Downing Street Says » Pre-Budget Report

Put that the Prime Minister and the Chancellor had given a particularly stingy settlement for Scotland out of spite towards Alex Salmond, the PMS replied that this was not the case.

Asked what they thought of this accusation, the Treasury Spokesman replied that the Scottish settlement was determined under the Barnett Formula which has existed for nearly 30 years now, and had been applied in the normal way.

Put that there was a pretty ferocious reaction in the Financial Times today, and asked what would the Government say to the charge that the one group missed was the fat cats, and that just about every other British business had been clobbered, the Treasury Spokesman replied that the main reform had been made to Capital Gains Tax where we were quite clear yesterday that was a simplification. Any simplification involved winners and losers, but we now had a single low rate Capital Gains Tax at 18%, one of the lowest of all our major competitors. We had stripped away all of the complexity that was there before with the number of different rates, and we thought that it was still a very competitive rate for British business, but it also offered us the advantage of greater simplicity and a more stable system going forward.

Asked on Inheritance Tax if we now had figures of how many people currently used nil rate discretionary trusts to gain the benefit of the equivalent to what had now been established, the Treasury Spokesman replied that we did not have any published figures on this, and that these would not necessarily be know because the nature of tax planning is that the Tax Authorities do not always know about it in advance. But we were confident of the costing. If we had not made changes to the Inheritance Tax we would have updated our forecast, and that forecast always reflected as it did for every tax, the actual instance of payments. The costing for the £1.4billion reflected the additional tax that we were not expecting to get because there would be universal access to the double allowance. The Treasury spokesman also pointed out that this kind of tax planning did you no good if you were already a widow or widower. The PBR inheritance tax measure was retrospective and would apply to the 3 million widows and widowers who were currently alive.

Put that over the last couple of years the Treasury had had many representations made on Inheritance Tax, and the response had always been that there was only a very small number of people affected by it, and asked why had we suddenly decided to do something about it, the Treasury Spokesman replied that the Government had always been clear that it had wanted action on Inheritance Tax. That was why, for example, the previous Chancellor, now Prime Minister, announced in the last Budget over-indexation of the threshold taking it up to £350,000. So there was nothing new about us wanting to act, at this PBR we were in a position to take action of this scale.

Put that the Opposition were claiming that there had been a £2billion raid on the pensions system as the capping of the second state pension had been brought forward to 2009, and there was no indication that the link to earnings would happen before 2014, and asked if this was a fair assessment, the Treasury Spokesman replied that these were essentially technical changes in the state second pension that we set out fully what we were intending to do with the Pensions White Paper last year. This implemented Turner’s package of reforms, and a key part of these reforms was the recommendation that the state second pension needed to move to just a flat rate rather than earnings related. That would happen in 2013 as a result of these proposals.

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» Wednesday, October 10, 2007

Pre-Budget Report

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