Jump to content
House Price Crash Forum
Sign in to follow this  
cashinmattress

Gordon Brown's 10 Worst Financial Gaffes

Recommended Posts

Gordon Brown's 10 worst financial gaffes

In 2006, an eloquent Gordon Brown, then Chancellor of the Exchequer said that he was "ready to make the decisions for people and to work with other people to make this country the great country it is at all times." A year later he became Prime Minister, and the rest is history. Here is a list of Gordon's worst financial blunders, the screw-ups which have cost us all dearly and left economists, accountants and the rest of us scratching our heads in disbelief.

1. Taxing 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 a system of tax credits. Not any more, decided Brown. Tax relief was scrapped, reducing the amount collected by pension funds by around £5 billion a year. Pension funds holding the cash that you, me and almost everyone else in the country plan to use for our retirement have lost around £100 billion over the last 12 years. That's one hell of a stealth tax.

2. Selling our gold

In May 1999 Gordon Brown had a plan to sell some gold. There were two problems with this, which concerned his economic advisers deeply. The price of gold had slumped after a decade of stagnation, but was likely to increase in the proceeding years. Added to this, the announcement of a major sell-off would drive the price down further. Little of this worried Gordon. Experts believe that the poorly timed decision to flog our national treasure has cost us all around £3 billion. Granted, that doesn't seem much nowadays, but more of that later.

3. Tripartite financial regulation

The system of financial regulation dividing powers between the Treasury, the Bank of England and the Financial Services Authority, established by Brown as Chancellor in 2000, missed what amounted to the biggest financial crisis of our lifetime. Whoops. This has led some glass-half-empty commentators to conclude that the system set up by Brown failed and should be replaced. The Commons Treasury Select Committee’s report on the collapse of Northern Rock said that the Financial Services Authority had “systematically failed in its duty†to oversee the troubled bank’s activities. Little did it realise at the time that Northern Rock was the over-leveraged tip of the securitised iceberg.

4. Tax credits

“Gordon Brown claims the tax credits system lifts children out of poverty,†says Simon Blackmore, 38, who was pursued for £6,057 in over-paid tax credits. “Maybe it does, but only to plunge them and their families into debt two years later.†Millions of low-income families have had to pay back the Treasury after receiving too much money in tax credits, putting them under huge financial and emotional strain. Meanwhile, 40 per cent of workers and families who deserved tax credits left billions of pounds unclaimed in the 2008-09 tax year for fear of being chased for the cash later on. Introduced in 1999, reformed in 2000, tax credits have been "a complete disaster zone", according to tax experts.

5. The £10,000 corporation tax threshold

In 2002, Gordon Brown introduced a new tax regime to help small businesses. He announced a new zero per cent rate of corporation tax on profits below £10,000. It was designed to boost the ability of small businesses to grow and prosper. It didn't quite work out this way. It became advantageous for sole traders such as taxi drivers or plumbers to turn themselves into limited companies to take advantage of the new rules. A Treasury Minister later commented that "the Government did not realise how many people would engage in abusive tax avoidance", despite the fact that it was "blindingly obvious" to tax experts "within 5 seconds" of the budget announcement that this would happen. Gordon scrapped the rules a few years later, raising the rate from 0 per cent to 19 per cent when he released how much money was being lost.

6. Abolition of the 10p tax rate

Mr Brown rarely apologises. In fact, he never apologises. But occasionally he acknowledges "mistakes", albeit begrudgingly. Over the abolition of the 10p tax rate in 2007, Mr Brown told Radio 4's Today programme that "we made two mistakes. We didn't cover as well as we should that group of low-paid workers who don't get the working tax credits and we weren't able to help the 60 to 64-year-olds who didn't get the pensioner's tax allowance." Experts use stronger language to describe the Budget of 2007, which was designed to produce positive headlines for the 2p cut in income tax. Accountants calculated that the scrapping of the 10 per cent tax rate, coupled with the increase in the proportion of tax credits withdrawn from higher earners, would leave 1.8 million workers earning between £6,500 and £15,000 paying an effective tax rate of up to 70 per cent.

