Dear Listener

MONEYBOX SATURDAY 28 JANUARY 2012

Dear Listener (skip to *** to miss out the chatter)

Raise the personal tax allowance to £10,000 sooner than 2015/16. That was the call from the country’s second-in-command this week. Deputy PM Nick Clegg said in a well trailed speech that he wanted his Government to go “further and faster” on achieving that goal.

The allowance will go up to £8,105 in 2012/13 anyway. So to get to £10,000 faster than the Coalition Agreement (which has committed to doing it by the end of this Parliament) it would have to be raised to that amount in 2013/14 or 2014/15 at the latest.

Raising it to that level would mean no-one paid tax if their income was £10,000 or less – which is about 30 hours work a week on minimum wage. And if that allowance began in 2013/14 basic rate taxpayers earning more than that would save £379 on their annual tax bill – about £7.29 a week.

The cost could be as high as £10 billion (If that seems high remember there are 30 million income tax payers). That cost could be cut by freezing the threshold for paying higher rate tax at £42,475 again. That would cut the net cost to about £7.5 billion more than just raising the allowance in line with inflation.

So where would that money come from? Mr Clegg was slightly vaguer about that but suggested there was scope to take more tax off the rich – without raising the marginal rate they paid – by closing loopholes and taxing unearned wealth and income. He also made it clear that the extra cost would not be paid by borrowing more – he was as committed as ever to the Government’s deficit reduction plan.

We will have to wait until the Budget on 21 March to see if Chancellor George Osborne – currently away in Davos at the World Economic Forum – will act on his colleague’s advice.

Full details of what the change will save individuals and cost the Treasury are in my blog www.paullewismoney.blogspot.com/2012/01/cleggs-pitch-introduction-deputy-prime.html and Nick Clegg’s speech is here www.dpm.cabinetoffice.gov.uk/news/deputy-prime-ministers-speech-supporting-working-families

***IN MONEY BOX THIS WEEK***

A major bank is withdrawing charity credit cards which have raised millions of pounds for good causes – we ask ‘why’. But will the bank (OK I’ll tell you – it is HBOS) answer?

Astonishing figures about how many people needlessly use a claims management company to make the simplest claims for compensation after paying payment protection insurance. Is there ever any need to use one?

An insurance company refuses to pay for the damage to a customer’s car in an accident that was not his fault (the car was parked outside his house). The insurer (oh all right then it’s Axa) refused to pay out on his comprehensive policy on grounds that in the past the car had been written off. Why don’t insurers check a vehicle’s history before accepting the insurance premiums?

Share prices on the London stock markets tumbled last year though they are recovering now. So should investors concentrate on dividends? What return can you get? What research should you do to find the best deals? What should you beware of?

National Savings & Investments cuts the interest rate on its direct saver account from a not very good 1.75% to an even worse 1.5%, saying it has been getting too much money paid into it recently and it wants to discourage wealthy savers depositing large amounts.

It’s always a challenge to squeeze five items into our 24 minutes of Radio 4. Find out how the magic works on Saturday at midday, repeated Sunday at 9pm. Or of course online anytime www.bbc.co.uk/podcasts/series/moneybox - or download the top audio business podcast (ours) through iTunes.

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Renting and letting is the topic on Money Box Live with Vincent Duggleby (it’s my month off) on Wednesday at 3pm. Call with your question after 1pm on Wednesday 1st February on 03700 100 444 or email through the website when the programme page is up later today. Or of course just listen.

Best wishes,

Paul

PS. I will be on Breakfast on BBC One around 0845 on Saturday with a programme trail and back on Breakfast later in the week, probably on Thursday and usually around 0640 and 0820 talking about a money story and answering emails and tweets. But the time, and occasionally the day, can vary.

e-mail Paul Lewis