Tuesday, 25 November 2008

Let's have a PBR debate based on fact not fiction

There has been an awful lot of nonsense talked about the PBR. We have heard that this is the death of New Labour because of the tax rises for people earning over £100,000 a year.

Yet the Irish government, for long held up as a low tax haven by the likes of John Redwood, has just imposed a levy based on wealth, after facing an even sharper credit crunch induced crisis (and having had to abandon dottier alternatives like charging pensioners for health care and taxing low paid workers more). Anyone earning from €18,000 (£15,380) to €100,000 (£85,000) a year will be levied an extra 1%; anyone on between €100,000-€250,000 (£213,000) pays a 2% levy and those above that pay 3% more. It is true that corporation tax is lower, but income tax rates are otherwise broadly similar and VAT is going up to 21.5% on Monday. There are also big public spending cuts on the way in Ireland.

A lot of the rubbish has come from George Osbourne, whom Tory blogs now seem to think is now a great hero after yesterday's excitable rant. I am still not convinced about the VAT move - though it was what Ken Clarke suggested also, lest we forget. But the last thing the economy needs is bare-faced porkies about the impact of the PBR on people's pockets.

According to Osbourne, everyone earning over £19,000 a year is a loser from 2010. For some reason, I suspect the independent analysis of KPMG, which shows that there is very little loss below £100,000 a year, is rather nearer the mark. There is a legitimate debate to be had about the impact of doing so on both the economy and politics, but it is not helped by people trading made-up figures.

Does born-again Thatcherite David Cameron really think his role and that of his putative chancellor should be to mislead people into a deeper recession, just to develop the electoral battle lines for 2010?

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