disallowable expenses against tax.
HMRC rules state that to be set against tax, company expenses must be “wholly and exclusively incurred for the purposes of the trade.”
In response to publicity about his channelling his earnings through Silveta, Mr Livingstone has stated that he has employed three people, two of whom remain currently employed. Mr Livingstone has made clear that he treats these expenditures as allowable expenses. On BBC London’s Vanessa Feltz show on Friday, 16 March, http://www.bbc.co.uk/podcasts/series/vanessa, he said:
“I’ve formed a company, and you have company expenses, travel, research and you employ people. And I’ve employed three people at different times over this last four years. And after you’ve had all those expenses, then the money you pay yourself I’ve paid tax on.”
One of the people he employed, he made clear, was an economist to work on his re-election campaign. He said: “Literally you can’t, if you’re running for mayor, off the top of your head come and say I’m going to cut the fares – you need to employ someone to go through their [TfL’s] books. I got a really well-established economist who’d worked in the public and private sectors, who spent a long time ploughing through – imagine the size of the accounts of TfL – who cam back and said, yes you can make a fares cut. It takes time to do that and you need to employ people to do it.”
In an interview on BBC Radio Five Live, Pienaar’s Politics, on Sunday, February 26, Mr Livingstone said: “The other thing is I’ve used that [company money] to pay for people to work on the campaign for mayor.”
In an interview on the Andrew Marr show, BBC One, on Sunday, March 11, http://news.bbc.co.uk/1/hi/programmes/andrew_marr_show/9704407.stm, Mr Livingstone said: “I employ people. I mean that fare scheme we’ve come up with, it took someone, a talented economist, to sit down and spend a lot of time going over the books. I’ve got people handling the media. I employ at the moment two people.”
Mr Livingstone has declared to the Electoral Commission a donation to the Labour Party of staff time worth just over £19,000. His campaign states that this is for three months’ work of two staff. This implies that the staff were paid a total of £76,000 on a full-year basis.
It is my belief that the employment of an economist to come up with policies for Mr Livingstone’s re-election campaign and the employment of “people handling the media” for the campaign cannot be expenses incurred “wholly and exclusively” for the purposes of Silveta’s trade.
HMRC rules are clear that the purpose of the company is a matter of fact, determined by the revenues it raises and the objects set out in the Articles of Association. Silveta Ltd’s Articles of Association state that the Company’s objects are:
(a) (i) To carry on business as a general commercial company.
(ii) To carry on any trade or business whatsoever and to do all such things as are incidental or conducive to the carrying on of any trade or business by it.
(iii) To undertake all or any of the following objects.
None of the following objects (b)-(z) specify political campaigning, the promotion of candidates, or anything related to the London Mayoralty or tube fares. Nor, clearly, can a political campaign be defined as a trade or business.
Silveta Ltd’s purpose is, as Mr Livingstone has stated, to handle his own personal earnings from “after-dinner speaking, TV stuff and all that” and not to further his re-election campaign. There is no evidence that Silveta Ltd received any revenues from its analysis of City Hall’s books, or the promotion of Mr Livingstone as mayor.
It appears clear to me that the salaries of a media assistant and an economist/policy adviser are not allowable expenses under HMRC rules.
This morning MPs spent an hour and a half debating pay in the public sector, with much discussion of remuneration packages for senior executives working at local authorities.
Labour MP Andy Slaughter, who instigated the debate, echoed TPA concerns about excessive pay in numerous public sector bodies and commended our work, describing our publication of the Town Hall Rich List in particular as “a great public service”.
Today we are joining campaigners across the UK to support National Fair Fuel day to persuade the Government to cut Fuel Duty on petrol and diesel. Organised by the FairFuelUK group, today’s protest will involve a mass lobby of parliament. MPs will come face to face with their constituents who are some of the people suffering because of high Fuel Duty.
Families in the suburbs and rural areas suffer the most as driving is so often essential outside city centres. Everything from driving to work to getting the kids to school is made much more expensive because of Britain’s excessive motoring taxes, which squeeze the budgets of struggling families who already have so many other pressures on their finances.
British drivers are hit unfairly hard by motoring taxes that are far too high (see our research on this here). Fuel Duty in this country is the highest in Europe and the second highest in the world; we are joining others to take action.
Average petrol prices reached a record high of 137.79p a litre earlier this week, with diesel now at an all-time high of £144.92.
Last year, with your help, the FairFuelUK campaign saw off rises that would have put another 9p per litre on the cost of every litre of petrol and diesel. We hope to help them stop future rises and are demanding that, when George Osborne delivers his Budget next week, he listens to ordinary taxpayers, cuts Fuel Duty, and then freezes it for the rest of this Parliament.
It’s the end of another week in Westminster when the issue of taxpayer-funded trade union activity has been on the agenda. Wednesday morning saw MPs debating the issue and now new evidence appears which suggests that the problem has reached a whole new level, with taxpayer-subsidised trade union branches openly campaigning against government policy in the very departments in which their members are supposed to be working.
