General Anti-Tax Avoidance Principal offers a new judgement-based approach tax

Matthew Robertson 10.39am

"The hardest thing in the world to understand is the income tax." - Albert Einstein

The list is never-ending:

  • May 2012 - 2,000 senior public officials on more than £58,200 were found to be paid “off payroll”, which could minimise their tax bills, according to a leaked letter obtained by Exaro, the investigate website and the BBC’s Newsnight programme.
  • November 2012 - A tax avoidance scheme, marketed by Ernst & Young, that claimed to license newspaper mastheads to avoid tax, has been thrown out by a tax tribunal.
  • November 2012 - Amazon, Google and Starbucks accused of being “immoral”, “manipulative” and of “practising tax avoidance on an industrial scale”.

It is difficult to find someone who doesn’t have an opinion on tax,  a meritocratic society relies on the idea that everyone pays their fair share yet there must also be incentives for individuals and companies to create wealth.

This dilemma has troubled governments for as long as tax has existed and the above examples show that they are not always successful. The onslaught of globalisation and multinationals has further hampered the ability of national governments to tax efficiently as the question of residency becomes less clear.

The constant attempts to avoid tax by individuals and corporations has created a behemoth of tax legislation with some rules dating back centuries. In 2009, Lexis Nexis revealed that the UK’s tax code has more than doubled in size since 1997, going from 4,998 pages in 1997, to 11,520 in 2009, making UK tax code the longest in the world.

Many have called for HMRC to have more powers and better resources to tackle tax avoidance as government initiatives have failed to prevent both individuals and corporations from ‘bending’ the rules. The implementation of IR35 is a prime example of misplaced tax legislation. It took effect in April 2000 and was designed to eliminate the avoidance of PAYE and National Insurance contributions (NICs) by ‘contractors’ who for all intents and purposes are employees.

As the BBC example above illustrates, IR35 has not delivered on its promises and moreover, it has had a negative impact on some businesses as clients become reluctant to engage with some professionals for fear of them being liable for PAYE on their fees. Furthermore, in some instances the legislation is unfair on certain freelancers as employer NICs at 13.8 per cent need to be paid as well as employee NICs and income tax of up to 50 per cent. IR35 has been found out to be unworkable and there is no evidence that it raises any income for the Treasury.

The failure of IR35 is similar to why Albert Einstein could not understand income tax but could comprehend quantum physics. That is, applying a rules-based approach to tax is always likely to fail as rules are open to abuse by their very nature. Rules cannot be applied to individuals in the same way that the laws of physics can be applied to atoms. The wording of any rule can be interpreted to have been complied with or not and it is because of this that many have been able to work within the rules to minimise their tax liability.

The Institute of Chartered Accountants in England & Wales (ICAEW) realised this a while ago and adopt a principles based approach to ethics:

"The ICAEW pioneered the principles-based threats and safeguards approach to Codes of Ethics in the accountancy profession internationally. We believe that this approach is flexible but robust because it focuses on the spirit of the guidance and encourages responsibility and the exercise of professional judgement. The guidance can be applied to the infinite variations in circumstances that arise in practice and can be adapted to rapid changes of the modern business environment."

Professional judgement is the key; HMRC should be able to analyse the economic substance of transactions to determine whether the behaviour represents the true nature of the business or whether it is merely avoiding tax. It is encouraging to see the ‘General Anti-Tax Avoidance Principal’ Bill being debated in Parliament on Friday. Richard Murphy, one of the main contributors to the bill, makes a good case for how successful a rule such as this could be.

One of the main ways Starbucks was able to make a loss in the UK was to pay a 6 per cent royalty to another Starbucks company for the use of intellectual property attached to the brand.

Murphy argues: “The profit stays within the group, and it cannot be justified as commercial since no one would pay a royalty for thirteen out of fourteen years to make continuing losses.”

In other words, economic substance has nothing to do with actual trade and is merely being pursued to avoid tax. An anti-tax avoidance principle would allow HMRC to apply a greater degree of professional judgement instead of following set rules.

Furthermore, it would dampen the obsession of creating more and more rules to close ever more elaborate loopholes. There is nothing inherently wrong with individuals and businesses managing their affairs to minimise their tax liabilities; no one would argue that investing in an ISA is immoral tax avoidance.

