The top 1% of income earners in the Uk pay 28% of the total income tax take. As they earn 13% of all the income, that means they pay twice as big a share of the tax as their share of the income.
The bottom half of all earners in the UK pay 10% of the total income tax. The sum they pay in total is less than the amount paid out in Housing Benefit, which goes to this wide group of people.
You could say this is a very “progressive system”. the bottom half paying less than the benefits they receive back, whilst the top 1% pay twice their share of the income.
However, at a time of economic difficulty, when the government wishes to spend so much more than it is currently collecting in revenue, there are many cries to tax the rich more. To do this successfully you need to have a tax system which attracts more very rich people here, and which tempts rich people to invest, venture and spend in ways which trigger more tax revenue from them. The higher rates introduced by the outgoing Labour and incoming Coalition governments have led to a predictable continuing drop in revenues. Taxes on wealth and income yielded 3.5% less to August 2012 than the same period the previous year.
The USA has lower tax rates on the very rich than the UK. Top rate federal income tax is 35%, compared to 50% (plus 2% NI) here. State income tax varies from 0% to 11%. Allowing an average of around 5% means the US top tax rate is more than 10% lower than the UK one.
Despite this- or more likely because of it – the US top 1% earn 17% of all the income. More importantly , they pay 37% of all the Income Tax paid. So with lower tax rates the USA achieves the goal of getting the rich to pay much more. It also has more seriously rich people, which some will dislike and others will see as helpful to pay all that extra tax. In the US the rich pay more than twice their incoem level. They make an overall bigger contribution than in the UK.
My advice to Mr Clegg is simple. By all means aim to get more money off the rich. The way to do it is to set rates that they will stay to pay. Get the right tax rates and more will come to pay.
By all means get the tax burden down on those on middle incomes as well. We are all overtaxed. That is one of the reasons the eocnomy is not performing as well as we would like.
September 24, 2012
“The way to do it is to set rates that they will stay to pay. Get the right tax rates and more will come to pay” – exactly.
More than that set a direction and vision, for a smaller, more efficient state sector and lower tax rates, particularly IHT, CGT and capital taxes. If that is done and looks likely to continue we will start to move the right way.
Yesterday Clegg in an interview said the rich were paying less tax on their “dividends” than their cleaners which is clear rubbish. He claimed to have changed this by altering the CGT rates. Clearly his grasp on taxation is rather limited as dividends are not taxed as CGT.
The CGT rates in the UK are absurdly high and even tax profits that have not actually been made after inflation.
What is needed is less expenditure and waste by the state sector. They are overpaid and pensioned by about 50% relative to the private sector. They need to reduce benefits and increase the relative incentives to work. They need to cut out the payments to the EU and the PIGIS and the green religion tosh. Also introduce easy hire and fire and reduce regulations and less EU nonsense. Everyone sensible knows this, but we have Cameron, Clegg and the anti-business secretary Cable in place alas. We thus have the almost certain prospect of labour in two and a half years time run by the Unison place man.
Leave now seems to be the best course of action.
Reply: Yes, top rate payers pay the 42.5% dividend tax, and the companies pay tax on the profits prior to paying dividends, with associated tax credits. As my encounter with a Lib Dem rep on Sunday Politics yesterday showed, they do not seem to know the details of the current tax code and just how many taxes are already imposed.
September 24, 2012
Also stop the banks, nearly all of them, sucking lending back from the private sector and ripping them off due to a total lack of competition in lending.
September 24, 2012
Dear Lifelogic, Lending officers get their kicks and their career progression and even their dreaded bonuses where these apply out of new lending but do not want to be tarred with, even dismissed for, making bad loans. If I were back in lending right now, with the government talking out of both sides of its mouth at once as usual on the subject (and apparently not being able to grasp the difference between funding and credit) and the economy down the pan, I wouldn’t be making many loans either.
September 24, 2012
The Banks are calling in perfectly good loans and refusing perfectly good, solid, well secured, requests for lending. Where they are lending at all the terms are hugely expensive and very restrictive terms.
It is not to do with risk in the main. It is to do with the new bank capital rules forced upon them. They were, I agree far too loose but are now far, far too tight for the current economic conditions. True a sensible government would help inspire more confidence.
