Month: September 2010

Left wing politicians always wish to believe there is a crock of gold for the Treasury if only it showed some determination to end tax evasion and tax avoidance. They think these crimes and malpractise are the preserve of the rich. Tackling it more resolutely would be just, as well as filling a black hole in the naitonal accounts.

The first error in this thinking is to assume previous governments have not tried to do just this. Every government spends large sums and employs large staffs to hunt out evasion, and to legislate to make some avoidance illegal.

The second error is to confuse avoidance and evasion, without also considering what the Revenue and Customs themselves describe as “ordinary sensible tax planning”. If Labour want to stop all tax avoidance, they had better start by asking the government to withdraw all its own marketed schemes to urge us to indulge in tax avoidance or “ordinary sensible tax planning”. National Savings has gained a large share of the savings market in the UK for its nationalised product range by offering tax free savings certificates. Savers can legally avoid both income tax and capital gains tax on some of their products.

The Treasury’s policy of allowing income and capital gains tax concessions on savings held through an ISA would also presumably need to be swept away. Is it avoidance to put money into a tax exempt pension fund? Or to pay a donation to a charity, calling on a tax rebate at the same time? Some avoidance is part of a grand plan by government to encourage certain kinds of financial conduct.

The third error is to think the main cuplrits when it comes to the criminal activity of tax evasion are the better off. No sensible accountant, company director, lawyer, or other professional is going to fail to declare income or sales to lower their income tax or VAT bill. They would be likely to be found out, and they would lose a great deal from successful prosecution. Many wish to uphold the rule of law and understand their professional status depends on doing so.

It is people who are less well off who have the opportunity and the motive to indulge in tax evasion, or who might make mistakes with record keeping which result in tax evasion. Electricians, plumbers, jobbing builders, mobile hairdressers, the organisers of the local dance or music classes, market stall holders – anyone handling cash from the public – could forget to declare all the income to the taxman, and could be shy about putting all revenue into the VAT return if they need to make one.

If more action was to be taken against tax evasion it would entail a new level of scrutiny and audit of all these small businesses and events where cash is handled. I think the Revenue get their actions about right in this field. Judging from my correspondence they sometimes overdo the doubts and probing with honest people. As I understand it they have commonsense views of how much a person is likely to be earning from various activities, and look more closely at ones falling well below the average. They follow up tip offs or information sent in alleging evasion. They can examine a person where the gap between lifestyle and declared income seems large.

There is no large crock of gold to be found from a different approach to evasion and avoidance, unless they mean by that the removal of a series of tax allowances and incentives put into tax law to foster certain kinds of conduct. What is true is tax does have a huge impact on our collective conduct. High Stamp duties discourage home sales, capital gains tax puts people off selling investments and buying different ones, and high marginal income tax rates put people off venturing or working harder.

The public spending debate in the media continues apace, with the crucial numbers left out. The debate about defence spending has been one of the most active, presumably because the lobbies in defence have been especially keen to put their views to the media whilst arguments rage within Whitehall.

The meetings at Westminster on this topic have tried to keep up with the ever more lurid portrayals of cuts. The Secretary of State, Liam Fox, has explained in various meetings that many of the stories are unreliable, without being able yet to replace them with accurate guidance based on agreement about the future. The new line in some of the papers is that this Defence Review is proceeding too quickly and will not be thorough enough, yet day after day brings evidence of every stone being overturned.

When I have attended meetings I have asked a couple of simple questions. Will Defence be in receipt of rising sums of cash current spending, given the fact that current public spending overall rises from £600 bn a year to £690 billion 2010-15? What is the scope to buy better, given the many criticisms of past weapons procurement, and the cost overruns on one off designs and some programmes? I can get no answer to these questions. Without an answer it is difficult to have a worthwhile discussion of what might be needed and what can be achieved.

The debate in the newspapers is conducted around the proposition that there will be cuts of 10% in defence spending. Does that mean that current spending will be 10% less by 2015? Does that include the cuts in capital spending as well? We know that by 2015 the Afghanistan war will be over for the UK, so we would expect a saving from that happy release. If we are talking of a five year programme, efficiency and effectiveness improvements and better buying could achieve a cumulative 10% if they run at a modest rate of under 2% a year.

I read some very odd ideas. Apparently an economy could entail selling or mothballing expensive ships we already have in the Navy. Another could involve buying two new aircraft carriers but not many of the planes that were meant to be on them.

