Tax rises and democracy

Last night we had a trip down memory lane to a time when Parliament had some rights. The government allowed us to talk for as long as we liked about parts of the Finance Bill. We had a rare Parliamentary day without a guillotine. We could carry on with our work after 10 pm.

The House held debates on corporation tax, small business taxation, and VAT. The government refused to accept a Conservative amendment to take the Corporation Tax rate down to 25%, to attract more business and investment to the UK. They refused to believe that if you set lower tax rates you can end up with more tax revenue. They declined to put the small business rate down to 20%, at a time when every little helps small business under pressure.

By 10 pm we had reached Clause 11, the big increases in alcohol duties. There was substantial interest in this debate, given the strenuous lobbying by the industry and the licensed trade. They have made the case that the sharp increase in pub closures results from high duty levels and therefore higher prices. The government got bored with having to face arguments about job losses, closures and the impact on communities, so it reverted to form and moved a premature end to the business.

Nonetheless, we did have three hours or so to examine the problems of a highly taxed industry, and did have a Parliament capable of functioning after 1 am. I felt nostalgic for a more democratic era as I spoke on the topic after 1 am this morning. If only we were allowed democracy more often, we might be able to educate Ministers some more. They still do not seem to understand the impact their fiscal decisions are having on jobs and output.

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30 Comments

  1. Posted May 13, 2009 at 6:59 am | Permalink

    Please do not think that closing down the pubs with yet another tax so that the MPs can buy little luxuries for themselves, is unimportant.
    In this tiny village we have a good piece of grass outside our house in what used to be a quiet hamlet.
    Last night some drunks, who could no longer go to the non smoking pub with its very expensive beer, consumed three bottles of some kind of vodka, a bottle of Australian rose, some cans of beer and then left the results and some of their clothes on the floor.
    If they had been able, financially and socially, to do this at the pub, there would not have been disturbance at night and I wouldn’t have had to collect the debris.

    • alan jutson
      Posted May 13, 2009 at 8:20 am | Permalink

      Mike whilst I have sympathy with you on the grass/green issue. (we have similar problems with a garage opposite)

      The real problem is not the tax on drink, but the amount of drink that is drunk.

      I take your point about drinking with no supervision, which a true landlord would oversee, but youngsters now get fuelled up before they go to the pub.

      We quite often have street signs and fences broken down in the early hours of the morning when they are on route home.

      Not a policeman in sight.

      What this government fail to see is cause and effect be it Taxes, Jobs, Police, or Sentencing in the Courts.

      Pleased you had the opportunity for a proper debate John, but why does it have to be so late at night.

      How many MP’s were present ???

      If this Government did not constantly and forever tinker with the system, then perhaps they would have more time for more Debates at a sensible time.

      Perhaps when this Speaker goes we may have even more sensible debates. Or at least some answers to some sensible questions.

      • Posted May 14, 2009 at 7:03 am | Permalink

        alan – I think you are missing the point.
        Were the pubs to be able to offer cheaper beer than the corner shops, and were they to allow smoking as well, then, surely the problem of street drinking would end because the supervision would be there and, above all, the teenagers could meet, have a “social life” and gain respect in the traditional way by winning at bar billiards or pulling or the local darts competition? Failing that they could always discuss global warming…..
        The government subsidises everything else, why not beer?

    • Lewis Bowker
      Posted May 18, 2009 at 11:45 am | Permalink

      Mike,
      I sincerely sympathise with you. However, this useless government is, as usual, attacking the problem from the wrong direction. Instead of “taxing” alcohol lokk instead at the “supply source”, afterall my local pub does not sell petrol, newspapers, groceries. Alcohol should be sold through the traditional outlets whereby it can be properly regulated.

      Lewis Bowker
      Wokingham

  2. RobertD
    Posted May 13, 2009 at 7:27 am | Permalink

    Many more nights like that and we taxpayers may reconsider the justification for paying for MP’s accomodation in town. Somehow I don’t think this government will ever see the connection.

