Where am I? 
Home Better Business
Categories: Better Business
Topics: Gold| Tax avoidance| pension reform| Corporation Tax| Labour| Gordon Brown| UK Election 2010
A week may be a long time in politics, but after 13 years in power Labour probably wants the public to keep their memories short and sweet. So just in case, IFAonline brings you a definitive list of financial blunders Labour would rather you forgot...
Feel free to let us know if we've missed any. Here we go...
Created in 1999, reformed in 2000, tax credits have led to millions of low-income families having to pay back the Treasury after over-payment, at the cost of huge financial and emotional strain.
Meanwhile, 40% of workers and families owed tax credits left billions unclaimed in the 2008/9 tax year for fear of being chased for the cash later on.
"We made two mistakes [in scrapping the 10p tax rate in 2007]," Brown told Radio 4's Today programme. "We didn't cover as well as we should have ...low-paid workers...[or] the 60 to 64-year-olds who didn't get the pensioner's tax allowance."
Accountants calculated abolishing the 10% tax rate, coupled with a withdrawal of tax credits from higher earners, would leave 1.8 million workers earning £6,500 to £15,000 effectively paying a tax rate of up to 70%.
In 2002, Brown announced a 0% rate of corporation tax on profits below £10,000 to help small businesses. Overnight, sole traders such as taxi drivers and plumbers transformed themselves into limited companies to take advantage of the new rules.
A Treasury minister later said "the Government did not realise how many people would engage in abusive tax avoidance", despite it being "blindingly obvious" to tax experts. Brown raised the rate from 0% to 19% when he released how much money was being lost.
Before 1997, dividends issued by UK companies and paid to pension funds were tax-free - that is, the tax could be claimed back via tax credits. Tax relief was scrapped when Labour got in, slashing the amount collected by pension funds by around £5bn a year.
Pension funds have lost around £100bn over the last 12 years as a result.
Asked in an ITV1 interview about his mistakes, the PM said: "In the 1990s, the banks....all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation'.
"All the complaints I was getting was, 'Look, you're regulating them too much'. And actually the truth is globally and nationally we should have been regulating them more.
"So I've learnt from that...you don't listen to the industry when they say, 'This is good for us'."
Horse. Door. Bolted, anyone?
In May 1999, Brown had an idea to sell-off more than half of our national gold reserves - a total of 395 tonnes - at a time when the price of gold had slumped after a decade of stagnation.
The family jewels went for an average price of $275 per ounce. On the Forex Gold Index today, the precious metal is trading at $1151.25 an ounce, nearly five times as much.
To be fair to Brown, he invested the money from his badly-timed bullion sale in dollars, euros and yen, which have all done better than sterling since then - though none as good as gold.
The system of financial regulation dividing powers between the Treasury, the Bank of England and the Financial Services Authority, established in 2000 missed what amounted to the biggest financial crisis of our lifetime. Whoops.
In the House of Commons in 2003, the Lib Dem's Vince Cable asked Brown: "Is it not true...the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices the Bank of England describes as well above equilibrium level?"
Brown replied: "The Honourable Gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the economy..." The rest, as they say, is history.
And before we are bombarded with cries of foul and bias, look out for IFAonline's list of big bad Tory financial blunders on Monday....
| Share | |
| Comment | Election 2010: Labour's biggest financial blunders |
More better business news
Email alerts
Recommended reading
Categories
Topics
Comments
Two More Blunders
1)Killing off final salary pensions by making index linking of benefits compulsory. 2)Errors in the creation of the FSA a) Failing to build in public accountability. b) Burdening the financial services community with the entire cost of this 'public body'. c) allowing a free hand in budget raising, and spending. Even borrowing to maintain unfettered spending, and burdening the financial services community with the debt. d) Allowing executives to pay themselves as if they were captains of industry. e) giving the banks effective control of the FSA. There are many more, but these are enough to be going on with! Roll on the election!
Posted by: Green Eyed Monster
FSMA 2000
This was set up by Mr Boom & Bust to deviate any financial mistakes that Labour may be accused of. In other words it was a politcal shield to protect Labour from being in the front line. But Crash Gordon was the architect so the blame is still his!
Posted by: Incompetent Regulators Awards Team
Welfare Abuse
What started out as a very noble aspiration (ending child poverty) has resulted in people who specialize in abusing the welfare system, much to the detriment of the people who genuinely need the intended safety net.