The effect on my businesses (due to the government owned banks clawing back about £2m of perfectly well secured solid lending) is just to defer and delay my planned investments and developments with a loss of perhaps 10 new jobs. Thus a large tax, growth and benefit loss to the government too.
God know what it is like for those businesses without a solid base and good security available.
September 24, 2012
As we have said ad infinitum, it is typical rear view mirror driving, squeeze private investment and make up for it with silly government schemes….
zorro
September 24, 2012
Lifelogic, Please read your first sentence again and reflect that (as so many statements here and probably more elsewhere) it simply and perfectly begs the question, said question being what is a perfectly good loan? It seems reasonable that the entity parting with its money (accountable to its shareholders and humiliated in the press if loans go bad–look at the Spanish banks right now) should be the ones making the decisions. Banks make a lot of money from loans and would make them or leave them in place if they felt safe. As to security it is Chapter 1.01 or even the prologue not to look to security as the first line of repayment.
I hope you are not in favour of Cable’s “Business Bank” where best I gather (actually I do not) jobsworths are going to be told to make loans on government say-so. Loan quotas BTW were never allowed in my shop and correctly so because despite what I say above it is the easiest thing in the world if excessively encouraged by the High Command (in this case Cable? Sob!!) to make loans ad libitum till quota or whatever met.
September 24, 2012
Didn’t all this subprime crisis start in the USA as result of Jimmy Carter’s Red Lines policy and Bill Clinton beefing it up. Whereby banks were forced to loan mortgages to high risk customers so as to be fair and inclusive. The banks then shipped these off in sophisticated investment packages. (Obviously the left will never admit an error and the right will never be able to put an open goal in the net).
As for banks now, Lifelogic makes a valid point I have heard stated quite a few times. Viable businesses can’t get loans easily or on reasonable terms. This is restrictive to business as cash flows vary through the year and capital purchase and investment don’t necessarily line up with annual business patterns. Banks do not appear to be able to have an “old school” manager in place that is able to recognise high risk from safe bet. It’s all tick box.
My sympathy with the banks is in the two sets of contradictory instructions they are being set. Lend money and recapitalise. Well which?
September 25, 2012
Leslie Singleton ,
“What is a perfectly good loan?”
From about 1995 to 2008 at domestic and small business level it was a loan which was secured on an asset which was assumed to be rising in value for the foreseeable future .
That was the only criteria in the case of domestic loans and the main criteria in the case of loans to small businesses .
The viability of the business or the proposition which the money was meant to fund was not a consideration as Mark W’s Red Lines example illustrates .
My concern is that the transition to loans solely on the basis of security will take a long time to reverse because the culture which preceded it was destroyed and cannot be re-established over night .
Cable’s national bank idea is flawed but not necessarily any more flawed than relying on high street banks to manage lending because over the last 20 years they have disposed and sidelined people with those skills .
Whilst the Govt skews the market in favour of existing banks no new players are going to get involved .
It was a mistake the taxpayer being co-opted into these insolvent banks in the first place . If we have to write off a few hundred million now to exit before the next raft of bad news arrives , that might look cheap in the long run .
How much more good money are we going to throw after bad ?
September 24, 2012
It is not the lending officers, it is high command (at government, the EU and/or the Basel regulations?) that have moved the goal posts. Moved from far too wide to far too narrow.
September 24, 2012
@Leslie Singleton.
What is happening is the banks have lent a X on say SME and property lending (often intertwined in fact as security) suddenly they are told that the new bank capital requirements are far more restrictive so they may only lend X/2. The result is (and the government banks are very the worst here) that they need to call in X/2 of lending. They are doing this wherever they can regardless of the strength of the borrower or the level of risk.
Often indeed the borrowers have rather stronger balance sheets than the banks themselves. Indeed it is easier to call loan back from the more healthy borrowers as they can find the money more easily. The result is poor growth, delayed projects and investments, unemployment and low tax revenues. The government is shooting itself in the foot as usual.
September 24, 2012
Not so. There are no goalposts, certainly not for the type of large evaluation loan I am talking about. After evaluating it (with others second guessing you) you either like it or you don’t. Admittedly, you could say that the economy represents goalposts and, as I have said, of course the state of the economy (and perhaps even the economy of the State) is very important and banks are not going happily to lend contracyclically–they are private companies, why should they?