    • Denis Cooper
      Posted May 13, 2009 at 2:59 pm | Permalink

      Or, paying for a taxi back to Wokingham … which is what an employer in London might do, if he wanted somebody to work very late at night.

  3. Simon D
    Posted May 13, 2009 at 7:33 am | Permalink

    Once we have all calmed down over MPs expenses we need to have a serious debate about democracy in the UK.

    Mr. Blair and his acolytes created a version of an eighteenth century German princely court. In this caricature of democracy Parliament was a mere rubber stamp and parliamentary debate a tiresome inconvenience. If you have a moral compass, a “project”, and a loyal regiment of spin doctors led by Alistair Campbell, who needs a bunch of windbag MPs. They only get in the way of your princely and global ambitions. Your spin doctors are your most valuable lieutenants. Machiavelli explains how it should be done in “The Prince”.

    It also appears that not much happened in New Labour’s version of Cabinet Government. The young Prince would apparently appear, cabinet members would bow and then rubber stamp the court agenda. The young Prince would then sweep out again.

    It strains credibility to think that Mr. Brown, who is alleged to be a control freak, does things any differently from Mr. Blair. He has serious matters to attend to, including “saving” the economy and winning next year’s election. In addition we must not forget the back story – 75% of UK legislation is now formulated in Brussels. What do all those MPs do?

    Perhaps the BBC, with its massive budget from the public purse, could lead a public debate on democracy for us. Personally, I don’t think that the UK electorate bothers much about democracy as long as house prices keep going up, but at least let us go through the motions of discussing it.

  4. Brian Tomkinson
    Posted May 13, 2009 at 7:59 am | Permalink

    The battle is between the people through their parliamentary representatives and the executive i.e. the government. Our parliamentarians in general have succumbed to the power of the executive. There is an urgent need to redress the balance whichever party is in power.

  5. Josh
    Posted May 13, 2009 at 8:05 am | Permalink

    Great speeches as usual from you. I must say though, that when you were discussing the Laffer curve, the ”laffing all the way to the bank,” made me cringe… though it is better than any of my jokes.

    • DBC Reed
      Posted May 13, 2009 at 1:03 pm | Permalink

      The phrase “laffing-stock” comes to mind since Laffer said that the American housing-market was not over-priced and that there would n’t be a recession.He backed his opinion with a $1 bet on live TV and still has n’t paid up.
      In the UK it appears the less you tax people the more they put the money saved ino property/land (see the 1972 Barber tax-cutting ,give-away budget ,shortly followed by 70% rise in house prices over two years).Any mathematical model that does n’t take account of money going into assets like property is not worth bothering about.

  6. Posted May 13, 2009 at 8:07 am | Permalink

    A happy reminder of what the business of government used to involve.

    Government is not just about the government of the day. Their role is to suggest new laws. There, in the legislative process, is the end of direct government control. They propose it and Parliament debates it. Some proposals receive universal approval, some universal disapproval, the vast majority need to be examined in detail. They need to be thought about and discussed so that potential flaws can be ironed out, seen not to be flaws after all or, as the case may be, exposed as fundamental errors.

    Making law is a serious business with serious repercussions. Twelve years on either the current government is unaware of this fact or it doesn’t care. Things really have reached a pretty pass.

  7. Posted May 13, 2009 at 9:08 am | Permalink

    It would seem that the “expenses” row is achieving what my cynical blog is suggesting. Brown gave The Barclay Brothers that CD and bingo, the economic mess and his failings are less to the fore. Note the word “less”.

  8. Lola
    Posted May 13, 2009 at 9:48 am | Permalink

    You cannot make people understand things they willfully do not want to understand. You can take a horse to water, but you cannot make it drink. Well, you can if you stand behind it with a couple of housebricks. Which is in effect what you’ll have to do with this lot. By the way it doesn’t hurt – as long as you keep your thumbs out of the way.

  9. Paul
    Posted May 13, 2009 at 10:10 am | Permalink

    Quite right too, and somewhat sadly I actually watched a lot of the debate on TV !

