February 2008 Archives

WHEN Alistair Darling delivers his first Budget next month, there will be the usual stern warnings about the need to cap the pay of public sector workers.
But, on two issues – the explosion in the pay of the richest in our society and their growing success in avoiding tax on it – the Chancellor will breathe not a word.

The FTSE 100 chief executives enjoyed a 16% pay rise last year, and have doubled their earnings in the last five years to £3.17m, but Mr Darling will not demand “discipline� from them.

His position is that the stratospheric salaries of the mega-rich is a matter for them alone – despite all the evidence that the gross unfairness triggers growing anger in the workplace.

It also blows out of the water that flagship pledge to end child poverty.

Such poverty is measured against other incomes – incomes that are becoming more unequal – but still ministers are silent.

It would not be so depressing if these multi-millionaires flooded the nation’s coffers with their taxes for better public services but, alas, the truth is dramatically different.

Earlier this month, a study commissioned by the trade unions found that tax avoidance by the very wealthy cost the Treasury a staggering £13bn a year.

That sum – enough to boost the education budget by 9%, or NHS spending by 5% –
dwarfs the amount lost to benefit fraud, but receives next-to-no attention.

Tax avoidance by the largest companies costs a further £12bn.

Now, I have given up on ever hearing Gordon Brown, or his lieutenants, utter a word of criticism about boardroom pay. That’s “Old Labour�, they shiver.

But, surely, they want the privileged few to pay their taxes?

If only because, if they don’t, the burden falls on the all-important middle-classes, who decide elections.

So three cheers for Birkenhead MP Frank Field, a Labour MP who has more good ideas before breakfast than the entire Cabinet achieves in a month of slap-up dinners.

Yesterday, Mr Field proposed a 10% tax hike on those earning more than £150,000 a year unless – like the richest in America – they pay back society for their good fortune by giving generously to charity.

That, surely, is a message Mr Brown can sell to the middle-classes – or the “coping classes�, as I saw them described the other day – without sounding like an evil tax-and-spend socialist?

Sadly, despite meeting Mr Field six times recently to explore ways to “make full use of his talents�, there is zero chance of the Prime Minister adopting any ideas from his old enemy in Birkenhead.

There is no sign of hell freezing over yet.

ONCE upon a time, there was a Chancellor so disgusted by the gulf between rich and poor that he snatched £5.2bn from City “fat cats� to put young people back to work.

The windfall tax on the privatised utilities was wildly popular with a public angered by their huge profits and the New Deal programme it funded successfully slashed youth unemployment.

It is hard to believe – after so many years of Labour bending over backwards to appease the City of London – but that Chancellor was Gordon Brown.

Back in 1997, the privatisations of electricity, gas, water and telecoms were fresh in the memory – and their eye-watering profits were deemed unacceptable.

Fast forward 11 years and the profits made by the energy companies, who are busy hiking their bills by up to 17%, attract similar condemnation.

A fuel poverty watchdog says utility bills are more than 50% up on five years ago – a far bigger rise than has hit energy companies’ costs.

Worse, the poorest are hit hardest, because the million lower-income households on pre-payment meters pay £140 a year more for gas and electricity than those using direct debit.

Meanwhile, the scandal of pensioners and the poor shivering in their own homes creates legal – as well as moral – dilemmas for the Government.

Ministers bravely set themselves a legal duty to end fuel poverty by 2010. That is now less likely to happen than the Premiership trophy ending up at Anfield. Yet, as the task gets harder, the cash to insulate homes dries up. Grants under the “Warm Front� programme will be slashed by 25% between now and 2011.

With the Government almost broke, if only there was a plan to raise billions of pounds that could reverse this shocking rise in the numbers unable to pay their fuel bills. Well, there is. Last month, Alistair Buchanan, chief executive of the energy regulator Ofgem, met Chancellor Alistair Darling to discuss this very problem.

He proposed a windfall tax on the predicted £9bn profits of the electricity companies over the next five years – a suggestion that was said to have been received “coolly�.

How long ago 1997 seems.

REPORTS condemning the Government for shackling power- starved local authorities arrive with a depressing frequency in this job.

Opposition parties and think- tanks all make the same criticism – councils are stripped of any meaningful muscle and ministerial pledges to restore it are a mirage.

So, what makes the latest study so notable is not its line of attack – “most disappointing�, “lacking vision�, “hobbling� – but the people firing the shots.

Because, this time, it is a Labour-dominated select committee, led by a normally ultra-loyal backbencher – so the Government must be behaving badly.

Worse, this time local authorities are being betrayed over the funding mechanism that was supposed to throw a lifeline to the likes of the axed Merseytram scheme.

Last October, Chancellor Alistair Darling announced that town halls would be able to levy a “supplementary business rate�, to raise tens of millions of pounds for key projects.

The idea is aimed specifically at accelerating transport schemes such as Merseytram, which appeared doomed in 2005 when the Government pulled the plug on £238m of funding.

But, in the face of protests from the CBI and the British Chambers of Commerce, Mr Darling pledged “four levels of protection for business�.

Most notably, the rate will be limited to 2p in the £ – half the figure recommended in an independent study.

Firms with a rateable value below £50,000 will be exempt, and a ballot required if the supplement is funding more than a third of the cost of a project.

Now the communities and local government committee has delivered its verdict – and it pulls no punches.

The committee is clearly furious that its own recommendations – no compulsory ballots, no cap on the SBR rate, exemptions to be decided by town halls – were dumped.

Chairwoman Phyllis Starkey said: “It is in this failure to trust local authorities to take effective decisions, in partnership with local business, about the levying and use of local funds that the Government demonstrates its lack of vision.

“We are dismayed that it proposes to hobble local authorities’ ability to raise sums which would enable them to make a meaningful contribution to the economic development of their area.�

Remember, this is the verdict of a Labour-dominated committee. Once again, ministers bow down to business – and local councils pay the price.