September 24, 2012
@Leslie Singleton
Lending on a property giving about £120K rents worth about £2M. Below is a typical example for investment property it is even worse for developments and trading companies.
In 2007 up to 80% Loan to value interest only, 1/2% arrangement fee, base plus 0.8%
In 2012 perhaps 50% LTV on a rapid repayment basis at base plus 4% fee of 1.5% and only for a five year term.
There is quite a large difference you need 2.5 times the money to do any purchase/development and are obliged to pay it back very quickly too and pay a lot more for it. A development company might have to halve its activity.
September 24, 2012
Leslie
It’s not too difficult to get the bank “Relationship managers” to back a business plan and put the case for a loan. As you state, the managers get a commission on the loan being approved.
The problem, in my experience, is when the manager’s report is submitted to credit.
At this stage the loan is disapproved or has covenants applied that clearly are too stringent, allowing for no leeway. Then personal guarantees are asked for.
Before the banking crash, managers tended to only issue reports for approval if they were pretty sure that credit would endorse it.
Add to this that credit can take weeks to come back with an answer.
As one manager informed me – he had been instructed to not fret about making loans, try and get some deposits in.
This relative inaction is another factor that is holding business back.
September 24, 2012
Exactly they are not even seeking loan applications and put you off even asking for a facility. Worse still they waste your time then put such absurd conditions, low loan to values or pricing on it that it does not work.
It is a better bet, currently, to ask someone you just met on the tube for a loan than most of the banks.
September 24, 2012
Matthew
The Clearing Banks (What you are describing, though I didn’t think they had managers anymore) are not the only banks around, and there are, certainly were, some banks that are much more interested in making loans, mainly because they do not get to take the huge cheap deposit base which the Clearers have naturally from their Current Account business.
In my shop the ethos was that the loan, putative then actual, stayed with the officer who brought it in. There was a credit committee to ventilate what the lender was doing which was anything but a rubber stamp because “Credit” (Credit Administration Division to be precise) was all powerful and rode herd all the way through (followed by review by High Command), and, if the loan started to go or (very rarely actually) went tits up, the same lender handled the recovery–so I repeat the primary decision had to be and was his. I have no idea how “goal posts” could have come in to this.
I could understand goalposts being adjusted (and why not???) in non business lending (10% deposits and all that on house purchase for example) but that’s not what we are talking about here.
September 24, 2012
Leslie
Well the relationship managers (on their card) – are now the personnel who come out to meet with the client.
What always happens now is that they submit their report to credit. In addition they push interest rate hedging LIBOR swaps (or did) and insurance and other services.
I agree with you that it’s understandable that the in the current climate, with a lack of demand that goal posts for lending have, quite rightly, moved. The problem is that no one knows where they’ve been moved to.
Banks just find it too expensive and time consuming to make loans in the £1m bracket. It’s easier for them to make a £100m loan to a big corporation.
September 24, 2012
Matthew
I agree with a lot you say in particular that it is in many ways easier to make the bigger loans ($100 million once in my case–though I have made very much smaller loans as well–the “walk-ins” as they say in America, indeed literally in America) but the idea that the Government should tell the banks what to do – a different point from how safe the loan should be – I regard as fatuous and I suspect you do too. I have written again much further down on learning more about Cable and his proposed “Business Bank”.
I note Lifelogic is now animadverting on Property Loans and the like. These are of course gr8 if you can get one. If things go well you rapidly become a multi – millionaire and the bank earns relative peanuts. If they don’t the bank loses millions and the borrower loses relatively little. Not as clear to me as it is to him that a bank would want to make this type of loan at all.
September 24, 2012
Re: Reply
I don’t think they care about details. They are clearly an extreme Left party. and with the absense of any serious criticism of their views in the media they are getting away with their inferences that the so called ‘rich’ are ‘enemies of the people’, widening divisions in society and spreading the politics of envy. I can easily imagine leaders of the Socialist Workers party for one laughing in triumph. The LibDems are doing their work for them.
September 24, 2012
Prangwizard
The more time passes, the more Cameron must realise he made one of the biggest mistakes of his career when he chose to run with the Lib Dems instead of going with a minority Conservative Government.
We now have the Lib Dems all pumped up, suggesting new government policy, making claims that they are always the good guys, when in reality they are reported as negotiating behind the coalitions backs with Labour, looking for their next power fix after the next general election.