  10. Paul
    Posted May 13, 2009 at 10:11 am | Permalink

    Darts and Skittles are the way forward apparently !!!

  11. Posted May 13, 2009 at 10:22 am | Permalink

    I hope the Conservatives can be relied to introduce the 25% CT & 20% rates amendment as part of their first budget. The fact that they have done it now certainly implies that & it will be a significant step forward that the other parties won’t do. The Conservatives could also promise that if the Laffer curve kick in & the tax take rises they will plough it back into further cuts. This would never cost any money actually received & would give business investors confidence in an improved future.

  12. A. Sedgwick
    Posted May 13, 2009 at 11:21 am | Permalink

    There is also a good argument for a flat income tax rate of 25% with a much larger personal allowance to take most out of this tax. All other allowances could be abolished together with other unjustified distribution of tax revenue. The elimination of tax bureaucracy would no doubt cause apoplexy in some quarters.

    • Janet Child
      Posted May 13, 2009 at 2:31 pm | Permalink

      Hear hear. This present government like nothing better than to overcomplicate what could be very simple and to take with one hand only to give back some of it with the other. I suspect this is just to create jobs and keep unemployment down. They’d rather have drones shuffling paperwork in offices than have them sitting on the dole. But the jobs are not productive and are totally meaningless to boot. The same applies to the overcomplicated benefits system.

      The debacle over the 10p tax rate illustrated this perfectly. Instead of admitting he’d made a mistake and reversing the policy all manner of silly “fixes” were substituted and as I understand it some people still missed out. It’s just tinkering at the edges while others get away with murder on a grand scale.

    • alan jutson
      Posted May 13, 2009 at 4:52 pm | Permalink

      Agreed
      Anything to make things simple, and encourage those who have work to work harder (for their own financial benefit).
      Much bigger allowance (before you pay tax) would help encourage those out of work, to get work, as it would be financially sensible.

      No tax to pay until at least £12,500 earnings (half average UK pay)

      Even better £15,000.

      Come on John apply that incredible financial brain of yours to put forward a very simple and uncomplicated income tax system.
      Start by combining Income tax and National Insurance to show the true rate of the Tax on Earnings, and at the same time reduce the collection costs.

  13. HJ
    Posted May 13, 2009 at 12:07 pm | Permalink

    John,

    What is the supposed advantage of debating until 1am rather than adjourning and carrying on the next day?

    I work hard and flexibly, but I function much better if I have a proper night’s sleep and have time for exercise. Because of this and family commitments, I wouldn’t consider a job which continued until this time (it would be different were it shift work).

    I imagine most ‘well-balanced’ people would agree with me. Do you really think it’s a good idea to discourage people from politics in this way? In my opinion, it’s the lifestyle that politicians are forced to adopt that discourages sane and sensible people from getting involved and which allows the likes of Ed Balls to get to the top (i.e. people of little or no intrinsic merit, just a determination to do, and put up with, whatever is necessary to forward one’s own career).

    Reply: I would be happy to debate these matters on days when the government will not allow Parliament to sit. I am also happy to use whatever time is available, and last night was a rare privilege under this government. We always used to go late, so Ministers – MPs with two jobs – could do the Ministerial job in the mornings, and do the Parliamentary one in the evenings.

  14. Posted May 13, 2009 at 12:41 pm | Permalink

    When it comes to addressing taxation on small companies, a drop to 20% of the basic rate will go nowhere near enough to solve the enormous problems for both profits for investment and cashflow caused by the disgraceful treatment of them in Brown’s 2005 budget.

    As a result of these changes a young or start up business with a net profit of £20,000 is now expected to be paying 73% more in corporation tax than in 2005. We also have the utterly absurd situation where if their profit is £11,000 the increase is actually 1055%!

    The facts are to be found in the link below. I hope you take a look at it Mr. Redwood:

    http://www.figurewizard.com/article.php/Small_Business_Corporation_Tax

  15. jeff todd
    Posted May 13, 2009 at 1:23 pm | Permalink

    I like the idea of a flat tax.