Nevertheless, there is a difference between arranging your business in the most tax-efficient way and creating transactions that merely exist to avoid tax. The complexity of the tax system is emblematic of such efforts to create loopholes, it is time for a new approach, one that allows more judgement to be applied.

Finally, I gave him the first word, so I shall give him the last.

‘We can’t solve problems by using the same kind of thinking we used when we created them.’ – Albert Einstein.

Follow Matthew on Twitter @FlatFootTory

Scotland’s unionists have to spell out what a ‘No’ vote means for devolution

Nik Darlington 11.25am

Today in Edinburgh, David Cameron, Prime Minister of the United Kingdom, meets Alex Salmond, First Minister of Scotland, to sign off the terms of an independence referendum to be held in autumn 2014.

Some are calling it historic. Not quite. The referendum itself shall be historic. Nonetheless, the occasion demands more gravity than it is being given. Britain’s summer of all summers has neutered the separatist cause; the polls consistently suggest a comfortable victory for the unionists. But with two years until the vote, the dangers remain.

Alistair Darling is right to favour next year. It is just one of the regrettable oversights of the Prime Minister’s negotiations. Though on balance, despite my criticisms of Mr Cameron on the radio yesterday (approx 1hr33’ in), presentationally speaking today has been well-handled. He has largely got what he wanted to achieve, and done so in a way that does not look like an overbearing Englishman - indeed, he has even permitted the appearance of his kowtowing to Mr Salmond.

Yet we are where we are. There shall be a vote, it shall be a straight ‘yes-no’ gunfight, and it shall take place approximately seven hundred years after the Battle of Bannockburn.

Over at the Spectator, Alex Massie worries about the absence of a second question - that outlet for the majority caucus of Scots who desire more devolution within the Union. This was put to me on the radio yesterday and I have to say that I agree. I’m not necessarily in favour of a second question because that could result in a close and indeterminate outcome, and subsequent re-match. However, like Alex, I worry about a unionist campaign that offers a bit more devolution if Scots vote to stay, but doesn’t spell out what it looks like.

Mr Cameron is guilty of making such a fudged offer; his Scottish party leader, Ruth Davidson, is guilty of making little such offer at all, as I have said on these pages before. Refusing to countenance further devolution within the Union is not so much drawing lines in the sand, as putting one’s head in it.

Principally here we’re talking about taxation. Holyrood currently spends money that it hasn’t raised. Until Scottish politicians have to raise taxes as well as spend them, there will be no fiscal impetus for a Tory revival. That much is simple. The Devo Plus campaign ought to be considered.

But putting party concerns aside, now that we have the terms of the referendum campaign, the unionists have to make a case for a better Union settlement once Scots have voted to stay.

Also putting party concerns aside, I do believe that there needs to be a more prominent role for Gordon Brown. Alistair Darling is an excellent choice to front the unionist campaign. Yet if the former Prime Minister desires a central role (and I understand that he does), one should be found. Fraser Nelson dismisses the notion entirely, though for reasons that seem to me discontinuous. Whatever his image down south, Gordon Brown retains a certain following and respect in Scotland.

Follow Nik on Twitter @NikDarlington

A curate’s egg of a Budget?

David Cowan 6.02am

On Wednesday, George Osborne grew in stature as a Tory Chancellor. The Budget was the most definitive account of the Government’s plan for growth. Yet it was mainly framed as a tax reform budget, and it is by this standard it should be judged.

In which case, it was also something of a curate’s egg. In places it was bold and radical, while in others it did not go nearly far enough.

Mr Osborne articulated a clear, long-term vision for tax reform. He began by claiming Adam Smith as his guide, embracing the principle that taxes ought to be “simple, predictable, support work, and they should be fair”.

The establishment of the Office for Tax Simplification (OTS) demonstrated Mr Osborne’s commitment to sustained reform of a tax code that must be “fit for the modern world”. (This already comprises measures such as merging the rates of income tax and National Insurance.)

There is the Personal Tax Statement, first proposed by Ben Gummer MP, which will appear for the first time in 2014. It will tell taxpayers exactly how much they are paying in tax and exactly where that money is being spent. This is particularly important at a time when people do not know how much of their hard-earned cash is consumed by the costs of servicing our £7.9 trillion debt.

At the heart of this Budget is the start of a serious shift in taxation from income to wealth.