Posted by: David McMeekin
Not all blunders
The taxing of the income of pension schemes when Brown became Chancellor was hardly a blunder. It enabled him to give tax credits to poorer families. Yes, the rest were blunders, though the flogging off of the gold reserves might be set against the lucrative sale of 3G licences.
Posted by: Robin Bennett
SIPP debacle
by first allowing residential property into a SIPP and days before the launch, after millions had been spent getting the admin ready, U turning...
Posted by: Ken Durkin
Halfway there
Mr Brown promised an end to Boom and Bust and has delivered at least half of this promise!
Posted by: Steve
Labours - biggest fianncial blunders
It is interesting that English voters and Scottish voters appear to have missed the facts - that Gordon Brown has permitted, if not assisted, in allowing Scotlands many TSB Banks, ( noting TSB life ) to PURCHASE the reputable bank "LLOYDS" - and change the brand name to LloydsTSB - reducing competition and permitting Edinburgh Bank to asset strip the Lloyds Group. GordoN Brown, as chancellor, permitted RBS to PURCHASE "Natwest" ( including Coutts )and chuck out customers to asset strip the Bank. By taking control of these Scottish Banks Gordon Brown has direct control over the voting public money. Rasing taxes reducing services, then permitting ( if not influencing ) Edinburgh based bank TSB - to purchase Halifax and Bank of Scotland once agin reducing banking competition, allowing increases in charges reductions in services claiming " econonomies of scale", - but only in Edinburgh where the " outsourcing of services of Edinburgh Bank TSB operates ( Gorgie Road and " nine other areas in Edinburgh). Is this a blunder of the tactics of communism. What it means is reduced services reduces opportunites - and total control of our money by Banks ( e.g Nationwide and their advertising and abuse against mutual customers).
Posted by: Ian Lees
Some for the future
If they get in we can look forward to: 1. The top rate of tax rising to 50%, which will- 2. Drive high earners out of the country, thus: 3. Bringing to an end London's preeminence as a financial centre, and 4. Lead to a higher tax burden for the poor souls still working here. 5. Oh and VAT going up 6. Did I mention ridiculously high fuel duty which is a regressive tax since the poor suffer more than the affluent? 7. Or sky high alcohol duty which is killing the pubs?
Posted by: Tim
Labours Financial Blunders
I have a client who has been overpaid £43000, yes £43000 in family tax credits and is paying it nback at £315 per month!
Posted by: James Town
3G v Gold reserves
You could argue that the sale of the 3G licences at such a massive profit offsets the loss of selling the gold at such a low price. But, could could argue that the incredible price of the 3G licences stiffled and delayed product development. It may have been better to keep the gold and give away the licences. This could be why, in the broadband/wireless world, we are so far behind many other counties in the world.
Posted by: Adrian
Pension Term Assurance
One other financial screw up to add to this list concerns pension term assurance. Despite being told that sales would increase which would in turn lead to lost tax, the government ploughed ahead, and the protection industry invested much time and money into product design, systems and training. Only for Gordon and his team to shortly 'realise' it was costing them money in tax and pull it. They didn't listen in the first place to the obvious, and when they finally realised and decided to scrap it, they didn't give a second thought about the financial impact their error of judgement had on providers or IFAs. PTA was great for customers as it was an incentive to buy protection. It was therefore a good Labour initiative, but their appalling u-turn demonstrated their lack of knowledge in this field, not to mention their lack of appreciation for those within it.
Posted by: Emma Prescott
Related articles
Most Read
Audio / Visual
With the industry's biggest fund managers, IFAonline welcomes you to the media centre.
This year we have 14 awards designed to mark out the very best products in a highly competitive and innovative market. This includes three new awards for 2011 to reflect the developments in this rapidly growing market: Best Dual/Multi-Index Product, Best Structured (Oeic) Fund and Best Structured Product Provider.
Events
Poll
|
|
Job search
Ifaonlinejobs will open the right investment career path for you. Search hundreds of vacancies on www.ifaonlinejobs.co.uk now
In Focus
Viewpoints
About 2.66 million people are looking to increase the amount of money...
sponsored by
you missed the worst and a small but apposite one
in the good times he was lucky enough to inherit, with cash coming out of our ears, HE WAS STILL BORROWING to fund the hare-brained initiatives and explosion in public non-jobs (plus perks and UNSUSTAINABLE PENSIONS). and now we are skint he wants to just keep right on borrowing. the little one? intro and late withdrawal of domestic property in SIPPS.
Posted by: david levin