Many of our leading retailers regularly cut costs by at least 2% a year. They do not do so by announcing the closure of the bread department, or by failing to stock milk and butter anymore. They do so by working away at doing more for less. The managers and staff do not parade difficult choices over which costs to cut in our daily newspapers. They know they are all in it together.

The Papal visit has become an opportunity or an excuse for the media to ask some fundamental questions about what kind of a country and people we now are.

I was brought up in a constitutional monarchy. The Queen was Head of an established Protestant Church and ceremonial Head of State. The Prime Minister was the elected leader who with his collegaues made most of the important government decisions. The Archbishop of Canterbury with his colleagues ran the Anglican Church at home and abroad. Religious toleration was assured for all those of differing Christian Churches.

This changed markedly with the growth of EU power. Gradually we had a second unelected government making laws and drawing up budgets. The monarch became a citizen of Europe like the rest of us. Parliament was no longer sovereign in areas of competence taken by the EU.

It has also changed somewhat as a result of social change. Many people feel no allegiance to the Anglican Church or to any Christian community. There are now larger communities of people who follow a different faith. There are many who take a secular or atheist view of the world.

The English Reformation was designed to end the authority of Papal courts and law codes in England, to end Papal power and doctrine and to usher in a more flexible expression of clerical power which was answerable to the English courts and above all to the High Court of Parliament.

At a time of flux and change it would be interesting to hear views on whether we are happy to keep our established Protestant Church, whether we should continue to represent it in the House of Lords through automatic seats for leading Bishops, and whether the Anglican Church has struck the right mood and tone in its response to the Papal visit.

This summer I fitted in a weekend visit to some Bordeaux vineyards (at my own expense as part of my holiday before you start to hurl your allegations!). I also visited some English farms, not in my own constituency.

The Bordeaux vineyards show what can be achieved, at the top end, by the vigorous pursuit of quality and improvement, through investment, thought, the application of science and judgement, and the exploitation of world brands inthe ever enlarging glamour end of the global market. The huge crane towering over the tiny property of Le Pin sums up the dramatic impact success at the top of the wine world that serving the mega rich can bring. Mouton Rothschild sports two massive construction cranes, as they too plough back some of the surging revenues from the giddy prices the rich Chinese will now pay for the finest wines. So far the buyers queue at the gates, the higher the prices rise. The best in Bordeaux show that from a very small farm base you can add prodigious value through selection, quality based production and excellent marketing.

My visit to one or two UK farms reminded me even in the UK we still have some relatively small farms struggling to make good money out of arable husbandry. If you are a wheat producer you are competing against the vast prairie farms of the new world, where ever larger and dearer machinery can till, sow and harvest vast acres laid out in mega fields with the minimum of cost. In the Uk we like our small fields and hedgerows, spinneys and lanes. The arable crops are broken up by the much loved features of the landscape and by the patterns of ownership and tenancy.

Which leaves us in the grips of the CAP. Much of what a farmer does is designed to use or draw on an EU subsidy. It distances the farmer from adding value and serving that ever growing and more demanding world market. Farmers do what the subsidy indicates. Green policies promote the idea of farmer as grand landscape gardener, earning money for maintaining various habitats and following prescribed rotations.

The CAP itself has been the object of criticism with demands for reform from successive British governments. Mr Blair said he was surrendering part of the UK’s rebate on contributions to buy us agricultural reform. We have lost a big chunk of the rebate but there is still no sign of reform. The new UK government should demand the follow up promised to Mr Blair. Now would be a good time to see if we can remodel or remove the CAP to give taxpayers a better deal.

Successful farming either applies more machinery and technology to ever larger units to get the economies of scale, of adds more and and more value to the fruits of the land before it leaves the farm gate. The successful Bordeaux chateau show what you can achieve by way of extra revenue if you turn your fruit into an iconic product. Some English farmers are struggling, despite some rises in grain prices, because they face strong global competition from bigger and better invested farms. The CAP is dear to taxpayers, but it cannot make up for all the problems caused by the lie of the land, the size of the holdings and the shortage of capital.

Throughout the long period of debate about the “cuts” prior to seeing how the extra cash amounts in the budgets for the next few years will be allocated, we have heard mainly about the defence and welfare budgets. There has been little attention paid to transport, the local government grant settlement, public sector housing, the European budget or agriculture and climate change. It is important if we are going to review all budgets fairly and sensibly to cut out waste and less desirable spending that these and other areas are not neglected.