The 50p top rate of income tax will be reduced to 45p in April 2013, but Mr Osborne has already reassured Conservative MPs that the new top rate will not be permanent. Following the announcement on Wednesday, Ed Miliband immediately rolled out the tired old rhetoric of faux class warfare. The fact is that the top rate was not raising any meaningful revenue - a mere third of what was promised - and as page 91 of the Red Book proves, it will actually be the millionaires paying more after this Budget.

The group of taxpayers that Mr Osborne ought to be most concerned about are the taxpayers still stuck in the 40p higher rate, between £41,450 and £150,000, especially since he has just shifted 300,000 new taxpayers into that category.

This situation is not helped by the changes to Child Benefit. What the economist Andrew Lilico has persuasively argued is a tax rebate, not a welfare benefit, has effectively been taken away from the important ‘squeezed middle’ at a time when living costs are still rising painfully.

Then there is the so-called ‘Granny Tax’, which was ‘unearthed’ by linguistically creative journalists hours after the Budget. Despite the Brown-esque manner in which it was delivered, the policy remains a sensible one. Mr Osborne has said that the age-related allowances will be frozen from April 2013 onwards. The impact has been exaggerated, as Sara hinted at yesterday, and it will be alleviated by the planned increases in the personal allowance.

This leads on to the Liberal Democrats’ key victory: the acceleration towards a £10,000 income tax personal allowance. As a result of this Budget, no-one will pay income tax on their first £9,205 as of April 2013. Everyone working for the minimum wage will see their income tax bill halved.

This has not stopped Conservative MPs from claiming some credit for the policy, as Nick Boles did during the pre-Budget PMQs, and as Robert Halfon’s fascinating Right Angle campaign web site has done of late.

However, what really matters is how these tax changes are funded. Mr Osborne, under pressure from the Lib Dems and even Tories such as Boris Johnson, unleashed a new set of measures to target wealth, largely through tinkering with Stamp Duty.

A new 7 per cent rate will be levied on £2 million properties and a new 15 per cent charge will be used to crack down on the use of corporate envelopes to avoid tax when purchasing properties.

Capital Gains Tax (CGT) will also be extended to residential properties being held by overseas envelopes. This will be accompanied by a new range of anti-tax avoidance and evasion measures.

Altogether, it means that the richest will pay up to five times more than they would have done with the 50p income tax rate.

This is the correct direction of travel for direct taxation. Wealth should be taxed in a manner that is fair and which encourages wealth creation. Yet it still remains the case that the best way to do this is a Land Value Tax (LVT), within the context of simplified property taxes.

The main rate of corporation tax was reduced by 2 points, which will eventually mean corporation tax of 22 per cent in April 2014 - well below the level of comparable countries like the United States but not as low as Ireland’s 12.5 per cent. Mr Osborne wants the rate to come down to 20 per cent by 2015.

But the method taken to fund the reductions in corporation tax was misguided. The bank levy is one of Mr Osborne’s more harmful gimmicks and has yet again been increased (to 0.105 per cent) at a time when our financial services industry needs to be made more competitive, not less.

Mr Osborne has also taken a leaf out of Sir Geoffrey Howe’s book by increasing indirect taxes on consumption (e.g. 5 per cent hike on tobacco duty) to fund deficit reduction and ever-increasing public expenditure. Albeit to his credit, he has managed to keep fuel and vehicle excise duties lower than they would have been under a Labour government.

George Osborne’s vision is of a tax code that is more transparent, where direct taxation moves away from income towards wealth, in which a more competitive business tax regime can boost growth, and where taxes on consumption help to maintain ‘fiscal stability’. Regrettably, political gimmicks like the bank levy and other tax raids continue to infect Mr Osborne’s agenda.

Earlier this week, I asked whether George Osborne could join Neville Chamberlain and Sir Geoffrey Howe among the pantheon of great Tory Chancellors. Wednesday’s Budget brought him closer to the mark, but not quite the whole hog. His fiscal plans have been blown off course since last November and we are yet to experience the full dangers of the largest experiment in quantitative easing ever embarked upon.

Follow David on Twitter @david_cowan

Breaking down the Budget

Sara Benwell 10.53am

Another year, another Budget. Another abortive attempt to find a pub with a garden and a telly with the Budget on it, so that I can enjoy the sunshine and a glass of wine (but perhaps not, thank you very much George, many more cigarettes).

This year’s Budget has been called ‘radical’ by members of the press. It contains many positive elements, including tax measures to help the lowest earners and stamp duty increases for the most expensive properties.

