Julian Knight: The lesson is, you can't make up tax as you go along

I remember vividly the surprise announcement by then Chancellor Gordon Brown (pictured) in the 2007 Budget that the 10p starting rate of income tax would be abolished and the money used to pay for a 2p cut in the basic rate. Backbench Labour MPs roared with approval, waving their order papers 10 to the dozen.

That it took a year for MPs to wake up to the blunt reality that money was going from the poor to the better-off says a lot about the intellectual wherewithal of our elected representatives (and the Tories were hardly sage: in his Budget response, David Cameron had absolutely no grasp of the tax changes).

Overall, though, it is all part of a highly damaging pattern of setting tax policy on the hoof, with the aim of grabbing the headlines and without enough consulting of business or those affected.

A few years back we had the chaotic U-turn over allowing people to use their pension funds to buy a second home. More recently, in the autumn, we had the stealing of the Tories' inheritance tax policy, the back-of-the- envelope taxation of non-domiciles which paid for it, and the highly unpopular reform of capital gains tax. Now the income tax decision made during Mr Brown's final push for No 10 has come back to haunt him.

Perhaps, a lesson will be learned and we will have fewer surprises in future.

Highly charged

The Office of Fair Trading (OFT) has won a landmark case in the High Court and now has the right to decide whether charges imposed by banks on customers who go into unauthorised overdraft are legal or not. It's a racing cert the OFT will find that the charges – which can be as high as £30 a pop – are excessive and need to be cut.

But we are only a small way down the road to resolving the issue of bank charges – one that has prompted the biggest consumer rebellion in living memory – unless of course the banks and the OFT can quickly come to some sort of agreement on how fees should be structured in the future.

Since the parties opted to go to the High Court last summer, some of the poison has been drawn out of the charges debate. The flood of consumers looking to reclaim their bank charges has been halted by the decision of the Financial Services Authority to allow banks to put such cases on ice. (The banks, though, are still free to continue to levy their charges, which is deeply unfair.)

The hiatus on claims has reduced the antagonism that was building between the banks and the OFT. In a way, this has been helped by the credit crunch, because it has focused the minds of consumers, regulatory authorities and the banks on a bigger issue – namely, how do we protect the Western banking system from meltdown?

Now, with tempers a little more even and the right of the OFT to decide what's what confirmed, we need discussions to open so that everyone knows where they stand.

I have never been one to say bank charges are unfair full-stop. Personally, I think it's wrong to borrow money without someone else's permission and there should be a price to pay – and not a nominal one, either.

Equally, however, the grasping and usury practice of the banks – levying charge upon charge – has to stop. Let's hope some common sense prevails soon but I won't be holding my breath for a conclusion to this saga.