You may be interested in an article of mine at the Cobden Centre website. Received wisdom is that governments should try to ameliorate the impact of the economic crisis by setting interest rates artificially low and penalising prudence. The article contains a suggestion of how to explain why received wisdom is wrong.
Be wary of strong drink. It can make you shoot at tax collectors... and miss. (Robert Heinlein)
When there's a single thief, it's robbery. When there are a thousand thieves, it's taxation. (Vanya Cohen)
It was a miserable budget. Lots of people got screwed. The main ones will be picked up by the commentariat. Let me add to that list a group who many might imagine had done quite well: renewable developers.
But didn't Darling throw lots of money at renewables?
Well, sort of.
The headline was £525 million "uplift in support for offshore wind investments" that "is expected to support £9 billion of investment and power up to 2.8 million homes". Pretty generous, right?
The way this money will be delivered is by "banding up" offshore wind under the Renewables Obligation (RO). Therein lies the rub.
Interesting post over at Bearwatch, on the recent purchase by the UK government of a huge quantity of US securities, and the risks to both the American currency, and to British reserves as a knock-on effect.
The time is drawing nearer and nearer where Tony will have to finally announce he is stepping down and the long, long awaiting "leadership contest" can finally begin. Since the Labour conference last year where Blair had them screaming in the aisles, this government has been completely paralysed and achieved next to nothing. As I have argued before, this is probably better than what they normally do, but it does beg the question what have we been paying for all these months?
The government is being urged to get VAT removed from school clothing - and quite right. It is the government that back schools having a uniform promoting the benefits of equality, i.e. no fancy Dans coming in with all the latest street wear, while the spotty kid with an interest in robots and computers gets bullied for wearing his older brother's hand me downs (it's not cool to be clever these days, in fact it's positively frowned upon; another feather in the cap of the famous line "Education, education, education").
The problem with this is kids come in all different sizes so even though VAT is waived for the under 14s, the fact that we have a nation of fat kids means that adults can fit in to much the same clothes as the kids - therefore it is done by size not age. I don't know whether to laugh or cry when I read that some shops were selling boys' blazers with a 52in chest and trousers with a 42in waist. Who breeds these monsters?! Of course, if the VAT was waived just for school uniforms by age, then it would be easy to enforce as you would assume (hope) that only a school kid who had to wear the uniform would buy it... All this does beg the question, should clothes be viable to VAT in the first place - I wouldn't call them a luxury, they are most definitely a necessity. The government is once again cashing in on things that we have no choice but to pay up for. As way of a point to prove it is a necessity, the last thing I want to see is a 14 year school boy with a 52in chest and 42 inch waist walking around in his birthday suit - a powerful argument to scrap VAT on clothes altogether, I'm sure you'll agree.
Forget about what the BBC, the Government or the Tories say about the impact of the changes to personal taxation and benefits announced by Gordon Brown today. Here is what it really means for people of working age (comparing the current system with the system as it will be in 2009, according to Gordon's announcements, taking 2009 because many of the announcements are delayed or staged).
- Those earning between around £5,000 and £18,000 p.a. get to keep less of their wages than before.
- Those earning over £18,000 keep more of their wages, with the greatest benefit (proportionately) going to those being paid in the £40,000s.
- Couples with one principal wage-earner continue to pay more tax than two-income couples on the same combined household income, thanks to his rejection of any form of joint or transferrable allowance.
- The negative impact on low-earners is to be compensated mostly through increases in the threshold for withdrawal of Working Tax Credits (WTC) and, for those with children, increasing the level of Child Benefit for the first child and of the child element of the Child Tax Credit. Those with one or two children will be best-insulated by these measures from the effects of the changes to income tax. Those on low incomes with many or no children will be the worst hit.
- To avoid these increases dragging too many more people into the means-tested benefits bureaucracy, the withdrawal rate for WTC has been increased to 39%. Because losing benefits has the same impact as paying more tax on a household's net income, this has further increased the effective marginal rates of taxation on poorer households. In some cases, marginal rates of taxation are now approaching 100% - in other words, you barely keep a few pennies of every extra pound that you earn. Marginal rates of taxation determine the incentive for people to work harder, longer or smarter to earn more money, so increases in marginal rates act as a disincentive to work. Gordon announced this change as "further strengthening the incentives to work for families with children and low-income working households". The precise opposite is the case. The disingenuity of this claim marks Gordon as either a knave or a fool.
The BBC's reporting of the Budget debate on Radio Five Live has been fantastically lop-sided. On the most basic measure - air time - they broadcast the whole of Gordon Brown's speech but cut off both David Cameron and Ming Campbell mid-flow.
