Gordon Brown bottles it again in the face of escalating revolt against the abolition of the 10% tax band that hit 5.3 million of Britains poorest workers. This hit at the core of the Labour Party's values of redistribution of wealth from the rich to the poor. As stated In last saturdays article Gordon Browns Abolition of the 10% Tax Band- Leadership Challenge? , that the logical thing for Labour to do would be a U-turn, otherwise the next election is as good as lost.

The tax hike on the poor made many Labour MP's sit up and realise that the days of Gordon Browns prudence, competence and decisiveness are long gone, first broken when he bottled out of an October 07 election. The Labour party clearly is coming to the view that the party's election prospects are not safe in Gordon's hands as virtually every major policy decision he makes backfires and therefore increases the probability of a leadership challenge.

The whole affair reminds me of episode 3 of the current run of the Apprentice, in that Gordon Brown resembles Simon to Tony Blair's Raef i.e Gordon is a great number 2 but is completely out of his depth as the project leader / Prime Minister. At this rate the Labour Party will Fire him within a year.

However the current tax storm may not be over as the government U-turn headline statements may not actually match the details. Frank Fields the architect of the rebellion initially accepted the U-turn in good faith, but given Gordon Brown's current lack of competence the U-turn may worded in such a way so as to make it unpalatable on close inspection, therefore all eyes are on Frank Fields to see if he decides the government has or has not fulfilled the rebels demands of a complete recompense for all low paid workers who were hit with the loss of the 10% tax band.

If the stated U-turn undoes the 10% tax band damage, then the pain of the U-turn will linger on for a few months more but it is in my analysis the best strategy for Labour than to let the wound fester and grow into the next election. The May elections will show exactly how much damage has been done to Labour as the voters brace themselves for Gordon's next big U-turn.

Whatever the final details, the facts are that in a time of increasing government spending and debt due to the slowing UK economy, and the continuing bailouts of the financial sector, the tax u-turn will cost the UK exchequer some £1 billion a year, which on face value is a small price to pay compared to the £100 billion so far pledged to the banks.

The whole affair just goes to show how bad a Prime Minister Gordon Brown is, he just cannot ditch the role of being a Finance Minister. The consequences of this are clear in that Alistair Darling is basically seen as Gordon Browns puppet without any real presence or clout in the city. Hence the heads of the major banks are able to get away with treating the chancellor as an idiot by spoon feeding him mis-information in support of literally unlimited amounts of free money from the Treasury in exchange for un-priceable and thus effectively worthless mortgage backed securities.

By Nadeem Walayat

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 120 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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Comments

Doreen Prince
10 May 08, 05:30

10% Tax abolishment

I am a widow of an Army Officer who had died in a tragic accident in Germany in 1991.He was 26 and I was 28, he only just returned from the Gulf serving his country as a young Officer. I am now aged 44 and have no children. I have since received his Army Pension of £249 a month (which is taxed I might add). I also work full time and since the change in the budget

I am paying out £61.20 tax on my salary of £262 a week. I don’t get single working tax credit since they said I was paid too much even though they were paying me only £67 a month.

I cannot live and stay insane to make ends meet anymore and its caused me to become a very depressed young lady. I only work temporary for an agency as its hard to find permanent work anymore, as of 16 May 2008 I will be unemployed as my job ends. I cannot get JSA? I tried 2 months ago when my job ended, the Jobcentre advised I was not entitled to JSA as I hadn’t paid enough NI contributions?

I was also advised as I receive an Army Pension this would go against my claiming JSA.Does the government not take into account that us Widows/ers no longer have our partners to rely on and this little bit of money is there to help us to make ends meet? I would think my late husband will be turning in his grave knowing that his wife cannot live on his pension, which he paid taxes on when he was alive. I am sickened that he served in the Gulf for his country and this is how the Government repay him while he TRIES to rest in peace.

If I was POLISH I would be better off!!

PS: I have just been billed from the Halifax Bank for £35 as I went over my overdraft limit by £1.80. Then by taken this £35 off me took me into the overdraft again by £20 plus a further £1.10 interest charge..A bank thats been receiving my Late husbands pension since 1991.Not to mension a Mortgage I had with them plus the thousands of pounds that were sitting in there when I got the money from my late husbands estate!..

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