This coalition team (if ever it was one) is falling apart.
What we need is a real reduction in borrow, tax and waste, and a large increase to £15,000 in the personal tax allowance that will go some way to help everyone who is making a contribution.
It would seem the summer break has not cleared anyones mind in the Government, perhaps they are suffering from heat stroke or water on the brain, whatever it is they need to get back to more basic mathematics and apply some commonsense to the country’s problems.
As you say in your reply John, few understand our present tax system, and perhaps that is the real point, because it is far, far too complicated for most.
If only we had a Chancellor who was experienced in financial matters, we may havwe had a chance, alas we have another 2 years of fiddling around the edges to look forward to.
September 24, 2012
I would be in favor of an “unsaved for pension tax” on senior public sector workers most of whom get multiples of what they pay in. I think this would be very “popular and fair”. Of course, it will never happen as it would catch policy and lawmakers equally!
September 25, 2012
Indeed a state sector private sector pension equalisation tax to redress the balance after Brown’s mugging.
September 24, 2012
You are right as you were yesterday on TV. Unfortunately the Lib Dems claim the wealthy to be taxed before the poor (plays on peoples emotions, as most consider themselves poor before rich). First, it is politics of envy and Clegg does not realise he is talking about himself and his relatives as wealthy. You and your colleagues ought to ask who they mean by poor. It is not all people on benefits, some of these earn more than ordinary working people and live in better homes than a lot of people who work very hard. You need to stop this fictitious notion and narrative of “the poor”. And use taxation to inspire the hard working, savers, old people and the young.
Most people will not understand the premise of the argument of your debate as you set out above- they will cling on to the term poor or poor versus rich. Most will think they are poor. A bit like they think anyone who speaks properly is rich or a snob- false but a stereo typical assumption.
Second point, could you urge Cameron to exercise and display some leadership skills. The ‘Thrasher Mitchell” saga only confirms most people’s view that Flashman Cameron” is out of touch rich boy who has extremely poor judgement (a bit like the Harry Endfield character Tim but Dim). It actually adds to the notion of rich versus poor that the other parties have/will latch on to. This is what was and is toxic about the Tories- not common sense policies. Bear in mind Cameron got his Flashman label by the way he speaks in parliament at PMQs in a bullying humiliating way towards his opponents (which he still continues). Having attracted that name and stigma one would think he would make sure no one else made the same mistake as he wants to change the image of his party (nothing to do with gay marriage or other green agenda crap).
Armed police officers accept they might use lethal force or be the recipients of lethal force in the protection of Flashman and Thrasher as well as the rest of the cabinet. They are laying their lives on the line to protect them (and accepted risk above the ordinary Bobby because of the role they perform). Thrasher insults the very police officers, and humiliates these officers in front of other people, who are prepared to die to protect him and he thinks saying sorry is enough! Stupidly it appears so does Flashman.
If Thrasher Mitchell is not prepared to resign, Flashman ought to have sacked him and the longer it goes on the worse it gets giving credence to the rich versus poor and the them versus us mentality. What world are they in? It is basic decency and common sense. It would also help to change the image of his party if Cameron exercised the basic leadership skills, it is not acceptable to insult the people who are prepared to die for you. Whether he did or did not use certain words is immaterial. He insulted and humiliated the police officers prepared to die for him in front of other people. I wonder who the public thinks has shown himself to be the pleb(s) in this saga?
Third still waiting for the apology from Clegg for his broken promise of right to recall MPs for wrong doing in contrast to having Laws back in cabinet. ANother extraordinary lack of judgement by Flashman Cameron.
September 24, 2012
Vince and his Lib Dems don’t do sacking, retraining is in order. Mitchell could do some special constable work to make amends and learn some civility. I wish there was CCTV and a lip reader because who knows what to believe, a law maker says on his word and honour he didn’t use the insult he was accused of and the police officer says the opposite.
If I were accused by an Officer of the law of insulting him like this what would happen to me? Mitchell should have no different treatment.
September 25, 2012
I would be very surprised if there was not a CCTV camera as part of the security on the gates. I am also surprised that the press has not demanded it to be viewed before a decision was made. Perhaps the tape will be soon be lost.