Both these online campaigns list a number of union branches supporting them, including Public and Commercial Services Union (PCS) East London DWP branch, PCS DWP Wirral Branch and PCS at the DWP Liverpool.
Our recent paper on the taxpayer funding of trade unions revealed, among other things, the fact that the DWP had the largest number of full-time equivalent trade unionists being funded by the taxpayer of any government department – and those PCS branches at local DWP offices will be among the beneficiaries.
Unions in other wings of government departments supporting the campaigns include the PCS at the Land Registry Computer Systems Branch Plymouth, Unison at Doncaster Local Government, and unions in a variety of local councils.
Taxpayers will be astounded that union branches in government departments can take taxpayers’ money whilst actively campaigning against policies they or their close colleagues may be involved in implementing.
This makes the case for cutting off the taxpayer subsidy to the unions all the more urgent.
In a great victory for Brighton and Hove taxpayers, Conservative and Labour councillors teamed up to defeat the ruling Green Party proposal to increase Council Tax last night. Plans for a 3.5 per cent increase were thwarted as the full Council instead opted for a freeze.
Brighton and Hove Council were one of the first local authorities to announce plans to reject Government funds to freeze Council Tax. Not content with saddling their own residents with increased bills, they were even encouraging other councils to follow their lead – a particularly appalling move when a poll revealed that the majority of Brighton and Hove residents didn’t even support a rise. So it’s great that so many councillors have listened to their residents and defeated the move.
This is a pleasing triumph in our on-going campaign against Council Tax increases. As part of our campaign we have also drawn attention to those authorities managing to go even further and cut Council Tax for the coming financial year. Brighton and Hove Council now have 12 months in which to find necessary savings to enable a freeze the following year, or even a cut. This list would be a good starting point.
A number of councils in England have announced that they will hike Council Tax at a time when many residents are struggling with the rising cost of living. So far
30 33 35 local authorities are choosing to reject an offer of extra money to help fund a freeze this year and are instead passing the burden entirely onto local residents. Council Tax is second only to VAT as the most burdensome tax for the poorest households. Most local authorities have chosen to freeze rates while some, like the Royal Borough of Windsor and Maidenhead, have chosen to help local families by cutting rates.A number are proposing the highest possible increase in tax while dodging a referendum by keeping the increase to no more than 3.5 per cent (the threshold for a referendum).
Here is the latest list of Town halls proposing Council Tax rises (those that have already voted through the rise at council are marked with a *).
*Surrey County (Con) 2.99 %
Nottingham City (Lab) 3.4 %
*Chelmsford Borough (Con) 2.46 %
Gravesham BC (Lab) 3.48 %
Cambridgeshire County (Con) 2.95 %
Gedling Borough (Lab) 3.4 %
Peterborough City (Con) 2.95 %
York City (Lab) 2.9 %
Preston City Council (Lab) 3.5 %
Stoke-on-Trent City (Lab) 3.49 %
East Cambridgeshire (Con) 2.95 %
Stockton-On-Tees Borough (Lab) 3.5 %
Darlington BC (Lab) 3.5 %
Chesterfield BC (Lab) 3.5 %
Middlesbrough (Lab) 3.5 %
Leicester City (Lab) 3.5 %
Redcar & Cleveland Borough (Lab) 3.5 %
Brighton & Hove City (Green) 3.5 %
Tunbridge Wells BC (Con) 3.3 %
Richmondshire (Lib/Ind) 3 %
*South Hams (Con) 2.5 %
*West Devon (Con) 2.5 %
Lichfied Distrcit Council (Con) 3.4 %
Luton BC (Lab) 3.44 %
Barrow BC (Lab) 3.49 %
North Dorset (Con) 3.49 %
Dover DC (Con) 3.45 %
South Ribble BC (Con) 2.5 %
Epsom & Ewell BC (NOC) 2.5 %
Babergh District Council (NOC) 3.5 %
Tonbridge and Malling (Con) 2.9%
Telford and Wrekin Council (Lab) 2.5%
Allerdale BC (NOC) 2.9%
St Helens Council (Lab) 2.0%
East Hampshire DC (Con) 2.5%
Huntingdonshire District Council (Con)
Scarborough BC and Taunton Deane BC have both previously proposed to raise Council Tax but have now publicly stated that they intend to freeze it.
**UPDATE1 ** 24/2
Brighton have been removed from the list but Tonbridge and Malling BC and Telford and Wrekin Council have been added to those proposing rises.
**UPDATE 2** 27/2
Two more to add to the list of those proposing rises Allerdale and St Helens
**UPDATE 3** 28/2
ConservativeHome have a news item on the 15 Tory Councils putting up council tax. That adds two more to the list: East Hampshire District Council 2.5 % and Huntingdonshire District Council 3.5% (the first Conservative council to choose the maximum referendum-ducking amount), Chesterfield and North Dorset have announced they are freezing Council Tax