On the negative side, pensions have taken a pounding and there is scant help for the nation’s savers. Let’s look at the headline measures and see what they actually mean in practice.

Income Tax personal allowance to be increased to £9,205 in April 2013

This is the big good news story, which will mean a real cash gain for British workers. George Osborne said this Budget would reward work and this will do so, while also keeping the Lib Dems happy (it is, in essence, a policy they mostly instigated). It means that the Government is hopefully going to reach the £10,000 level desired by Nick Clegg sooner rather than later.

It is worth noting, however, that hidden in the Budget, the Chancellor has lowered the threshold for the 40p higher tax rate from £42,475 to £41,450.

50p top tax rate to fall to 45p

This could be interpreted as a political gamble, rather than financial decision. A nod to the well-heeled and a sop to the right-wing, it could sit well with ‘traditional’ Tory voters.

But it isn’t. While the move will only (directly) assist the highest earners, Mr Osborne said the 50p rate had distorted the economy by encouraging tax avoidance and the cut to 45p will only cost the Exchequer £100 million.

He also claimed the richest would be paying five times more than before, due to other measures such as the increase in stamp duty on properties worth more than £2 million.

Age related additional personal allowance to be phased out

This is already turning out to be the biggest headline of the Budget, with #GrannyTax being the highest trending topic on Twitter yesterday afternoon. Commentators circled in their droves to criticise the changes, for instance Iain Martin on Telegraph blogs, who said it would “spark a war between the generations”.

The Chancellor announced a phasing out of the higher income tax allowance, meaning that from next year, people turning 65 will no longer qualify for the higher rate allowance of £10,500 and instead only receive the standard allowance, which was raised to £9,205. This change, reported to be worth an additional £3.3 billion over the next five years for the Treasury, represents one of the biggest money-makers of yesterday’s Budget.

It is a strange move from Mr Osborne, given that retirees are, statistically speaking, more likely to vote - and vote in great numbers. (While the top rate reduction, conversely, will affect very few voters.)

What we have to remember is that pensioners have also borne the brunt of quantitative easing as annuity rates have been hit hard (see Fraser Nelson’s figures of an ‘annuities rate massacre’ on the Spectator's Coffee House), and whose savings are already hit by with record-low interest rates.

Nevertheless, we ought also remember that most pensioners don’t pay any tax at all and this change will only affect those who earn more than the average working wage.

Child benefit gradually withdrawn from those earning over £50,000

Mr Osborne has bowed to considerable pressure from his own MPs and diluted plans to remove Child Benefit from all families containing at least one higher-rate taxpayer.

Under this new scheme, anyone earning up to £50,000 will be able to keep their Child Benefit, worth £1,055.

Child Benefit will still disappear but now only gradually for parents earning between £50,000 and £60,000. Earn above £60,000 and you will lose the lot.

One of the biggest concerns with the original plan was that it didn’t take into account single income families with that single income falling into the higher bracket - and this problem still exists. Mr Osborne will continue to face criticism as the cuts hit families with a sole high earner on more than £60,000 but not families with two parents earning up to £49,000 each.

New Stamp Duty of 7% on properties worth more than £2m (and rate on company-bought properties rising to 15%)

It is a policy designed to show that the biggest burden should fall on the wealthiest.

It will mean that anyone purchasing a property above the £2 million threshold will be looking at a Stamp Duty bill of at least £140,000.

Property investors will also be a casualty of the new charges on high-value homes.

The Chancellor emphasised a crackdown on tax avoidance and unveiled three extra levies on people buying homes via companies. In future, people who purchase properties for £2 million or more via a company will have to pay Stamp Duty at 15 per cent.

There will also be a consultation on whether people who have already bought homes worth more than £2 million through companies should have to pay an annual levy.

These Stamp Duty changes will have a disproportionately high impact on the London property market. Take just one borough, the Royal Borough of Kensington & Chelsea, for instance, whose average property price is more than £2 million. Some are concerned it could have negative repercussions for London as an international business centre as it will discourage corporate executives from basing businesses in the capital.

Follow Sara on Twitter @sarabenwell

George Osborne has to dump this toxic 50p tax rate

Craig Barrett 11.48am

Time and time again, I am reminded of those words of Sir John Major, spoken early on in the Blair maladministration:

"The Conservatives are elected to govern, Labour governs to be elected."