7. Failing to spot the housing bubble

Gordon Brown said he ended boom and bust, and in those innocent days before the collapse of the global finance system we believed him. In 1997, he outlined his plans. "Stability is necessary for our future economic success", he wisely informed an audience at the CBI. "The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management." The other components of that bedrock including a trillion-pound debt mountain and a decade of unchecked and unparalleled house price inflation presumably slipped his mind. In 2003 a mild-mannered Liberal Democrat MP by the name of Vince Cable dared to question the mantra of "the end of boom and bust". He asked Gordon Brown: "Is it not true that...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 that the Bank of England describes as well above equilibrium level?" Gordon 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..." We all know what happened next.

8. 50 per cent tax rate

Robert Chote, director of the Institute for Fiscal Studies, has said the tax hike which heralded the end the new Labour may actually end up losing the Government money. "If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it, as people actually declare less income for tax," he said.

9. Cutting VAT

"It would be funny if it wasn’t so serious," said a tax accountant when asked about the Brown-Darling brainwave to cut VAT by 2.5 percentage points. As a nation of shoppers, rather than shopkeepers, a chopped down sales tax sounds like a good idea, providing a vital boost to hard-pressed families at a time of financial hardship. There were two problems. It costs £12.5 billion a year and it has made little discernable difference to those hard-pressed families because it is shopkeepers, rather than shoppers, who have pocketed much of the benefit.

10. Public-sector borrowing

If Gordon had only saved a little more in the good times, we might have had a little more to fall back on in the bad, economists sigh. Last month saw public-sector net borrowing hit £19.9 billion, the highest on record, according to the Office for National Statistics. The chancellor of the exchequer, Alistair Darling, has forecast that Government borrowing will reach £175 billion this year. It is forecast that total government debt will double to 79 per cent of GDP by 2013, the highest level since World War 2. Mr Chote recently warned that "the scale of the underlying problem that the Treasury’s detailed forecasts identify will require two full parliaments of mounting austerity to repair.â€

Even after he leaves office in 2010, as is almost certain, it seems that we will all be paying for Gordon's gaffes for many years to come.

What a shameful legacy. He's done more far damage to the nation than the 1939-44 Luftwaffe, and our long term financial health looks very bleak.

Share this post


Link to post
Share on other sites
Can anyone list 10 of his best financial achievements?

Not fecking up the financial legacy left to him by Clarke/ and that grey guy who was PM (but whose name I cant remember for the life of me ;);) ) for the first few years of his chancellorship?

The 'ten years of growth thing.' Well...... I dont think that was either real or something he can take credit for, is it?

Other than that, I'm at a loss

Share this post


Link to post
Share on other sites

I understand some of the money from the gold sales went to buying euro which at the time wasn't too bad for that one particular part of the transaction.

Share this post


Link to post
Share on other sites

Brown's decision to set monetary policy by targeting a selective index of consumer prices (so called 'inflation targeting') under the guise of making the Bank of England "independent" dwarfs all those "financial gaffes" (indeed it's the root cause of gaffes 7, 8, 9 and 10). Sure such managerialism has been the fashion worldwide for at least a decade (starting with New Zealand in the late 1980s), but that's no excuse. So called 'inflation targeting' has been a disaster whereever it's been tried.

Share this post


Link to post
Share on other sites

gawd, not the old gold chestnut again. So what ? he sold off some gold that would still be worth less today than the profits we'll make from our bank bailout preference/ordinary shares [eventually] or from selling some radio spectrum via auctions when the economy rebounds. Infact at around the time he sold the gold he made an absolute mint from selling 3G spectrum at the height of yet another different bubble. :lol: Trouble is with brown, no matter how much he wants to spend to make a difference to public services or investments he finds a way to malinvest or just waste a lot of the time.

Brown's big mistakes are obviously the housing bubble..., i think there has been an element to tax credits which has been used to disguise the problems in our labor market so for me it's not been the success gordon has trumpeted.

Then there's the FSA, utterly pointless organisation, and by far the biggest mistake of ensuring the focus of the BoE's remit was on the neo-liberal dogma of inflation control and monetary policy as king, rather than a focus on fiscal policy.

Share this post


Link to post
Share on other sites
Brown's decision to set monetary policy by targeting a selective index of consumer prices (so called 'inflation targeting') under the guise of making the Bank of England "independent" dwarfs all those "financial gaffes" (indeed it's the root cause of gaffes 7, 8, 9 and 10). Sure such managerialism has been the fashion worldwide for at least a decade (starting with New Zealand in the late 1980s), but that's no excuse. So called 'inflation targeting' has been a disaster whereever it's been tried.

absolutely spot on. this inflation control is central to the neo-liberal orthodoxy of economy thought.

