Election 2010: Labour's biggest financial
Author: Laura Miller
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,
here is a definitive list of financial blunders Labour
would rather you forgot...
‘Give-to-take-back' tax credits
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
7. Abolition of
the 10p tax rate
"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
6. 0% corporation
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.
5. Taxing pension
fund dividend payments
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
Pension funds have lost around £100bn over the
last 12 years as a result.
4. Bending to the
banks when Chancellor
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
"So I've learnt from that...you don't listen to
the industry when they say, 'This is good for
Horse. Door. Bolted, anyone?
3. Flogging the
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.
2. The (un)Holy
Trinity of tripartite financial
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
1. Ignoring the
wisdom of Vince "Economic Superman"
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
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,
That’s a lot of blunders and yet we still voted