This is the latest in a series of “controversial” bus adverts in London. There have been campaigns run by atheists telling Londoners that there is probably no God. Stonewall ran a campaign reminding telling people to get over the fact that some people are gay. If the banned advert was a simple religious message it probably wouldn’t have been banned.

Some have said that this amounts to an assault on freedom of speech. I say that is rubbish. Transport for London is a corporation. It is entirely within the corporation’s rights to decline to run an advertisement which does not fit in with that corporation’s perceived image. This is not a case of the state banning the circulation of a message, however unpleasant that message might be. The “ex-gay” movement has not been prevented from handing out leaflets in London or running a website. They have not been banned from renting advertising space elsewhere. Nobody is stopping anyone from standing on their soapbox in Hyde Park. It is a simple case of TfL taking the view that it does not wish to be a party to messages which many of its customers would find unpleasant.

The basic idea which underpins this position is this: an increase in the personal allowance benefits all taxpayers above the old threshold. Those who earn more pay tax higher up the scale benefit more from the increase in the allowance because more of their income falls liable to income tax. Therefore for several years now when Chancellors have reduced income taxes at the lower end of the scale they have reduced the thresholds for paying higher rates to ensure that higher earners don’t benefit as much as lower earners. I think Gordon Brown introduced it but I am prepared to be corrected.

Even as someone who would embrace lower taxes and lower state spending overall, it’s hard to moan from a moral or ideological stand point about a tax change which benefits lower earners more than higher earners. Those of us in the middle aren’t very affected. One tweet I saw stated that those above £40k will make an overall gain from George Osborne’s changes of £42.50 a year.

The reason this is interesting is because of what Nigel Lawson did in the late 1980s. When he reduced the top rate of income tax to 40p, not only did the amount raised by income tax increase hugely, but the proportion of income tax raised from the richer end of the scale increased hugely. Income tax got more progressive as a result of cutting the rate. The “rich” suddenly became more responsible for funding state expenditure than they had before.

Some of New Europe went several steps further than this in the 1990s. Several countries went for flat tax regimes and saw their economies multiply. There has been a healthy flat tax lobby in the UK ever since. The challenge for any UK flat taxer is devising a scheme which doesn’t involve huge tax cuts for “the rich” without anything corresponding for “the poor”. The economics might make sense but the politics never would in the absence of a political revolution of the scale seen in Eastern Europe in the early 1990s.

But this is where Laffer economics comes in. Laffer states that there will be a revenue-maximising rate of income taxation. Above that rate, taking avoiding action or changing one’s lifestyle or plain old breaking the law becomes more attractive to those on high incomes. A Treasury report which I can’t be bothered to find right now showed that the civil service in the dying days of Gordon Brown’s government reckoned that beyond about 45p in the pound, the financially successful would start to reduce their exposure to UK income tax. Which is what makes the debate around the 50p rate so stupid. It was estimated to be a money loser before it was even introduced.

So what we seem to have here is a pincer: the highest rate of income tax set to the revenue-maximising level. The middle (“higher”) rate thresholds fiddled with and the lowest rate threshold increased to take people out of income tax altogether. The trend is clear: the UK is heading towards a flat income tax.

This is in my mind a step in the right direction. A big tax free allowance and a revenue-maximising marginal rate seems like a sensible way to raise a chunk of the money the state spends on providing the services that so many voters demand. But of course income tax is not the whole story. Maybe a future Chancellor will have the stones to touch the third rail of UK taxation: National Insurance.

But when we’re shoe-horned into paying much more money to keep our neighbours warm and fed we get shouted at for being non-compassionate if we even mention the words “shellsuit” or – shock! horror! – “chav”. We get told by the bleeding-heart hand-wringers that if we don’t give at least half our income to the worse off then we are sick selfish rich bastards.

I’ve got an idea.

Instead of running an entitlement-based welfare system where Parliament decides the rules and then makes up taxes to pay for it, how about a sponsorship system. The system should match up contributors and recipients in, say, a local area and provide information for the sponsor. The sponsor would get to see how the people he/she is funding are getting on and the sponsored might be encouraged to persuade the sponsor that he/she is getting value for money. Sponsors might even want to give advice to their mentorees to help them get on in life.

Those wanting to receive money from benefactors should have to provide certain information in return for their money: what is the money going on, how are the children getting on at school, how is the job hunt going?

