Rather than "shaming" tax avoiders, the coalition should stop them

The latest "crackdown" on tax avoidance is nothing of the sort.

In these austere times, tax avoidance, as Ken Livingstone and Jimmy Carr learned to their cost, is a toxic practice. In view of this, the government is preparing to announce a new "crackdown" on avoiders today. Treasury minister David Gauke will tell Policy Exchange that scheme operators may be forced to hand over client lists to inspectors, and will be "named and shamed" for not sticking to the rules.

Gauke will say:

We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill.

These schemes damage our ability to fund public services and provide support to those who need it.

They harm businesses by distorting competition. They damage public confidence.

And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.

Laudable words, you may think. But Gauke's suggestion that "naming and shaming" tax avoiders will reduce the practice is either extremely optimistic or extremely disingenuous. Were negative publicity enough to dissuade avoidance, men like Philip Green, hired by the government to advise on its spending cuts (the need them for them partly derived from his and others' avoidance) would have paid up long ago. Rather than merely "shaming" avoiders, the government needs to stop them. Yet there is nothing in today's announcement to suggest it will do so.

As Richard Murphy noted on The Staggers last month, the coalition's much-vaunted "anti-avoidance rule" will do little to end the cat-and-mouse game between HM Revenue and avoiders. As the government closes one scheme, another opens. Only an anti-avoidance principle, which looks at intent as well as practice, would significantly reduce avoidance. As Murphy explained:

A principle is something quite different. It looks at intent. It is not about box ticking, as rules are (which is why they are so easy to get round - general anti-avoidance rules included). It is about looking at what you did and using that evidence to assess on the balance of probabilities what your intentions were.

On this point, George Osborne, who memorably described tax avoidance as "morally repugnant", and his Treasury colleagues remain mute.

Finally, one might ask why, if the coalition is so opposed to avoidance, its Budget rewarded it. The stated reason for the abolition of the 50p tax rate was that high-earners were avoiding it. As Osborne stated in the Budget

HMRC find that an astonishing £16 billion of income was deliberately shifted [emphasis mine] into the previous tax year - at a cost to the taxpayer of £1 billion, something that the previous Government's figures made no allowance for.

But this was an argument for reducing tax avoidance, not for cutting taxes for the one per cent. While the rich avoided the 50p rate in the first year of its existence (by bringing forward income from 2010/11 to 2009/10 in order to pay the 40p rate), this was not a trick they could have repeated. Yet Osborne cut the rate all the same. It was as if he had rewarded welfare cheats by increasing their benefits. Seen in this light, the government's new fondness for moralising against avoiders is merely an attempt to change the subject. We should ensure it cannot.

Jimmy Carr recently said he made a "terrible error of judgment" in using a tax avoidance scheme. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: www.oldmutualwealth.co.uk/ products-and-investments/ pensions/pensions2015/