Pick your fights very carefully: it's good advice in life, as well as in politics.
But it's advice that Tory MPs John Redwood and David Davis seem to be ignoring in their opposition to the proposed capital gains tax (CGT) rise. They think that by coming out so openly against CGT rises they are drawing an early line in the sand for the Government on behalf of the right of the party. Instead, what they are doing is taking on a Prime Minister at his strongest, firing their broadside when there will be much bigger battles ahead as the inevitable tax rises happen next year.
By saying CGT is a tax on ordinary people – including, laughably, the working class – they are being either delusional or untruthful. Since the CGT rate was lowered by Labour, it has been used as a tax dodge by many in the City who, by morphing income into capital gain, have cut their tax exposure from around half of the sum earned to just 18 per cent. As for savers, they have individual savings accounts to shelter growth free of tax. And second-home buyers – who, don't forget, have drained a lot of housing stock, particularly in rural areas – well, they have a generous CGT allowance. Also, this tax is on a gain, not on the value of the property being sold.
I'm no fan of higher taxes, but CGT reform is different. It's about fairness, and, if they pitch the tax level right, it won't scare real investors. Here's an idea, why not align capital gains with an individual's income tax rate?
What a good pension plan
State pension to rise in line with life expectancy is one proposal by Iain Duncan Smith, Secretary of State for Work and Pensions, last week – and it's a good one.
It would be transparent and could be independently monitored. But the state pension isn't the big problem anymore; the argument over whether we must work longer has been had and won. The big problem is how to get people to save more so they don't have to rely on what the state pension offers.
Greater flexibility proposed by IDS will make pensions more attractive, but won't be enough; we need a root-and-branch review. As for his benefit reforms, the idea of topping-up the pay of people leaving benefits for a job, so that work actually pays, as previewed in this column two weeks ago, is the best idea in this field for a generation. It will cost just shy of £4bn a year; a lot of cash in a fiscal crisis. It's going to be very difficult for IDS to get the money out of the Treasury – although David Laws is, I believe, quite sympathetic towards the scheme – but it has to be found, not just for the hundreds of thousands it will help, but also from a party-politics view. It was the Tories who "parked", in IDS's phrase, millions on benefits in the 1980s and early 1990s. A too-dogmatic industrial policy – or de-industrial policy – and a couldn't-give-a-damn attitude scarred this nation. You see, the Tories stopped the heartbeat of the working class in the north and inner cities as part of otherwise necessary reforms; it is now down to them and the LibDems to resuscitate it.
Better news on store cards
It's rare that I get to spread good news, but here's some – store-card spending has fallen 33 per cent year on year.
These pernicious products, plugged by pushy salespeople, are a rank deal. Despite Bank of England rates at 0.5 per cent, they commonly charge close to 30 per cent interest. The Finance and Leasing Association, the trade body of the store-card industry, is less than pleased with the news of failing sales. It called last week for the Government urgently to review the legislation which sees interest rates capped and a cooling-off time of seven days on new agreements. In my view, an industry that doesn't accept the right of a consumer to have second thoughts is trying to pull a fast one.
But, you never know, with the new austerity, we could see the withering away of the whole store-card industry. Good. These cards have been ripping off the public for far too long.