If all this sounds quite intrusive to you then that is the idea. It’s about time the relatively small number of people who pay for the huge all-encompassing welfare machine got a little bit of influence on it.

Exclusive: here is what George Osborne will not say in the Budget in a few weeks time:

Many of my Conservative colleagues and many outside this House would love me to abolish the 50% income tax rate on those who earn at least £150k. However my LibDem colleagues believe, and the Coalition Agreement confirms that any reductions in taxes should benefit the lowest-paid. Further, my friend on the Opposition bench Mr Ed Balls will tell you that cutting taxes on the lowest-paid boosts the economy more quickly than cutting taxes on the rich because the poor spend more of their money than the rich do.

Therefore I am replacing all the income tax rates and both forms of National Insurance with a single rate of income tax. The rate will be 50% payable on all income earned above £15,000 a year.

Corporation tax and the tax on UK capital gains will also rise to 50%. The rise in corporation tax is offset by the removal of employers’ National Insurance “contributions” and VAT and leaves Britain in a very favourable competitive position.

The capital gains tax exemption for owner-occupiers will be abolished. All other income tax and company tax exemptions and tax breaks will be abolished from today. However, capital gains tax will reduce according to the length of time that assets are held. Gains on assets held for seven years or more will be zero rated for capital gains tax.

Stamp duty is abolished from today.

Inheritance tax is abolished from today.

VAT is abolished from today.

Fuel and booze duties will increase to offset the removal of VAT. Booze duty will be charged at a single amount per unit of alcohol.

All renewable energy subsidies will be phased out over two years. They will be replaced by a straightforward tax on carbon emissions. The tax will rise at inflation plus 5% every year. All goods imported into the UK will be subject to the same carbon tax rate based on estimates of the carbon emissions required for their manufacture and transport to the UK.

Over the next five years the central government grant to local authorities will be cut to zero. To replace these revenues local authorities will be given the proceeds of business rates raised in their authority area and within two years a new set of Council Tax bands will be introduced to enable local authorities to charge more to the residents of expensive properties. Each year as the local authority grant is cut, so shall the flat rate of income, corporation and capital gains tax.

This Budget is broadly revenue neutral. However the savings arising from a massive simplification will boost the economy at a critical time. Further, businesses and individuals will save a fortune in accountancy and legal fees. As the economy returns to growth and the deficit closes there will be scope to reduce the 50% flat rate.

I commend this very short and straightforward Budget to the House.

2011 has been, to steal a friend’s phrase a “year of the cutback”. I set myself an extremely tough target to reduce the burden of debt from my spreadsheet. Remarkably, I haven’t missed it by much. Contemplating my calculator at lunchtime another target suddenly appears in reach. If I carried on being a tight bastard for another year then by the end of 2012 I could have a nice round number in my bank account.

But, stealing another friend’s phrase, isn’t this all rather a case of “numbers on a screen”? I sometimes fear that by concentrating so hard on being sensible I will wake up one day with a decent bank balance regretting that I have not enjoyed myself very much. It could be even worse: I might have chipped away at the mortgage, be feeling financially more confident and independent and then get hit by a proverbial bus. It could be even worse: I might financially bore myself to an early grave.

I was doing some back of the envelope calculations and worked out that I could give myself enough pocket money each month to do the sorts of things I like doing, but then realised that I hadn’t included a holiday in 2012. A year without a holiday? Rubbish! Another year with my ancient laptop? I’ll be lucky. Then I remembered the plan is already off course because a fat bill from my freeholder is due thanks to some electrical work which is to start any minute. And what if my income changes for whatever reason? Would I feel dependent on having a lodger when, quite honestly, I would rather have the place to myself? And with no space in the budget for home improvements I might be living on my own in a miserable slum before the year is out. And all these issues built on the very flimsy premise that we all get through the year without a major financial or economic apocalypse.

No.

No.

No.

The plan for 2012: to have no plan for 2012.

Happy New Year!

No burning issues and little time to spare before the big day, so I am taking this opportunity to wish my readers a Merry Christmas. Thank you for making this an enjoyable pursuit over the last twelve months!

Midday: I’ve made the dough and it looks plausible, it took about half an hour from raw materials

13.45: It looks less impressive after having the air knocked out of it

14.20: I fear this may not have risen enough but it’s about to go in the oven anyway

15.15: the finished product! I think five minutes overdone to be frank, the crust is *very* crusty. Tastes wonderful though!