Election 2010: Tories’ biggest financial blunder

After last week’s run-down of Labour’s biggest financial cock-ups,
Accountancy Age’s sister publication
brings you the worst financial gaffes thrust on society by the
Conservatives. *Warning: The following may stir some unhappy memories…

Some of these gems are from back in the Tory heyday, but being out of power
for more than a decade hasn’t stopped them fumbling with the figures.

As with our ‘Labour list’, please feel free to point out any we might have
missed. (Un)happy reading…
8. Poll tax riots

The last day of March this year marked the 20th anniversary of the 1990 poll
tax riots, when 200,000 British citizens protested in Trafalgar Square against
probably the most unpopular tax in British history (outside the FSCS interim

The ‘Community Charge’ shifted focus from house price to the number of people
living in it, moving the tax burden from the rich to the poor.

By November, the Tories had forced Prime Minister Margaret Thatcher to step
down, with her still defending a tax opinion polls showed had just 2% support.

7. Lord Ashcroft on Tory economic policy – do as I say not as I do

The annual tax-saving of the Tory party’s biggest donor, who took his seat in
the Lords in 2000 and so has been involved in setting UK law for a decade, is
£12.76m, according to Lib Dem research.

That’s £127m in unpaid British tax.

Ashcroft, who has given millions of pounds to Tory campaigning, confirmed
last month he was non-domiciled for tax purposes after years of speculation.

Nice of him to pop back from time to time to vote on how us domiciles do pay
tax, though isn’t it?
6. Nigel Lawson’s pensions holiday from hell

In the 1986 Tory Budget, then Chancellor Nigel, now Lord, Lawson introduced
an effective 5% cap on the surplus of an employer’s pension fund.

Employers could use surplus assets to improve member benefits, or take a
contributions holiday. Otherwise, assets above 5% would be heavily taxed.
Predictably, employers opted for the holiday.

But the holiday is now over. In a report last year, actuaries Lane Clark
& Peacock (LCP) said the pension black hole at FTSE 100 companies has hit a
record £96bn, up from £65bn in 2003.
5. Boris Johnson on Tory economic prudence

In a Telegraph article in 2007, London Mayor Boris Johnson analysed the worst
recession in 70 years, and what to do about it: “This isn’t the Black
Death….The boom-slump cycle is a natural part of our history… It is like
love…..there is no need to go into mourning for capitalism….and there is
nothing remotely impolite, in these circumstances, about spending money and
being seen to spend money. Far from it.”

As every financial planner knows, people lose the £1m which would secure
their and their family’s future £50 at a time, buying stuff instead of saving
and investing it. But at least according to Johnson, they will be the most
polite people at the homeless shelter.
4. Osborne reinvents mathematics (part 1)

In 2007, Osborne proposed a flat rate levy of £25,000 on non-domiciled
workers, which he said would generate £3.5bn and allow him to cut inheritance

But only non-doms with over £62,000 in yearly foreign income would pay the
charge and according to Treasury costings then, only 15,000 non-doms received
income at this level. Osborne’s proposal would raise a maximum of £650m – £2.9bn
short of his total.

Another ‘number problem’ with the plan was it assumed 150,000 resident
non-domiciles. HMRC figures at the time recorded only 114,000.
3. Boris (again) on ‘ends justify the means’ economic policy

In an interview with the BBC in September, Tory Mayor Johnson told Britain:
“Bankers are the scum of the earth at the moment but they contribute huge sums
of revenue to the Exchequer.”

Not exactly in the spirit of TCF, is it?
2. Osborne reinvents mathematics (part 2)

At the Tory party conference in October, Osborne claimed he would save £13bn
by upping the state pension age from 65 to 66 from 2016. The respected think
tank the National Institute of Economic and Social Research (NIESR) disagreed,
saying not only would the savings take five years longer, they would fall £3bn
short. And they should know – they provided the figures Osborne based his
calculations on.
1. ‘Black Wednesday’

Reams have been written about 16 September 1992, when the Tory government was
forced to pull sterling out of the European Exchange Rate Mechanism (ERM) after
the currency sunk in value below the agreed lower limit. But all you really need
to know is:

1. Black Wednesday cost Britain £3.3bn.

2. Trading losses in August and September were estimated at £800m.

3. Taxpayers lost out most because better management of devaluation could
have turned a profit, around £2.4bn if the government had kept $24bn in foreign
currency reserves. Instead the Treasury spent £27bn propping up the pound.

4. Interest rates rose from 10% to 12% (and stayed that way even after
Britain exited the ERM…..great news if you had a mortgage).

5. Guess who was ‘Special Adviser’ to Tory Chancellor of Exchequer Norman
Lamont at the time……… David Cameron.

Further reading:

2010: Labour’s biggest financial blunders

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