September 24, 2012
Perhaps Mr Gove at educations should remember (in addition to his french word genders) that there can be political problems with a good classical education and classical references. Mr Mitchell allegedly with Pleb and Mr Powell with his:- “Like the Roman, I seem to see the River Tiber foaming with much blood”. They can get you into much hot water, especially with the BBC and “BBC think” people. Best for politicians to stick to “you silly jobsworth” or “I see trouble ahead” even if they are a bit on the bland side.
September 24, 2012
To mention Mitchell in the same breath as Enoch Powell is unseemly and disrepectful to Mr Powell…
zorro
September 24, 2012
Sorry, perhaps you are right.
September 24, 2012
Lifelogic
Don’t like to talk behind your back but ran out of room for Replies (at least I think that’s what happened) and I commented on one of your comments in my last Reply above to Matthew.
September 25, 2012
Thanks but a loan of say 70% of the value of a good property producing sufficient rents to repay it and with a solid personal guarantee from someone with substantial assets is surely a far better risk than an unsecured deposit with a dodgy bank (as most clearly now are).
The governments do alas interfere by guaranteeing deposits and by setting capital requirements. All I am saying is they have gone from rather too loose to far too tight and this is causing companies to retreat and delay projects which is very damaging to the economy, jobs, growth and tax revenues.
September 25, 2012
I am talking of loans of perhaps £500K – £3M type of level.
September 24, 2012
Mr Redwood, How right you are. However, when did facts get in the way of reality? As far as the LibDems are concerned, never…
September 24, 2012
How about using easy hire and fire to employ more ‘cooperative’ workers who will put up with worse conditions and pay.
September 26, 2012
Yes that would increase profits make the company more competitive and create new jobs and growth. Sound good for the country.
September 26, 2012
Exploiting the most desperate I presume?
September 25, 2012
As long as there are 450,000 jobs and 2.59 million people unemployed there’s no much you can do to increase the incentive to work for over 2 million people. Reducing their benefits definitely won’t magically create jobs.
September 25, 2012
uanime5
How about stopping immigration.
Then every new job would be available only to people who lived here.
Given it is suggested that over 1 million new jobs have been created we would have bneen halfway to solving the problem already had someone had the balls a couple of years ago.
September 24, 2012
Amazing, isn’t it, that the ‘progressives’ and the left simply do not get it that over-taxation is lowering the amounts reaching the treasury, after all this time, after all the real-live examples.
This attitude simply underlines that for that group, taxation is not about revenue but about punishment and redistribution.
It is a pity that so many Tories also seem to subscribe to this rather uneconomic attitude.
September 24, 2012
It’s “Golden Goose” syndrome, which goes hand-in-hand with the Money Tree Delusion. Both are epidemics in the Entitlement Society in which we live.
September 24, 2012
Indeed those and the evil politics of envy – The they are richer than I am and that is not fair attitude. Much incubated by Labour, Libdems and now the Tories too. Mainly encouraged to justify the state grabbing the money off the the rich and then largely wasting or using it to buy votes.
September 24, 2012
Spot on. But not expected from a Tory led government.
September 26, 2012
In many cases they got rich by using the infrastructure including the population and their skills, and political stability of this country. Your views I suppose are sympathetic to third world dictatorships where unless you are connected in some way you will live in dirt and this is entirely your own fault?
September 24, 2012
“It is a pity that so many Tories also seem to subscribe to this rather uneconomic attitude.”
One assumes they foolishly think it will win votes. It will not. What actually works namely a positive, small state vision, lower taxes, jobs and less regulation is what will win votes in the end.
September 24, 2012
@lifelogic: You fail to grasp the fact that what will win the election is what the non politically aware public are told… For example only this morning the BBC “Today” programme was talking about the petroleum tax under-receipt that will happen if/when electric cars are more popular, there was a comment along the lines that the petroleum excise duty receipts represent something like 7% of government expenditure [1] so the premiss of the discussion was how government could make up the short fall -the LD suggestion was national road pricing- never once was it suggested that government could shrink by an equal amount as the under-receipt.
[1] I might have miss heard as I was doing something else at the time so if that figure is wrong
September 24, 2012
Indeed one people have bought the absurd (for most) and absurdly expensive electric cars (which clearly have no carbon advantage anyway) they will have to tax them somehow. Road pricing or a large VED. Cutting back the size of state sector parasite is not on the cards.