So nightmarishly often in those thirteen years was policy made on the hoof. We endured a bewildering array of ill-thought out responses to opinion polls, designed to retain an unnecessary lead with no election in sight.

Of all the policies adopted by the last Labour government, none was more cynically designed to make life difficult for a future Conservative government than the 50 pence tax rate.

A lot has been written saying it is unlikely to cover the costs of its administration. But even to analyse its economics is to give Messrs Brown, Balls and Miliband the undeserved courtesy of implying they have any kind of grasp of basic economics.

Put simply, the 50p tax on incomes over £150,000 was designed to be eye-catching, a demonstration to the masses that Labour was prepared to soak the rich until the pips squeaked, so to speak.

Much of Gordon Brown’s fiscal policy during his tenure at the Treasury was less about raising revenue and more about making the tax system too complicated for people to understand.

Faced with a possible Conservative election victory, Brown’s Labour government knew the 50p tax policy was one that a future Chancellor Osborne would find difficult to reverse. The left-wing media would instantly bash it as a tax cut for the rich.

Yet abolish it Mr Osborne must. I have written before about the dangers of punitively high and unjustifiable taxation in a mobile global economy. This applies both to individuals and companies - the news earlier this week that Prudential may shift its headquarters to Hong Kong demonstrates our loss of competitive advantage.

Nearly 30 per cent of all income tax revenue is paid by the top 1 per cent of the earning population. We would all have to work a lot harder to replace one high earner who fled abroad to protect their salary. Many people may not hold much of a candle for high earners these days, but surely it is better that they and their companies remain on these shores so their taxes pay for British hospitals, rather than Chinese ones.

I welcomed the news yesterday that 537 entrepreneurs have written a letter to the Telegraph calling for the Chancellor to abolish the 50p tax rate. I understand that self-assessment tax revenues have fallen by £509 million year-on-year, which these entrepreneurs attribute to the toxic top tax bracket.

A tax that costs more to administer than the revenue it generates is no tax at all. It is just a soundbite. An embarrassing sop.

As the Chancellor prepares this month’s Budget, fully three years before the next general election, he must take note to use the opportunity to announce that Britain is open for business and encouraging of growth.

And there is one lesson he could learn from Gordon Brown, the old master of hiding bad news amidst the details. Just as Brown silently abolished the 10p tax band (doubling the tax rate on the lowest earners), so must George Osborne silently abolish the 50p rate.

Labour MPs, rightly, wailed with fury at that earlier sleight of hand. Conservative MPs will only cheer, rightly, at the sight of the second. The loss of a tax rate whose only effect is to tell the world the UK is not on the side of the wealth generator is nothing worth crying over.

Follow Craig on Twitter @mrsteeduk

Scottish Tories won’t advance until they support more devolution for Scotland

Nik Darlington 10.32am

If unionists in the Conservative party - and I presume, perhaps too romantically, this means most people in the Conservative party - want to win the Scottish independence debate, they must see the necessity for further devolution.

Resistance to devolution fuels the perceptions of English prejudice and arrogance on which the SNP feeds. It runs contrary to the party’s localism agenda, and the innate Tory values about freedom and ‘little platoons’, about power being best exercised the closer to the people it affects. And it ignores the basic fact that the surest route to a Conservative renaissance in Scotland is by forcing Scottish politicians to raise as well as spend Scottish taxes.

Yet frustratingly, resistance seems to be the default position for many Tories, most worryingly so in Scotland itself. Prior to being elected leader of the Scottish Conservatives, with minority support among her own MSPs, Ruth Davidson vowed to draw “a line in the sand” and oppose any further devolution beyond the Scotland Bill. This intransigence might have won the favour of the party faithful (though I wager Scottish party members were more scared by Murdo Fraser’s radicalism than wooed by Ms Davidson’s obduracy). But it won’t win Holyrood seats, nor will it win the impending independence referendum.

So it is hugely encouraging that yesterday some Scottish Tories lent their support to a new unionist devolution campaign that aims to challenge the SNP’s desire for total separation.

Devo Plus is headed by Jeremy Purvis, the former Lib Dem MSP. It has cross-party support from the likes of Tory MSP and former Presiding Officer, Alex Fergusson; Tavish Scott MSP, the former Scottish Lib Dem leader; and Labour MSP Duncan MacNeill.

