After the pre-budget report last week, the Institute for Fiscal Studies gave a briefing at which it said that the decision to create a new 45% top rate of income tax would raise "approximately nothing". Now it seems to have gone even further. It has just published its full report on the distributional effects of the PBR, and it says the new rate could even cost the Treasury money.

The Treasury says the new rate, for people earning more than £150,000, plus changes in personal tax allowances for those earning more than £100,000, will raise £1.6bn every year. But, partly for reasons to do with "taxable income elasticity" – ie the notion that the rich stop paying once tax levels reach a certain point – the IFS is very sceptical about this.

There are also considerable uncertainties in forecasting the underlying pre-tax incomes of the very rich in 2011-12 given that the latest micro-data available on the incomes of the very rich dates from 2005-06, and given that recent analysis showed a close relationship between income growth amongst the very rich and the performance of the stock market, which has been extremely volatile in recent months. These issues, combined with the uncertainty over how very rich adults will respond to higher marginal tax rates, must surely mean that the HM Treasury's estimated revenue yield of £1.6bn a year is subject to an extremely wide margin of error, and the possibility must exist that the measure could lose the government income tax revenue.

You can read the full report here.

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Peter Hain, the former cabinet minister, will not be prosecuted over his failure to declare donations to his failed bid for the Labour deputy leadership on time, it was announced today.

The Crown Prosecution Service issued a statement saying that Hain would not be prosecuted over the proper registration of donations worth £103,000 because he was not in charge of fundraising for the campaign.

Hain, who has always insisted that there was no intention to conceal the donations and that the failure to register on time was the result of chaotic organisation, welcomed the announcement, saying he was "pleased" to be able to clear his name.

The CPS also said that no one else would be prosecuted in connection with the allegations.

In an article for Comment is free published shortly after the CPS made its statement, Hain criticised the Electoral Commission – the body that reported him to the police – for acting in a "politically unworldly, incompetent and inconsistent" way.

He said it was unfair that he was reported to the police when other MPs declaring donations late, including up to seven years past the deadline, had not had been referred to the police in the same way.

He called for "wholesale reform" of party funding legislation, going well beyond what the government was already planning in its "unsatisfactory" bill on political parties.

And he even criticised the Labour party, saying that it was "absurd" that all the deputy leadership candidates had to send their literature to party members separately when it would have been far cheaper to include all leaflets in a single mailing.

Hain, who was a government minister from 1997 until his resignation in January, also indicated today that he would like to return to frontbench politics. Gordon Brown hinted this afternoon that this could happen when his political spokesman welcomed the news that Hain had been cleared, adding: "Peter has been a great servant of the Labour party and has much to offer in the future."

Hain was brought down by legislation introduced by the Labour party forcing parties and individuals to declare the source of political donations. He received donations in 2007 when he ran unsuccessfully for Labour's deputy leadership, coming fifth out of six.

Under the Political Parties, Elections and Referendums Act 2000, donations have to be declared within 60 days. Hain declared donations worth £77,000 on time. But it subsequently emerged that further donations worth more than £100,000 had not been declared within the time limit.

In the past the Electoral Commission, which is in charge of enforcing the rules relating to political donations, has accepted late registrations from parties and individuals without taking any further action. But it decided to refer the Hain case to the police because the sums involved were much larger than in any previous cases. Hain resigned as soon as he heard that the police were being asked to investigate.

In a statement, Stephen O'Doherty, of the CPS special crime division, said prosecutors could not prove Hain handled the unreported donations.

He said: "Although Mr Hain did not report all regulated donations to the Electoral Commission within the 30 days stipulated by the Political Parties, Elections and Referendums Act 2000 (PPERA), in order to prove a criminal breach of the act, the crown must first prove that Mr Hain held the position of either a 'regulated donee' or, if operating via a 'members association' he was the 'person responsible for dealing with donations to the association'.

"The evidence in this case shows that Mr Hain's campaign was run through an organisation named 'Hain4Labour' which was made up of members of the Labour party.

"That organisation had its own bank account and the funds for Mr Hain's campaign were solicited for that account and cheques donated were made out to that account.

"Those were all characteristics of a 'members association' as defined in the Act. Mr Hain was not a signatory to that account and did not direct where funds should be spent."

O'Doherty said it was impossible to identify anyone who was responsible for dealing with donations to the associations. As a result, he said he was advising the police to take no further action.

The Electoral Commission said today it would be reviewing the decision. It said there needed to be "certainty" as to who was responsible for reporting donations and that it would be considering whether it needed to recommend any changes to the law.

Hain has also said that he believes the law needs to be changed because of the inconsistencies in the way the regulations are enforced and to prevent the police being involved where there is no evidence of any intention to break the law.