    Surely to goodness scrapping as many as possible of all the other little sneaky taxes (and the organisations responsible for collecting them) would be more beneficial to the low paid.

    Council Tax, Road Tax, Insurance Tax, etc take a greater percentage of a low paid person’s income than the better off.

    Fewer taxes mean that avoidance is more difficult as well.

    • chris southern
      Posted May 13, 2009 at 2:07 pm | Permalink

      Totaly agree about fewer taxes being far fairer.

      Sales tax cuts out legal avoidance and illegal evasion, you have to buy products to live in society.
      The wealthier members also contribute more, as they spend more.

      All other taxes are literaly goverment theft, we didn’t need them at one time, it’s goverments who find more and more ways of needing them.
      Road tax is the only one that i would say is not theft, as that is supposed to be used for the maintenance of the public highways.

    • Josh
      Posted May 13, 2009 at 2:52 pm | Permalink

      When the fiscal position allows, I think the tax free personal allowance should be brought up to £18000 and the top and middle rates should be merged at 20%. Tax revenues may lower to begin with, but we don’t need to spend £650 billion a year. Also, when the system is implemented, we will attract more and more investment, so the government can then, as Mr Brown so memorable put it, implement ”post neo-classical endogenous growth theory,” a fancy way saying investment in R&D

      • alan jutson
        Posted May 13, 2009 at 4:55 pm | Permalink

        Even better than my £15,000 suggestion.

      • Elle
        Posted May 13, 2009 at 10:11 pm | Permalink

        I, probably naively, think the basic rate should start at the top of what somebody can earn if working a 40-hour week on minimum wage.

        It might encourage people out of the benefits’ trap, would give them more money in their pocket to spend when and where they want, which would in turn boost local economies.

        The current system takes, then gives back to put people on what government thinks is a “reasonable” income, but only if they fill in loads of forms. This costs money to administer.

        If the change in personal allowances could show that it genuinely gave people more than they could claim back in some “benefits” – that only give back what’s been taken away – there would be less form-filling, so fewer administrators.

        “Something” also needs to be done for pensioners, who may have a bit of money from selling their final property and who have a bit of money put to one side, get heavily taxed and then have to claim it back. The forms are a nightmare.

  16. Tony
    Posted May 13, 2009 at 3:59 pm | Permalink

    John: Why are you making it seem like there was a golden age when Parliament mattered? I fail to recollect any government in living memory where Parliament was treated as such.

    Westminster is and always has been a policy influencing legislature. Parliament lacks the capacity to formulate and substitute policy and to pretend it has ever had such power is misleading.

    Reply: I think Parliament has mattered at a lot in past periods. It certainly mattered throughout the 1992-7 period when the government had to agree all that it wanted to do with Parliament given the small majority. Margaret Thatcher took Parliament very seriously, and made sure you always told the truth to it,. and told Parliament first.

  17. Adrian Peirson
    Posted May 13, 2009 at 7:25 pm | Permalink

    They can’t lower taxes, they always have to go up because our Taxes do not go to govt, they Go to the Offshore banks from whom we borrow our money.
    since they have a monopoly on Coining/Printing our money and they lend it to us AT INTEREST.
    Consequently we owe them MORE money than we actually have, where does the money come from to pay back this loan PLUS the Interest.
    Why of course, Govt Borrows a greater sum next year.

    Of course if we coined our own money, there would be no loan to pay back, but the Offshore banks would not like that.
    The last western Leader to try coining his iown money instead of borrowing it from the International Bankers ended up being shot in dealy Plaza.

    http://video.google.co.uk/videosearch?hl=en&q=executive+order+11110&um=1&ie=UTF-8&ei=oBkLSsaEG6COjAeZ5ICSCw&sa=X&oi=video_result_group&resnum=4&ct=title

  18. Bazman
    Posted May 14, 2009 at 3:09 pm | Permalink

    What’s the price of pint of larger in the commons bar these days?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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