National Insurance, VAT and smaller levies like TV licences would be retained by Westminster, but most other taxes, including income tax and corporation tax, would be transferred to the Scottish Government. There would also be a geographic settlement of oil revenues.

As I wrote for Total Politics last October, lower taxes could be the making of Scotland, turning it into a kilted Asian tiger economy. Devo Plus offers this prospect, the chance of a new Scotland ‘on the make’, and the imposition of fiscal responsibility on Holyrood’s politicians, who in simple terms just spend other people’s money. Falling short of ‘devo max’, Devo Plus ought to look an attractive option for Conservatives in favour of local accountability and critical of the fiscal deficit between England and Scotland.

But what happened yesterday? The SNP quickly endorsed ‘devo plus’ as their preferred third option on the independence ballot paper. The nationalists’ conversion from ‘devo max’ to ‘devo plus’ was as speedy as it was cynical. But it has, for now, left opponents still treading water.

We have reports of the Scottish Tories being “at loggerheads” over the new campaign. Alex Fergusson hinted at a dangerous divide between Ms Davidson and many of her MSPs.

David McLetchie, the Scottish Tories’ constitution spokesman, called Devo Plus a distraction that is “playing into Alex Salmond’s hands”. This could not be further from the truth. Devo Plus may not end up being the right answer, but the Scottish Tory leadership should at the very least be trying to ask some questions.

Scots want more devolution. Ignoring this simple fact is what plays into Mr Salmond’s hands and perpetuates the assumption that the Conservative party is an English party, first and foremost. It amounts not so much to drawing lines in the sand, as sticking one’s head in it.

When the Prime Minister visited Edinburgh to make his powerful, emotional case for the Union, he promised greater devolution for Scots if they vote to stay. But in the process of publicly refuting the leader of his party in Scotland - “blurring the line in the sand”, according to Mr Fergusson - David Cameron failed to say what this greater devolution might look like.

It might, just might, look like Devo Plus.

The Government says we’re all in it together. We must prove it.

Jason Frost 6.00am

“In one of the biggest surveys of the British public, Lord Ashcroft concluded that the ‘party of the rich’ label is still the biggest barrier for the Conservative’s target voters. There is a north-south divide gap too. The Tories are doing less well in Northern England than they were when Margaret Thatcher was elected. Mr Cameron cannot be blamed for this but….he is responsible for recent decisions that have begun to recontaminate the brand. Voters, for example, are most anxious about jobs and incomes but the Coalition spends much time talking about the deficit.”

So wrote Tim Montgomerie in the Times recently (£). Some people feel betrayed by the Government, and consequently the painstakingly reconstructed brand of Conservatism is again beginning to slide back to being just the uncaring ‘party of the rich’.

This can only result in electoral oblivion and historic irrelevance. Such a prospect has of course threatened before. The former Prime Minister Benjamin Disraeli wrote in Sybil (1845) of:

“Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets; who are formed by different breeding, fed by different food, ordered by different manners and are not governed by the same laws. They are the RICH and the POOR.”

Many a commentator would do well to hold these words in hallowed reverence, for their meaning reflects all too well the perceived social and economic climate of today.

And yet, it is in these words that could lie the Government’s, but more importantly Conservatism’s, potential salvation.

These ‘Two Nations’ must once again be reforged into one; One Nation under the trusted leadership of the Government.

How? Our modern ‘Poor’ must once again be understood by ‘the Rich’, but in a respectful, as opposed to paternalist, sense of mind. This ‘Rich’ - as the Government puts it, those with the “broadest shoulders” - must offer hope and leadership in all areas, and a good starting place would be financially, as Mr Montgomerie quite rightly suggested.

"When tax cuts become affordable, low income households should be at the front of the queue. Lower petrol duty and National Insurance must come before a cut in the 50p tax rate…. The tax system needs rebalancing… Extra taxes on high-end properties should fund emergency tax relief for families hurt by inflation.”

Through such acts ‘the Rich’ will have shown some element of dutiful, and very responsible, sacrifice in these times. It would demonstrate the Government’s changed, moral priorities.

In addition, the Government should bring forward and champion some of the measures they have already floated but are yet to implement.

The appointment of worker representation to the management and remuneration boards/committees of leading companies. This would subject decisions to greater accountability and improve industrial relations through more direct contact between shop-floor and boardroom (in contrast to the mediated contact through Trades Unions).