In a statement today, Hain said: "I chose to leave government to clear my name and I am pleased I have now done so.

"I said all along that reporting some of the donations to my 2007 Labour party deputy leader campaign late was an honest mistake. Now everyone knows that it was.

"After 10 months in limbo while the inquiry took its course, I now look forward to tackling again the issues of social justice, human rights and equality as I have done for all 40 years of my political life, both outside and inside government, from anti-apartheid protester to cabinet minister."

Following his resignation, Hain kept a low profile politically for some months. But for most of his life Hain has been a hyperactive campaigner and recently he has started to speak out again on issues such as welfare and Zimbabwe.

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Peter Hain is a hyperactive campaigner. Today he learned that he will not be prosecuted for breaking electoral law. But whereas other politicians in that situation might have settled for a quiet celebration, Hain has responded this morning with an angry article for Comment is free calling for a comprehensive overhaul of the way party-political funding is regulated.

Hain saves his sharpest criticism for the Electoral Commission ("politically unworldly, incompetent and inconsistent"). But he's also not shy about telling the government and the Labour party where he thinks they've gone wrong too. It's a typical response from someone who has spent all his life campaigning for change.

Hain, 57, was born in Kenya but grew up in South Africa, the son of radical parents who were both jailed in 1961 and, later, became the first couple to be banned by the apartheid regime.

His mother Adelaine took food to the young Nelson Mandela in prison. Hain was 15 when he made a speech at the funeral of an activist hanged for bombing a railway station. A year later, he arrived in London with his parents after they were forced to leave South Africa.

His campaign against tours by the South African tennis, rugby and (successfully) cricket sides shot him to national prominence and made him a prominent target of the regime's security services. "Peter Hain may go down in history as the man who made apartheid a national issue in Britain, though at the moment he is being careful not to parade his triumph," the Guardian recorded in May 1970.

He received a letter bomb in 1972, and was framed by the South African secret police, Boss, for robbing a bank in 1975, for which he was acquitted after an Old Bailey trial. Inside and outside parliament he continued to campaign against apartheid and, when the regime fell, was able to enjoy the political capital gained from his family links to Mandela.

His mother was honoured with an 80th birthday party last year at South Africa House. The degree to which Hain traded on his opposition to apartheid became an issue inside and outside his campaign to become Labour's deputy leader last year. "Some of his people wanted him to say he ended apartheid," one supporter complained this month. Hain wasn't shy of mentioning South Africa during campaign speeches but others felt he could have exploited it more if he had chosen.

Arriving in Britain during Harold Wilson's Labour premiership, Hain opted for the Liberals, becoming a member and then chair of the Young Liberals, then a radical, dynamic group that contrasted with the party's moribund leadership. In 1977 he switched to Labour, encouraged by Neil Kinnock, and for years shared a similar spot inside the party, as a radical, almost romantic figure on the soft left - a member of the Tribune group and a critic of Militant.

A prolific author, he was close to Robin Cook, but he had a fractious relationship with Kinnock when he became Labour leader. And those years in the Young Liberals made many rank-and-file MPs, particularly in the north, suspicious of him. While Hain contested Putney, in south-west London, twice during the 1980s it was not until the Neath byelection in 1991 that he became an MP.

In the early years of Tony Blair's leadership he was not close to him and was a public critic of Peter Mandelson. But he joined the frontbench in 1996 and became a junior Welsh minister in 1997, where he led Blair's unsavoury campaign against Rhodri Morgan for the leadership of the Welsh party. He became a Foreign Office minister in 1999 and was switched to energy minister in 2001, when his anti-nuclear past was less of an issue than it would be now.

A year as minister for Europe followed where he was an enthusiast for Britain joining the single currency, and in 2002, in a mini-reshuffle caused by Estelle Morris's resignation, he joined the cabinet as Welsh secretary, promising to bring the spirit of Nye Bevan to the post. He held that job until he resigned in January, sharing it from 2003 with the posts of leader of the Commons (2003-05), Northern Ireland secretary (2005-07) and work and pensions (2007-08).

In Wales, he stemmed the Plaid tide. Blair gave him licence to speak out across the board, but sometimes slapped him down, for instance over his call for the rich to pay more tax (a proposal that has now become government policy).

Last year he had an angry row with John Reid over proposals to extend stop-and-search powers, which he described as a "recruiting ground for extremism". But Hain was regarded as a minister who could score political runs: he helped restore power-sharing to Northern Ireland, where his South African pedigree earned Republican respect and where he encouraged unionists to settle by using his executive power to issue a host of leftish proclamations and directives, for instance on scrapping the 11-plus and introducing new water rates.

