Shadow chancellor George Osborne today outlined to the Conservative Party Conference the economic proposals which he will bring in if elected in next year’s general election.
His biggest announcements were a one year freeze on public sector wages for those that earn over £18,000 a year and a reversal of Labour’s ‘tax raid’ on pension funds. The former point will affect four million public workers. It will come in from 2011, with Osborne estimating a £3.2bn yearly saving. The latter proposal was less clearly articulated as Darling conceded the initiative could not simply be reverted. Instead he promised to reverse the “effects” of it. This move found favour from HW Fisher & Company accountant Andy Rich who said the proposals probably mean the removal of the repayable dividend tax credit. “Restoring this would hopefully benefit not only the pension schemes but also those individuals who rely on dividends rather than interest to provide for themselves,” he said.
Osborne said the move will cost £5bn.
A pre-leaked proposal included in the speech was to raise the retirement age to 66 from 2016 for men and 2020 for women. David Cameron was questioned later and promised that the rise for women, who currently retire at 63, will not be introduced all in one go.
Osborne declared that he would restore the earnings link for basic state pensions, something that Labour has also pledged to do, and promised a crack down on offshore bank accounts, saying: “I believe in the free market, not a free ride.”
The 50p tax band will stay for now under a Conservative government. Osborne said it “would be grossly unfair” to scrap it while public sector wages are frozen. Given that the pay freeze will last for a year though, many commentators took this to mean that Osborne does still intend to cut the band after shoring up the nations books.
Only the poorest families will continue to receive Child Trust Funds while families earning over £50,000 will lose the child tax credit. However the party does remain remain committed to raising the threshold of inheritance tax to £1m.
The party is also opposed to the VAT cut and, “more alarmingly perhaps,” to use the words of Andy Rich, have not set an upper limited. “VAT in some European countries is currently upwards of 20%, so it would be interesting to see what might happen under a Conservative government,” said Rich.