There must be more active encouragement of individual, as opposed to corporate, endowments to universities, e.g. scholarships or sponsorship, contributions to hospitals, and even to the funding of apprenticeships and enterprises in the private sector by individuals.

The coalition’s mantra, ‘We are all in this together’, is exactly the right call to the nation. It stresses our united nature. But it is time it was backed up with actions.

Egremont blogger the toast of the Spectator Coffee House

Nik Darlington 6.06am

Fresh from his 42nd place finish in the Total Politics conservative blogger awards, our very own David Cowan has landed himself another prize from The Spectator's Coffee House blog.

A bottle of Pol Roger is now David’s after winning over Spectator editor Fraser Nelson with his superlative description of George Osborne’s economic strategy.

And as I promised all Egremont bloggers, if they won I would double the prize with another bottle of Sir Winston Churchill’s bubbly of choice. David will be kicking the festive season off early!

Here is David’s winning entry again for those who missed it:

George Osborne is a man with a plan. He is also a Conservative Chancellor in a Coalition government at a time of financial turmoil not seen since the 1930s. However, he is also a shrewd political operator who managed to use his inheritance tax pledge to call Gordon Brown’s bluff in 2007 and opposed Alastair Darling’s NIC increase in order to give the Conservatives some momentum in 2010. George Osborne has managed to construct a growth strategy which accommodates the Liberal Democrats, includes political electioneering for a Conservative majority in 2015 and will hopefully rebuild the British economy.

The absolute bedrock of his growth strategy is to keep long-term interest rates low. That is why he is trying to eliminate the structural deficit by 2015 in a way which is fiscally responsible, i.e. through public spending cuts and modest tax increases. Keeping interest rates down will ensure that people can still borrow at German style costs whilst the country has a Greek style debt, and so the markets will maintain their confidence in Britain as a safe haven.

Dovetailing with his efforts to keep long-term interest rates low George Osborne has been trying to get credit flowing back into the British economy. The Bank of England’s second round of quantitative easing and holding the bank rate at 0.5% represent a large part of this. However, George Osborne has also managed to contribute by pulling off the major Project Merlin deal with the banks in order to get them lending again.

However, it is not just the deficit which George Osborne has inherited from Labour. After 13 years of Labour misrule Britain has fallen to 22nd in the world ranking [business.timesonline.co.uk/tol/business/economics/article7132864.ece] of most competitive countries. The Chancellor is now on a crusade to put Britain back at the front of the pack. This has led to serious efforts at supply side reforms which include cutting corporation tax to the lowest rate in the OECD, introducing the zero-rating of business rates in 21 new enterprise zones andsimplifying the longest tax code in the civilised world. The Coalition has also introduced a new ‘Employer’s Charter’ as part of a Whitehall review of employment legislation, the ‘one in, one out’ rule is in place, small businesses are being exempted from domestic regulations for the next three years, and our antiquated planning system is being radically reformed.

Another part of this crusade to create a new ‘enterprise culture’ is to regenerate Britain’s ailing infrastructure and maintain the capital investment which will help sustain small businesses and create jobs. Obvious examples include High Speed Rail 2, Crossrail, and the extension of the broadband network, all of which will help to integrate all of Britain’s regions into a more balanced economy. Human capital is also being nurtured by the 500,000 new apprenticeships, new vocational training centres, more schools and greater science development.

George Osborne’s growth strategy is also ensuring that it is the least well-off who have more money in their pockets and that the rich pay their fair share during this ‘age of austerity’. That is why the personal allowance is being increased, council tax is being frozen again and fuel duty was cut, while the 50p tax rate is staying, capital gains tax was increased and new taxes have been slapped onto big banks and oil companies. As for the controversial VAT increase, it is a necessary measure which will raise more revenue, at a minimal cost to the economy, for paying back the debt and protecting the schools budget and real terms increase in NHS spending.

George Osborne’s strategy for growth is a clear and coherent set of policies based on the need to encourage a new competitive ‘enterprise culture’ by providing low long-term interest rates and cheap credit, a vibrant national infrastructure, lower business taxes and less red tape. However, the Liberal Democrats have placed serious restraints on the options available to him, but if he successfully manages to deliver a healthy economic recovery in 2015 then he will be able to grant the generous tax cuts which many are calling out for now and gain all the credit in the process. This is a pragmatic and solidly fiscal conservative strategy which will pay off if George Osborne stays the course amidst the current financial storm and if he is very very lucky.