Financial reform at heart of new coaltion government agenda

Wednesday, 12 May 2010 03:36

By Matthew West

The Liberal Conservative coalition government intends to make financial reform one of its highest priorities it was revealed today.

The details of the negotiations between the Liberal Democrats and the Conservatives were released on Wednesday with David Cameron calling the policy agreements that had been put in place evidence of a strong stable government that would last.

The prime minister said his meetings with the Lib Dem leader - and now his deputy prime minister - Nick Clegg in the days in the run up to last night's historic agreement had shown that the two leaders had been able to broker a five year deal and had been able "to take the difficult decisions in the long terms interests of the country".

"We had a meeting about confidence and supply and we both thought 'this is so uninspiring' it might last 6 months or a year but it was not what we came into politics to achieve," Mr Cameron said.

In terms of the financial decisions that face the country the coalition government will take steps to reduce the structural deficit by curbing public spending this year rather than wait until 2011 as had been proposed by Labour. There would then be further cost cutting measures throughout the life of the parliament to reduce the deficit.

There will be an emergency Budget within 50 days, which should mean an emergency Budget in the House of Commons on the 30th June or 1st July, if not before.

The Coalition government also announced:

The introduction of a Banking Levy.

Plans to gradually increase the income tax threshold from £6475 to £10,000 over the life of the next parliament, starting with an increase at the start of the next tax year in April 2011. The increase will, in part, be paid for by the Conservatives rolling back on their election promise to raise the threshold of the employee part in National Insurance. But it will also be paid for by an increase in Capital Gains Tax for non-business assets. The tax threshold increase will also be paid for by revenue collected through Inheritance Tax, another Tory proposal they have had to drop, and through a new per plane rather than per passenger air traffic duty.

The introduction of detailed proposals to tackle unacceptable bank bonuses - although specifics were light in this area.

The establishment of a commission to investigate the possibility of separating the retail banking and investment banking industries with a time frame of one year for the commission to report back to the government with proposals.

Handing power of the financial services to the Bank of England. In the statement this is described as proposals: "To give the Bank of England control of macro-prudential and oversight of micro prudential regulation" but the proposal effectively kills off the Financial Services Authority.

There were proposals to increase the state pension age to 66 although this will not come into force until 2016 for men and 2020 for women.

The rules requiring those over the age of 75 to buy an annuity will also be abolished.

And most for that suffered financial loss as part of the collapse of Equitable Life a decade ago the government will fully implement the recommendations of the parliamentary and health ombudsman in order to make fair and transparent payments to policy holders.

Home Information Packs are also to be scrapped.

Reductions will also be made to Child Trust Funds and Child Tax Credits for high earners although again no specifics as yet on the earning threshold here.

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