Sam Dunn: When a system hits the poor and helps the rich, it stinks

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You don't get much in a Salvation Army food package - pasta, tinned vegetables and maybe rice - but it all helps.

The last time I looked, it wasn't government policy - or, at least, not official government policy - for the public to rely on charity to survive. Yet this is just what has happened.

It's the last thing you'd expect from Gordon Brown, a Chancellor with an indelible socialist streak.

Misery caused by the tax-credit chaos spread from struggling families to the Commons last week, prompting emergency statements and an apology from the Prime Minister.

As we report on page 23, the scheme's mix of complexity and cock-up has hit families receiving the means-tested benefit hard, forcing the Citizens Advice Bureau to hand over a Salvation Army pack so that one mother could feed her children.

Given all the resources available to the intellects who dreamt up this scheme in Treasury and Inland Revenue boiler rooms, it is abhorrent that the most deserving - the people for whom the scheme was devised - will find themselves dependent on food parcels.

This financial foul-up is even more galling when you look at the tax breaks and financial flexibility being flaunted at the other end of the personal finance dining table.

No handouts here - we're talking fine wines amassed in cellars over the years. In around 10 months from now, owners of these collections will be able to put them into self-invested personal pensions (Sipps) - where they will earn instant tax relief and boost the retirement funds of the wealthy. This is thanks to "A-Day" - a new plan that allows sophisticated investors to pull fancy levers to engineer better pensions.

From 6 April next year, these investors will also be able to squeeze buy-to-lets, their homes and even commodities such as gold into their Sipps - and again enjoy the tax relief.

But for the average worker, the treats on offer are less tantalising. Being able to place half your annual salary in a pension fund sounds great, but who can afford to do so in practice? What about finding the money for bills and mortgages?

These changes are being made in the name of simplification but the real beneficiaries are clear: financial sophisticates who have already amassed considerable wealth.

For those in real need of encouragement to save for retirement - low and lower-middle earners - the changes will be less welcome.

Datamonitor, an analysis company, estimated last week that A-Day would mean the Government giving away £2bn a year in tax relief to some of the UK's wealthiest individuals.

Meanwhile, sales of government-backed stakeholder pensions and investment schemes for low earners continue to falter.

This is a gross distortion, and shows how policymaking and its practical application can go horribly awry.

It's all going on under Mr Brown's nose. A man committed to society's less well-off should be able to tell that it stinks.

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