How the rich deferred bonuses to avoid the 50p tax rate

Earnings rose by an unusual high of 2.1% in the latest quarter but only because bonuses were paid in April, rather than March, to benefit from the new 45p rate.

At a time when Labour is attacking the coalition for presiding over a "cost of living crisis", the latest figures on earnings contain the superficially good news that the average weekly wage, including bonus payments, rose by 2.1% between April and June compared with the same period last year - the first time the growth rate has exceeded 2% since late 2011. 

But read on and it soon becomes clear what lies behind the spike. The ONS notes that "The relatively high growth rate for April to June 2013 partly reflects unusually high bonus payments in April 2013. Some businesses have reported that they paid bonuses in March last year but in April this year." 

The ONS doesn't explain why they did so, but it might just have something to do with the fact that April was the month that the cut in the top rate of tax to 45p took effect. Had businesses paid out bonuses in March as usual, they would have been taxed at the higher rate of 50p - this was avoidance on a grand scale. 

If we strip out bonuses, average weekly earnings rose by just 1.1%, 1.8% below the rate of CPI inflation. As the Conservatives resurrect the myth that "we're all in this together", today's figures are a salutary reminder that we're not. 

George Osborne attends a press conference on July 19, 2013 during the G20 Finance Ministers and Central Bank Governors' meeting in Moscow. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.