Instead of hearing their words, we were given John Pienaar's conclusions to save us the bother of making up our own minds. DC had been "outmaneouvred", he was "like a man who had had his legs cut off from under him", he was "floundering" and "drowning", unable to respond to the "magic" of Brown's cut in the basic rate of income tax to 20%.
To be fair, Cameron had missed the main point - that the cut to 20% had been largely paid for by the replacement of the starting rate (10%) with the basic rate, which Brown disingenuously announced as the abolition of the starting rate - sounding as though tax on income within the 10% band would now be zero, rather than the 20% that is actually intended. This is dangerously close to deceiving the house, but it did seem to have done the job in deceiving DC.
Ming Campbell (whose Treasury team, headed by Vince Cable, have a real understanding of economics, unlike the Tories) was not taken in, and, in his earnestly dull but intelligent way, nailed the point - that the changes to income-tax rates benefited middle-income earners but penalised low-income earners. We were not allowed to hear much more of his speech (in many ways a blessing, but hardly balanced) before the BBC cut back in and Pienaar told us that Campbell must have "mis-read" the announcement, that the effect was not to penalise the poor. This is what we need from the BBC - insightful analysis of the impacts of the budget. So why has Campbell got that wrong, then, John? Because Gordon "would not do that", apparently. What insight!
No wonder the big beast of the political jungle has survived so long, when the elephant guns of the media have been aimed largely at his predators. How strong is the beast really, if he needs that sort of protection?
So what can we expect from Wednesday's budget, apart from Gordon Brown boring us all to tears? Well, the buzz word at the moment is green and it's an expensive word at that. It seems the biggest losers on Wednesday will be the evil folk that are deliberately going around doing their best to destroy planet earth - yes, I'm talking about you Mr Car Driver. Mr Brown does not care that you have not got a viable alternative to get to work unless you live in London - in fact the less viable the better. For if these green taxes actually worked the Treasury would be out of pocket, the car industry would collapse and cost of running over crowded trains would bankrupt the country.
With the budget coming up next week, it is that time of year where Gordon Brown lays it on thick that this country has never had it so good and that we have seen ten consecutive years of growth and he has been the longest serving chancellor in history and then he says something else, but I'm always asleep by this point. You would have thought that all this meant that we have more money in our pockets than ever before. Of course, things are not always what they seem.
The Centre for Policy Studies think tank has reported that we are virtually no better off than we were six years ago. In fact, in real terms, households have an extra £9 disposable income in our pockets. This is a growth rate of just 0.35 per cent a year - I bet Gordon doesn't bore us with that statistic next Wednesday. Tax lawyer Charlie Elphicke, who led the study, uses the example of Ronald Reagan when he asked the question in the 1980 US Presidential debates - "are you better off now than you were four years ago?" As Elphicke points out "For the average voter, the answer to Ronald Reagan's question is likely to be a resounding no." The report also concludes that the lowest income households in Britain are paying a higher share of tax - and receiving a lower share of benefits - than they were in 1996/7. The Treasury have countered the report with claims that disposable income has increased since 1997. For a government that came to power promising that income tax will not rise only for it raise just about every other tax possible and create a few more on top of that, it is hard to believe a word they say.
The attacks on Gordon Brown's high taxation, high spending polices are becoming more and more frequent on this website. It it not the intention of picking losers to target individuals nor is it partisan. However, it is of course more likely that attacks will be made towards the Government as they are the ones in power actually making and implementing policy. It is also not without good reason that this high level of scrutiny and criticism is directed at the Treasury at the moment. The International Monetary Fund share the view that Brown's policies are unsustainable and have issued a warning - one that Mr Brown will do well to heed.
You have to hand it to him, Gordon Brown is a highly successful opportunist. If it can be taxed, it will be taxed and the less people realise what he is doing the better. The Dour Scot is famed for stealth taxes but it's the way he makes the most of changing circumstances (and gets away with it, it seems) that is most impressive.
As we all know, house prices have been rising at an impressive rate over the past few years. However, the rate at which buyers pay stamp duty has barely moved. So a house that was free from stamp duty a few years ago, is now ripe for the Iron Chancellor's very large hands and deep pockets. A survey by the Halifax has revealed the extent of the problem. Nearly 300,000 purchases fell into the three per cent bracket last year as the number of properties sold above its £250,000 threshold soared. Their figures show that over the past five years there has been a 281 per cent rise in the number of home sales in England and Wales above the £250,000 threshold. Kaching!
He's at it again, our Chancellor, talking about Britishness. That is one paranoid Scot. Does he not realise that dissecting Britishness is profoundly unBritish, and that real Brits have the self-confidence in our culture not to need to define it endlessly? Has he not noticed that we've been pretty fond of some Scots even in recent times. If we don't like Gordon Brown as much as we liked Robin Cook or John Smith, or even as much as we like John Reid, Ming Campbell and Charlie Kennedy still, it is not because he is Scottish, but because he is Gordon.
