Dear Listener

You may not have heard of the Mirrlees Review. But believe me you will. In September it will publish its report on making our ragbag system of taxation more rational. It will set out how we can strip away decades of short-term political expediency from what is, for most of us, our main financial contact with the state – how much it takes of the money we earn or make or spend or inherit.

The Review has been set up by the Institute for Fiscal Studies – perhaps the one economic think tank which is respected and quoted by all main political parties. And it consists of people whose interest is in tax not politics. And rational debate not, well, politics again.

So judging any tax changes in Tuesday’s budget against Mirrlees’ preliminary thoughts on how tax should be reformed will be interesting. For example, it thinks Capital Gains Tax should be aligned with income tax and the separate £10,100 CGT annual allowance should, logically, disappear. CGT should not distinguish between business and non-business assets but it should be index-linked so only real gains are taxed.

The review also prefers removing the numerous exemptions from VAT – which cost around £30 billion a year – to raising the standard rate which simply increases the gap between the zero rate and the full rate and makes future reform more difficult. There are lots more ideas and it is all much more complicated than that (it is tax after all). But its preliminary thoughts do give us some interesting benchmarks to judge George Osborne’s Tuesday debut as Chancellor. For more (a lot more) see http://www.ifs.org.uk/docs/johnson2010.pdf

Poor Hector Sants. The Chief Executive of the soon-to-be-dismantled Financial Services Authority was looking forward to six months leave on full pay when he resigned in July. Senior staff who leave the regulator are not allowed to work for anyone else for six months. So they get paid to do nothing until that time is over. I have reported here before on these generous deals – for example Chief Operating Officer David Kenmir left in March 2009 with total pay that year of £800,000. See  http://www.paullewis.co.uk/archive/MoneyBoxNews/2009/20090626.htm.

Hector Sants was paid £742,000 in 2009/10. So when he announced earlier this year that he would leave in July he could expect to be in line for well over £350,000 for a six month holiday. But now he has been persuaded to stay on at the FSA until it is broken up in 2012. So he will have to work for his money this year after all.

But there could be more pain ahead. In 2012 he will become the chief executive of the new Prudential Regulatory Authority (PRA) which will take over the FSA’s work in making sure the banks and other key financial companies don’t behave so foolishly that they threaten to bring down the entire financial system on which we all rely. The PRA will be a subsidiary of the Bank of England and Hector Sants will become a deputy governor of the Bank in order to run it. At the moment the two existing Deputy Governors each get £252,497 a year and no bonuses. If those rates persist he could be facing a two thirds cut in his pay. Watch this space.

***IN MONEY BOX THIS WEEK…

**We explore the other side of dismantling the FSA. How will the new Consumer Protection and Markets Agency work? Will it protect consumers better than its predecessor did? Or be much the same under a different name?

**How do you make sure your plastic will work once you leave the UK? Different banks have different policies about blocking cards when they are used abroad. And that has been causing problems for some of our listeners.

**With just one full working day between now and Tuesday’s Budget is there time – and is there any point – in taking emergency action to avoid its consequences?

**With little pomp and circumstance the £20 note with the image of Sir Edward Elgar is fading out by the end of the month. So what can you do with the old notes once they can no longer be used to pay for stuff?

**And there is still time to suggest where the Osborne Axe should fall. The Chancellor has asked the public for its ideas on where the government can save money. And you can let us know your thoughts on what he should cut. We will do a round up of them in the future.

That’s our hope. Other things may happen. Some may drop out. Find out what makes it and what doesn’t by listening to Money Box at noon on Saturday, at nine pm on Sunday, or at any time on the website bbc.co.uk/moneybox. 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 Have Your Say on your experiences of having your credit or debit card blocked abroad.

Best wishes,

Paul

PS don’t forget the programme trail on Breakfast on BBC 1 between 0845 and 0900 on Saturday.

e-mail Paul Lewis