Yesterday I wrote about the obvious scope for cutting the costs of social housing whilst delivering more and better results for those in search of a home. Today I invite readers’ views on the large subsidy programmes in place for railways. I will move on to farming and certain kinds of energy production over the next week.

The railways are mainly used by the better off. They attract very large subsidies relative to number of journeys conducted, combining this with high fares. There is some necessary price control in place given the substantial monopoly elements in their provision. Trains run with many empty seats on lots of off peak services, and run with people having to stand for long distances at popular times of day. They would seem to me to be a case where a combination of fare control and subsidy reduciton could act as a necessary stimulus to much more efficient working.

Network Rail fails to harness private capital to improve and develop its property estate rapidly and widely enough. I have tried over many years to get the owners of Wokingham Station and the surrounding land to set up a development which could transform the area, provide a new station and offer shopping and travel interchange facilities on railway land. Such a development would make them money. It is a modest scale example of missed opportunities in many places in the UK.

The train leasing and operating companies procure expensive foreign trains that are heavy and not very fuel efficient. These heavy trains cannot brake quickly and constrain use of the limited track available, leaving us with inadequate train services at peak times. The railway fails to maximise revenue when people would most like to use it, owing to capacity shortages.

The railway industry does not show much imagination in finding additional streams of revenue from its travellers and from passangers waiting for trains or using station car parks. A subsidy reduction programme might act as a stimulus to more enterprise and more efficiency. At many stations you cannot buy a morning paper or a cup of coffee, cannot have your car cleaned or serviced whilst away for the day, and cannot buy your supper on the way home at a shop on railway land. The retail offer on trains is also limited to a narrow range of eating and drinking items. Air travel offers a much wider range of additonal services to the traveller.

Twenty five years ago today Laura Ashley died.

She was in the great British tradition of designer entrepreneurs who create large businesses out of their taste, passion and drive. We need more of her like to help pull us out of recession, and to create the extra jobs our country needfs.

Josiah Wedgewood led the way with his ability to excel at innovation, design, marketing and new methods of production in his chosen industry.

You do not create them with more quangos, higher taxes or more regulations.

Yesterday I attended a meeting organised by the National Housing Federation where a number of public sector housing groups came to lobby MPs.

Their gloomy presentation was based on the usual precepts that state direction and control and more use of the state cheque book were the only possible answers to a problem. We were told that the cuts to Housing benefit, the removal of regional planning and housing targets and the level of public funding were all bad decisions which stood in the way of a good housing policy.

In the discussion which folllowed it was good to see some newly elected MPs cut through their two central propositions that all that was needed was more public cash and more central control to solve the problems. It was also good to have an old fashioned meeting about the issues with some disagreements and differing views in a Commons committee room, instead of the informal meetings with drinks or running buffets available that were so common in the Labour years. It emerged as we questioned the panel of presenters that:

1. Current new public sector housing provision costs more than it need do thanks to the rules and bureaucracy surrounding its procurement

2. There are substantial numbers of empty homes already owned by the public sector which need to be brought back into use

3. Subsidising people rather than houses makes more sense. If you subsidise houses people living in them may get better jobs and good incomes but you cannot withdraw the house subsidy.

4. There are problems with a small minority of tenants whose anti social behaviour disrupts neighbours. The Housing Association representatives complained about courts and legal enforcement standards

5. The current policy does not allow sensible incentives to be offered to people in social housing to encourage a move to smaller homes when their families have left home

6. New home building hit new lows during the easy spending Labour years, so even Labour did not in practise think they could build their way out of the problem.

I pointed out that around half of those living in rented accommodation would prefer to buy but cannot afford to do so. We need more pathways into home ownership, assisted by more shared ownership and easier purchase schemes.
The aim of housing policy should be to offer more people the choice and security which ownership brings. For all those approaching retirement it is especially important to lift the need to pay rent for the rest of their lives. The poorest of our society end up paying the most for their housing at the end of their lives when they can least afford it. We should look again at schemes like the proposals I put forward to help members of the armed services own a home whilst on Her Majesty’s service, so they have some housing equity when they leave the forces.

I know many of you think that UK house prices are still too high, thanks to the mortgage soaked credit binge that the government and Central Bank allowed or encouraged 2002-7. That is a topic we have debated often before. Today I want to concentrate on how much the government and its quangos should do, and what is best for social housing tenants.