It is one thing to be the pub bore on the subject. It is another to try to get sympathy by picking on others less fortunate than himself. Gordon thinks that "it is right to consider asking men and women seeking citizenship to undertake some community work in our country or something akin to that that introduces them to a wider range of institutions and people in our country prior to enjoying the benefits of citizenship". It's a garbled sentence expressing garbled thought.
What immigrants need as much, if not more than anyone, is to find a job and make a life. That is how they will fit into and contribute to our society. Why would we place on them a burden that is otherwise placed only on convicted petty criminals? What will that prove? How will that help them to adapt to a British way of life (other than the criminal British way of life)?
If we want a test by which we will judge whether an immigrant is fit to enjoy British citizenship, having held down a job for a sufficient period of time would be a much better test than having undertaken community work.
To coincide with Gordon Brown’s birthday last month, the prudent, iron chancellor made a surplus of £21.4bn thanks in part to a surge in income tax from record City bonuses. I can only imagine what he is planning to spend it on, but I’m sure he knows full well. With the incredible amount of money we are paying in taxes each month at the moment along with the seemingly endless list of stealth taxes we have to put up with, coupled with the waste this government is synonymous with how can he have a surplus of £21.4bn in one month. Surely he does not need to be collecting so many taxes?
Congratulations to the Gordon Brown who has claimed to have made a whopping £13.3bn a year efficiency savings across Whitehall. Fantastic headlines for our PM in waiting. Chief Secretary to the Treasury, Stephen Timms, has described the savings as “robust”… Cue alarm bells...
According to the National Audit Office, and I hate to break the news to you, but not all is what it seems at the Treasury. Auditors have claimed that nearly £10bn of these savings is open to question either because they could not be properly measured or because they are plain and simply wrong. No wonder tax payers' money is being wasted everyday - our chancellor can not even do his sums properly. Either that or someone is doing some very creative accounting…
What do you do if you are refused a loan for your struggling small business from the bank? Ask Gordon, of course. And why not – what do the banks know anyway? They only have decade upon decade’s worth of experience and expertise on who is sensible to loan to and who isn’t. Besides, as we all know, Mr Brown seems to have more money than he knows what to do with at the moment and what better way to
waste invest it than through the state funded small firms’ loan guarantee scheme? The figures speak for themselves - almost 35% of Government loans end in default compared to 4% of commercial loans to small businesses.
According to the official figures obtained by the Lib Dems, many information technology projects across government have overrun their initial budgets by more than £260 million over the last five years. The Department of the Environment Food and Rural (Defra) was the worst offender with the highest proportional overruns. Defra managed to run over budget by an average of 46 per cent with one scheme costing the department 72 per cent more than anticipated.The Department of Trade and Industry and the Department of Education had such poor management systems in place that they could not provide sufficient data. The Treasury itself overran by 7.3 per cent on its own projects.
The celebrations of 2012 days left to the London Olympic Games a few days ago were overshadowed by the publication of a critical Commons Committee report. MPs (mainly Labour) criticised the planners for poor management of the games' finances.
The cost of the delivery has increased from £2.4bn to 3.3bn. This is a result of the planners not thoroughly thinking through the budget before they submitted their bid. Now the government wants taxpayers to foot the bill.
Wat Tyler posted an entry on his excellent Burning Our Money blog, pointing out that yesterday's interest-rate hike was a positive sign that the Bank of England Monetary Policy Committee were deciding to get back on top of inflation, not a disaster for an economy, as it was reported by much of the mainstream press. As usual, Wat is quite right, but I questioned the final part of his post:
"this time through all those pensioners, widows and orphans who've invested their savings in fixed income debt such as government bonds will be protected. For the first time since we abandoned the Gold Standard....Let us all give thanks for sound money."
I questioned not whether an increase in interest rates is necessary, but whether it is sufficient. Is it sufficient, for the purposes of maintaining sound money, to target changes in inflation indices with interest-rate adjustments, or can those inflation indices be misleading? In particular, I questioned whether expansion of the money supply and net sale/consumption of capital could conspire to give the appearance of only modest inflation (according to price indices) when the real value of our money and national wealth was falling faster than the indices indicated.
The Times reports that tax inspectors are being offered bonuses related to the amount of money collected.
It seems that job satisfaction isn't enough - the respect of your fellow man, the pleasure of a job well done, the happiness brought to your customers. Nor is a decent wage. To do their job properly, they need to be incentivised to collect as much as possible. After all, we don't want tax collectors collecting only what is reasonable, do we? We want them trying to screw every penny they can out of businesses. And recent experience of tax inspectors has shown what a slack job they have been doing - almost throwing money at businesses in their generosity.