Hain was the most visible early runner to succeed John Prescott as Labour's deputy leader but his campaign misfired. Most Welsh MPs backed him but he struggled to extend his reach beyond them. His dry, self-deprecating sense of humour was visible only in patches. He allowed himself to be outflanked on the left by both Jon Cruddas and - unexpectedly - Harriet Harman.

The revelations about his failure to declare donations started to come out at the end of last year. They caused surprise at Westminster, not least because Hain had always been seen as a formidable organiser. But, while Hain was running for the deputy leadership, he was also in charge of Northern Ireland at a time when talks to get the executive up and running were at a crucial stage, as well as looking after Wales, and it is obvious that something went badly wrong with the way the campaign finances were being managed. Hain was never accused, even by his enemies, of intending to conceal the donations.

Hain has indicated he would like to return to frontline politics. He was never politically close to Gordon Brown. But, in his letter to Hain when Hain resigned, Brown said his colleague had "always played an active role in politics" and that he was sure he would "continue to contribute to public life in the future". Hain now has the chance to do so with his reputation cleared.

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Buried away on today's Guardian letters page is one of those short-and-to-the-point protests from a reader. If so many journalists who spoke to Karen Matthews and her dysfunctional family failed to rumble the fake kidnapping of nine-year-old Shannon, perhaps they will now be less judgmental about social workers who make similar mistakes, suggests Richard Moore of Bletchley.

Good point. Fat chance. Since her conviction yesterday of kidnapping Shannon to obtain a reward they hoped would be as much as £50,000, "Heartbreak Mum" Karen Matthews has been recast as "pure evil" across the Sun's front page this morning.

But everyone has piled in with grim features about dysfunctional families on sink estates like Dewsbury's Moorside where the extended Matthews clan lived, all representative of "Breakdown Britain".

Social workers are again in the frame for not sorting them out sooner; the coppers too – they should have smelled a rat. One outraged neighbour told reporters she had complained to council officials as often as three times in six years. Well, well, duty done.

Publicist and self-styled Robin Hood Max Clifford, who trades in promoting or suppressing stories of varying quality to the tabloids, was duly wheeled on to Radio 4's Today programme, along with Graham Dudman, the managing editor of the Sun, which offered a £50,000 reward to anyone who could find Shannon. Not being bishops or elected politicians they were treated with due respect by John Humphrys, who keeps a pair of kid gloves in the drawer for special occasions.

The pair of them agreed that we're looking at "human nature" here and that society has changed in recent years. People now understand that the media makes money out of "stories" and they might as well get their share – that seemed to be the general drift.

There was nothing about the role of the media in either modifying or accentuating weaker aspects of human behaviour, as distinct from human nature, which we know all about, thanks.

Yet few sentient readers could deny that most British media is coarser, more cynical and more raucous than it was when Rupert Murdoch bought and "revitalised" the dying Sun in 1968. It's not all the Sun's fault, of course. We have all contributed to crude commercialism, money/celebrity culture and lax social morality, which all help drown the poor and inadequate on sink estates – but usually not the well-off or well-educated.

Dudman's line was that the Madeleine McCann kidnapping had been generating vast publicity for months, that no one was interested in the fate of little Shannon, the wrong kind of kid, except the Sun – "we felt good about it" – which eventually put up the prize money.

Kate and Gerry McCann, were a good-looking pair of middle-class doctors, you see, on holiday in Portugal, not on benefit in Dewsbury. So the Sun's position is basically what might be called the Michael Martin defence: they're picking on us because we're poor.

Class is always relevant, but only in mitigation: plenty of people in Dewsbury are poor, but honest. In any case, the tabloids spend a lot of time and effort exploiting the misery of their poor readers – I think that's part of Max Clifford's point.

There won't be any inquests about how the media got Karen Matthews so wrong – because there never is. If they did get her wrong, I suppose. It's always possible that concerns about her story were privately shared with the police, as they were so helpfully in the McCann case, where the bereaved couple – and a local ex-pat – were put in the frame by several of the same perceptive newspapers.

Why does it matter to me? It's not my problem. Actually, no: Karen Matthews is our problem, all of us. And because most aspects of modern public life are put through the same media food processor with similarly inaccurate and unsavoury results … football managers and film stars, politicians and businessmen, social workers, trade unionists and police officers, the Archbishop of Canterbury and the Speaker of the House of Commons.

Plenty of them deserve at least some of the mud thrown at them some of the time – but not as much as they get and not from a pack that can't tell a Karen Matthews from a Kate McCann. Next time you read of someone in the stocks – tomorrow, I imagine – remember Richard Moore's excellent suggestion.

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