September 26, 2012
The electric car could be viable in some cases for the user. Milk floats have been used for decades and many small fork lift trucks use battery power. How the grid would cope with thousands of them owned by the population is not clear.
September 26, 2012
Jerry: “For example only this morning the BBC “Today” programme was talking about the petroleum tax under-receipt .. ”
The BBC is poisonous!
Odd, how this Tory (snigger) government hasn’t done anything about the organization.
One might think the Tories don’t have a vision of a small state low tax economy.
September 24, 2012
You are absolutely right. We all know we are over taxed and the way to raise revenue would be to cut the top rate of taxes. Lets be frank, the strivers, entrepreneurs and business people will rightly avoid tax or simply leave if the levels are too high. Why do the socialists think its fair to tax the strivers, workers, wealth creators anymore whilst giving it away to shirkers or foreign dictators? Its the politics of envy with no common sense. We need a “Conservative” Government to put this right. We will never have this with Liberals Cameron/Osborne in charge.
September 24, 2012
I’m afraid that whenever you try and explain uanime5 et al all say that your examples aren’t valid. It is a shibboleth issue with them…..
zorro
September 25, 2012
Not including any examples also means your argument isn’t valid.
You think that with all the countries in the world there’d be some examples of countries that consistently got higher taxes (adjusted for inflation) through lower rates of taxation.
September 26, 2012
@uanime5: Assuming that you are older than 22 and were in the UK at the time, you lived in one during the 1980s, and you have been (repeatedly) told that on these blogs.
September 25, 2012
Isn’t it more likely the faltering economy is resulting in lower tax revenues, rather than tax levels that haven’t changed.
September 24, 2012
It does seem bonkers we’re taxing so much when we have George Osborne, a natural conservative he says, as Chancellor. He’s already printed £150bn and rising, why can’t we just print enough so that we can give everyone great whopping tax cuts, spread the love.
When is the next bout of printing due anyway? With record monthly deficits surely it can’t be far away. That’s one genie that’s only going to disappear back into the bottle when he can’t produce any more magic and the QE trick will be shown to be smoke and mirrors.
Carry on spending.
September 24, 2012
And the likes of Clegg, what right does he think he has to just decide how much of people’s private property he’s going to extort from them? The gall of politicians who think that they can decide ‘we’ll take so much from him, take that from her, from this family we’re going to take this much’ and just help themselves to whatever they want.
Believe it or not I’m pretty laid back, but the likes of Clegg, Cameron and Osborne with their ‘morally superior’ arguments for taking whatever they want from whoever they want while they are chauffered around in bullet proof limousines and have everything down to a packet of Maltesers paid for them from the public purse makes me want to end this with a string of expletives.
September 24, 2012
Yeah and as a “high” earner I am supposed to take lectures in morality and my duty to the “poor” from the likes of David Laws, Mike Hancock and Simon Hughes
September 25, 2012
Indeed what a collection to lecture people on morality.
Hancock according to wiki is a notable supporter of homeopathy, having signed several early day motions in support of its continued funding on the National Health. Tax borrow and waste everywhere.
September 24, 2012
norman
Its not just the we want your money mantra, bad as that is, its the arrogance of “we think you are guilty so you have to prove you are innocent”, that is the real problem here.
I have never been on the end of a tax investigation (and certainly have nothing to hide) but I know some who have, and I am informed that it can make your life a very expensive and absolute misery for years, as officials ask you to prove every entry on every bank and credit card statement going back many years.
Clearly it is right that people should pay the correct taxes, but just to assume that because you have a certain amount of wealth (perhaps a 3 bedroom house in a nice area of London) you should have to defend your position with evidence and your own money, is something nearer to the behaviour of a third world police state.
September 24, 2012
@AJ
“…you should have to defend your position with evidence and your own money, is something nearer to the behaviour of a third world police state.”
Third world?
Police state?
Yes, that seems to be the direction of travel.
September 24, 2012
“When is the next bout of printing due anyway?”