Share this post


Link to post
Share on other sites
Can anyone list 10 of his best financial achievements?

1. He took VAT off gold, thus making it an affordable safe haven.

2. He introduced stakeholder pensions which reduced the fees people had to pay.

3. He kept us out of the euro.

4. Er, that's it!

Share this post


Link to post
Share on other sites
Can anyone list 10 of his best financial achievements?

Um, yeah. He pricked a pensions bubble that otherwise would've grown a whole lot lot fatter and more damaging by now.

http://bahumbug.wordpress.com/2007/04/03/pensions-blame/

Shame he spoiled that by turning property into such a huge tax break for the rich, stoking another hugely damaging (albeit much shorter-term) bubble.

Share this post


Link to post
Share on other sites
Well we could do if they hadnt blacked out all those expenses claims.

:lol:

Share this post


Link to post
Share on other sites
Then there's the FSA, utterly pointless organisation, and by far the biggest mistake of ensuring the focus of the BoE's remit was on the neo-liberal dogma of inflation control and monetary policy as king, rather than a focus on fiscal policy.

What monetary policy?

Monetary policy would surely involve some kind of constraints on the growth of money supply. But by policy, the BoE wasn't to consider money supply!

Share this post


Link to post
Share on other sites
Can anyone list 10 of his best financial achievements?

I think SIPPS (if labours idea) are good. I wouldnt even consider starting a pension now unless i could invest it myself, given the level of corruption (and stupidity) that exists within the Pensions and IFA industry.

Share this post


Link to post
Share on other sites
1. He took VAT off gold, thus making it an affordable safe haven.

I don't think he did. EU rules don't allow anybody to remove VAT from an item once that have put it on. The best that can be done is to reduce it to the lowest allowed which is 5%.

tim

Share this post


Link to post
Share on other sites
I don't think he did. EU rules don't allow anybody to remove VAT from an item once that have put it on. The best that can be done is to reduce it to the lowest allowed which is 5%.

tim

The abolition of VAT on investment gold was required by an EU directive. Under EU VAT rules the UK has no sovereignty over Sovereigns.

'VAT Abolished on Investment Gold':

http://www.taxfreegold.co.uk/newsaboutinvestmentgold.html

The UK and all other EU members abolished VAT on all investment gold as from midnight December 31st 1999. From January 1st 2000, all purchases of investment gold within the EU are exempt from VAT. Exports of investment gold will be zero rated.
Edited by Crash Connoisseur

Share this post


Link to post
Share on other sites
I think SIPPS (if labours idea) are good. I wouldnt even consider starting a pension now unless i could invest it myself, given the level of corruption (and stupidity) that exists within the Pensions and IFA industry.

SIPPS were introduced by the Conservatives.

'Sipps: Coming of age' [May 2009]:

http://www.ftadviser.com/InvestmentAdviser...ming-of-age.jsp

The first Sipp was launched in 1989 as a personal pension version of the popular small self-administered scheme (Ssas). A growth spurt occurred in 1995 when deferral of annuity purchase was introduced, and another one followed ‘A-Day’ in 2006.

Since its introduction, the definition of a genuine Sipp has been one that permits the full range of investment options allowed by HM Revenue & Customs (HMRC). This is where the term ‘self-invested’ originated and why many say it should remain.

Share this post


Link to post
Share on other sites

the Bank of England who enables the politicians is the problem, for years their low interest rates created the bubble. of course, they're not independent and dance to the governments tune but until we get rid of it then we will have politicians like Brown come into office and order them to create booms so they can get re-elected

Share this post


Link to post
Share on other sites
Gordon Brown's 10 worst financial gaffes

What a shameful legacy. He's done more far damage to the nation than the 1939-44 Luftwaffe, and our long term financial health looks very bleak.

Number 10...... not keeping govt spending under control and reducing debt in the good times is in my view the worst of the lot... if he'd done that then we could have possibly lived with some of others.

Its worth saying that I think he was right to target improving public services and indeed spending lots more on them BUT he could have done that and kept things under control... depending on which figures you read the govt has "wasted" something in the region of £400bn in the last ten years... money that could have reduced debt levels.... but which instead was squandered on waste or things which have made not a jot of difference to most peoples lives.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   323 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.