Dear Listener

I know it will come as a shock. But I have decided to reveal that for more than the last decade I have been resident, ordinarily resident, and domiciled in the UK for tax purposes. Yes, I am a UK taxpayer. So it is very important to me to know that I can rely on what the Chancellor says in his annual Budget speech.

I always assumed I could. But one listener emailed me to suggest the opposite. Bill Jones reminded me that in the 2007 Budget Chancellor (as he then was) Gordon Brown told Parliament

“When we came to power, elderly citizens started to pay income tax when their income exceeded £5,200. Today no tax is paid before an income of £7,280. For those under 75, the tax free allowance will rise in three stages from £7,280 now to £8,990 in 2008, to £9,500 in 2010 and £9,770 in 2011, almost twice as much as in 1997. For those over 75, the tax free allowance will rise annually from £7,420 to by 2011 £10,000.”

But Bill pointed out that in the Pre-Budget Report on 9 December 2009 Chancellor Alistair Darling (as he now is) said the tax allowance for people aged 65-74 would be frozen in 2010/11 at the 2009/10 level of £9,490. So it is £10 short of the £9,500 promised in the 2007 Budget by the Chancellor. Bill also felt that the commitment to the over 75s that their ‘tax free allowance will rise annually’ had not been kept either. That allowance was also frozen in 2010/11 at the same level as 2009/10. So it won’t ‘rise annually’ in the coming year.

I put these points to the Treasury. I was told that I had to distinguish in what the Chancellor said between ‘commitments’ and general statements based on the economic forecasts of the time.  The commitment in these figures was to make the tax-free allowance for the over 75s up to £10,000 by 2011/12. That commitment would be kept. The other figures were merely illustrations of where the allowances would be assuming they rose each year in line with the predicted levels of inflation set out in the Budget Report. At the time the rate of RPI inflation was predicted to be 2.75% and that would indeed have led to the figures given by the Chancellor. Except the £10,000 for the over 75s by 2011. The forecasts would have made that £9,930. So the commitment amounted to an extra £70 a year. Worth £14 to a basic rate taxpayer. I wonder why he didn’t put it like that?

So when the Chancellor stands up in the next few weeks to deliver his pre-Election Budget remember that a lot of the figures he gives are not commitments. Just hopes based on economic predictions. Which may turn out to be wrong.

IN THIS WEEK’S WAITING-FOR-THE-BUDGET-DATE-TO-BE-ANNOUNCED MONEY BOX

Pensions – the clock is ticking. The cliff edge approaches. And I’ve run out of metaphors. From April 6th there are major changes in the state pension which will affect everyone who reaches pension age from that date. But not anyone who reaches pension age before it. Except that they will get less than they would have done had they been born later. And some of them are very cross. We will be explaining the facts and the choices or hopefully putting some of the problems to Angela Eagle the Minister for Pensions and the Ageing Society.

Talking of clocks and deadlines the ISA season is not so much hotting up as sizzling. We look at ISA truths, tricks, and travesties as the banks and building societies compete for the chance to pay us less than the rate of inflation (taxfree) on our spare cash.

If your taste runs to investment rather than saving then can you resist the lure of China? A man who has consistently made money for his investors – not quite year in year out but close – wants us to put our money into his new Fidelity China Special Situations Fund. The word ‘Fidelity’ gives us the clue – this is the de-retirement of its legendary fund manager Anthony Bolton who stopped running his famous fund in 2007. But why is he charging investors so much to ride the dragon’s tail with him?

Adults manage their money so badly that it is essential to teach children about personal finance while they are at school. So says the man the BBC website describes as ‘grime vocalist Tinchy Stryder’, a 22 year old rapper who is fronting the Government’s latest plan to teach personal finance in schools. This week his music makes that crucial move from 6 Music to Radio 4.

And – well you’ll have to wait and hear. The rest is fluid as stories pop out of the quantum field only to disappear in a picosecond. Find out by listening just after noon on Saturday, or nine pm on Sunday, or on the website www.bbc.co.uk/moneybox at any time. There you can also watch videos, follow up items, read web pieces, download transcripts, follow links, and send us stories or ideas you want us to look into. And of course Have Your Say on teaching personal finance to children.

Best wishes,

Paul

PS Don’t forget the programme preview on Breakfast BBC 1 soon after 0845 on Saturday.

e-mail Paul Lewis