Well, the current bout is still ongoing, at present the ceiling on purchases by the Asset Purchase Facility is £375 billion, it already holds a stock of gilts valued at £357 billion:
http://www.bankofengland.co.uk/markets/Pages/apf/results.aspx
and recently it’s been buying up previously issued gilts at a rate of £3 billion a week, three reverse auctions at £1 billion a piece on Mondays, Tuesdays and Wednesdays:
http://www.bankofengland.co.uk/markets/Pages/apf/gilts/results.aspx
So at that rate the Asset Purchase Facility’s total stock of gilts should hit £375 billion in about six weeks, say early November.
Maybe there would still be time for a group of MPs to put down a motion to the effect that the Chancellor should not authorise the Bank to embark on a further bout without prior approval by a vote of the House of Commons.
Meanwhile, in parallel to the Bank’s Asset Purchase Facility buying up previously issued gilts from investors at a rate of £3 billion a week, the Treasury’s Debt Management Office has been selling new gilts to investors, a total of something like £12 billion so far in September:
http://www.dmo.gov.uk/reportView.aspx?rptCode=D2.1prof7&rptName=455322&reportpage=Summary_of_results
It genuinely surprises me that three and half years after this “money-go-round” was started up in March 2009 some people still haven’t realised that the QE money is not being “given to banks” but instead is migrating from the Bank to the Treasury via the gilts market and is then being spent by the government when it pays its bills, while of course gilts are migrating in the opposite direction from the Treasury to the Bank.
Call it “the Bank rigging the gilts market”, or “the Treasury indirectly borrowing from the Bank”, or “the Bank and the Treasury swapping their respective IOUs”, even say that “the Bank’s stock of gilts is like the mountain of butter in cold storage that the EEC built up by repeatedly intervening in the market to buy up surpluses and support the market price”, it all comes to much the same thing but however expressed it still seems incomprehensible to some.
Which is unfortunate, because many people still don’t realise that the government is relying on QE to provide about a fifth (or maybe back to a quarter) of all the money it is spending, and that can’t carry on indefinitely any more than borrowing those kinds of sums in the normal way could carry on indefinitely.
September 24, 2012
But the Tories are happy to let Labour and others claim they are cutting too fast and too quick; in short they are content for political pain for something that is not happening to allow them to continue to borrow and spend wastefully.
When do the spending cuts actually happen??? Come on JR, you must have an insight why this is going on and being allowed?
September 24, 2012
I honestly think that people are daft enough to believe that if you try and rip off the “rich” that suddenly all our economic woes will be over.
Here is a suggestion:
Why should it be the government that handles my charity giving? Why should it be the government that decides how much I give to the third world and where it should be given? Why do we actually need the DfID? Why not simply allow us to choose which charity we want to support?
Have you not heard? The Empire is dead.
And where are the churches in all this? What about Zakat for Muslims or Cafod for Catholics or Christian Aid for everyone else?
Mind you, I cannot see a massive parliamentary majority for this. People never let go of power once it is theirs.
That suggestion actually would raise far more money for the half of the population currently living (like me) off the state.
September 24, 2012
Mike
I agree, time to stop all foriegn aid.
Not only does our government give it away, but also remember the EU does the same, again from our money raised from taxes.
The great British public have always for the most part been charity minded if they think a cause is worth supporting, so why does the government just let us leave it at that.
Just like Camerons Big Society idea, its interference we do not need, we have millions of people who belong to voluntary organisations, who freely give of their time and money, why does the government need to get involved.
September 26, 2012
Ripping of the poor will work? Lets face it million are being ripped off.
September 24, 2012
Your effort today – a bit like a hard A level Maths question – might be altogether too scientific not to say incomprehensible for and to the people you would like to convince, indeed how many ever would even to try and understand it, never mind be able?
Most of the the people who will study and appreciate it will be the rich themselves who will just use it in self-justification.
Others, and as I say I have no real idea how many but it’s going to be a bunch, will just be plain jealous and want, at all cost (even to themselves except they don’t know it), for the rich to be smoothed out in some way. They don’t care how or why the rich widow of yesterday is in a big house, they just do not like to see her living there, full stop.
Reducing taxes at the lower end is highly commendable but it wouldn’t matter if it was zero till quite high up in the scale, the cry would still be, I’d like to have to pay her taxes.
The rich man in his castle
The poor man at his gate
God made them high and lowly
He ordered their estate
……….apparently no longer applies, even though I suspect, but again do not know, that the range of income and wealth was much larger then than it is now.
September 24, 2012
The Socialist model is to tax the rich and give it to the politicians, not the poor.
