Osborne at select committee

George Osborne told MPs yesterday that cutting the top rate from 50p to 45p raised an extra £8bn in tax revenue, a claim regurgitated without checking by most of the press today.

Figures from the HMRC do show that in 2013-14, after the top rate in tax was cut, taxpayers paid £8bn more to the exchequer.

But even the Financial Times was forced to admit, near the end of its article, this was misleading:

The increase is likely to be largely a result of wealthy taxpayers delaying taking bonuses and dividends until the rate cut took effect. In 2012, the Office for Budget Responsibility forecast that £6.25bn of income would be shifted from 2012-13 to 2013-14. Together with a small “underlying behavioural effect” it predicted that the rate change would cut liabilities by £3.4bn in 2012-13 and increase them by £3.3bn billion in 2013-14, at a one-off cost to the Exchequer of £100m-£200m.

Or to put it more simply, as Jolyon Maugham does:

tax receipts were artificially low in 2012-13 (because people delayed receiving income until rates fell) and were artificially high in 2013-14 (when those delayed receipts were received). Combine those two numbers and you may well explain your £7bn jump.

(That £7bn refers to the HMRC projection, compared to the £8bn actual figure. The point remains the same)

The HMRC knew this would happen, and in fact they predicted in advance that tax revenues would fall and then artificially jump.

Osborne is proving to be dodgier than a snake-oil salesman.

  1. You have to wonder about the honesty of a man who felt the need to chang his name from Gideon to George and flattened out his hair.

  2. Thomas Ritchie says:

    Does that not show how
    This Tory Govt have shown a level of corruption and dishonesty never been seen in recent years.

  3. All governments like to present data in the best light. There has never been a government that hasn’t done this. So the accusations of corruption are overstated. Gordon Brown, more than anyone, was guilty of skewing statistics to slant in his favour.

    Irrespective of whether it is £8bn or even less, what nobody seems to be disputing is that the amount collected is LESS. If that is the case, then he has been shown to be right to reduce the rate. The government hasn’t lost any income but the economy has gained from the additional 5% of tax not being spent by the earners who can now feed that money into the economy by purchasing goods. That helps society as a whole. Meanwhile, the best entrepreneurs leave the country. Look at the French moving to the UK. So since 2013 its Socialist Government has operated highly capitalist moves to encourage entrepreneurship and it’s working incredibly well. The entrepreneurs employ people, pay good wages, pays taxes, the economy grows.

  4. The highest earners do not spend their excess money. They squirrel it away in offshore tax havens where it is no good to us, the majority.

  5. indeed mattoid ! poor people pay the highest percentage of their income in taxes, parasites do not pay high wages, they sit any extra in off shore tax free accounts, charge every item they do use to expenses and claim tax back on it, they pay minimum wage and sponge the rest off us in tax credits, organised criminals.

  6. Welfare Central says:

    @ Mark Deacon

    If the UK economy is so bloody good, why do “the best entrepreneurs leave the country” ?

    Because they know that this country is being screwed by corrupt Tory politicians.

  7. Osborne let the rich squirrel their money away by giving them a years notice. That’s why the figures are so twisted. To really get the tax owed he should have introduced the measure immediately.

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