Look at any Communist country, and our Labour ex Ministers and Prime Ministers, and compare that with the RISE in inequality under Labour.
We all absolutely know that Clegg will be rewarded with a senior position in Europe when he leaves office, and will receive an enormous salary and expenses package which is tax free; he will avoid all the taxes that he wishes on everybody else and pay less of his fair share of taxation than all those businessmen he hates so much. The European politician is the true parasite.
Clegg’s taxation policy is based on encouraging envy and jealousy; it has nothing to do with either fair taxation or the maximisation of revenue.
Mr Redwood’s message needs to be on the lips of every coalition politician; low taxation provides a fairer and richer society.
September 24, 2012
A review of the low tax rate on the EU pensions for the likes of the Kinnock’s and Baroness Ashton need to be reviewed before we look at anyone else. Why should they be excluded from contributing to their fair share towards supporting the vulnerable and disadvantaged?
September 24, 2012
Bob
I was given to understand from Press Reports that they pay no tax at all on their EU Pensions, (being completely TAX FREE no matter how much they get) but they do make a community contribution of 8% from it to compensate.
Nice money if you can get it !!!
Remember Nick Clegg and Mr Huhne also served in the EU proir to being MP’s so they I assume also qualify for this nice little earner.
One rule for us, another for them it would seem.
Seems to me that Revenue and Customs should look into this before anything else.
September 26, 2012
Bob: “Why should they be excluded from contributing to their fair share towards supporting the vulnerable and disadvantaged?”
Because they can be, these people are the new aristocracy. They can do what they want.
They have control of the levers of government, having been placed in position by the EU to do it’s bidding, they are not in the slightest bit interested in democracy of any sort.
September 24, 2012
For how many times! Socialism is not an exchangeable term for Communism, by making such a basic mistake people just degrade their arguments to that of political rants.
MarkW, what you said is very true of a Communist regime (or any single party state, which might be to the right or left), I would counter that under the UK’s last -only?- truly Socialist governments (1945-51 and 1964-70 [1]) inequality did reduced, certainly by the end of the 1970 house building programme those who wanted a house (loose terminology) could obtain one [2], those who wanted a job had a fair chance of finding one, those who wanted to work hard and make money -plenty did- were able to.
In modern parlance, the SME was never discouraged by those postwar governments, it was also relatively easy, from what I understand, for people to start their own business and find suitable premises etc. -indeed many I talk to have said that these regulation/taxation problems started during the Thatcher/Major government and have became almost unbearable since 1997…
Back on topic, but relevant to the above, does anyone have the (adjusted) tax rates that applied during the 1964-70 Wilson government, might make an interesting comparison with today?
[1] discounting the 1974-79 period as the economy was strangled by the ’73 oil crisis, it hindered both the Heath and second Wilson governments
[2] either owner-occupier or private/LA tenant
September 24, 2012
Jerry, the initial post was by Nick W, not myself.
I too have fun with the Communism / Socialism comparison though. Maybe it does degrade arguments a bit. Who knows. Although there is no doubt in translation the Russian superstate did title itself Union of Soviet Socialist Republics. (not Communist Republics).
I also feel some people I know, who descibe themselves as socialist are generally almost communist without the totalitarian angle. Socialism like most utopian ideas fails one test. It conflicts with human nature. Is this innate or the way we are brought up? That would be an interesting expiriment. I have heard of little trials done with groups of young children in various parts of the world that attempt to challenge this view. I have no evidence of this as I heard it heresay. I doubt it would be conclusive and what would the point be. The developed world has its populations the way they are.
The great leftists attempts on a year zero in the last century meant mass murder on an industrial scale. And leftists governments had to resort to armed guards to keep their populations in. Great utopia. Socialism failed.
September 24, 2012
@MarkW: Yes sorry about the mixing you up with someone else.
As for your comment about the USSR, indeed they did but then what did Hitler call his brand of far right totalitarianism – yes, National Socialism…
September 25, 2012
I must confess that when bringing idealogical utopias into debate, they all seem to have some phase of Industrial Murder. Nazism is so well known for it, it almost goes without saying. Stalin, Mao, Pot etc seem to get away with it in discourse. (I don’t think leftists like to admit that leftists in their extreme have used genocide).
Leftists also don’t take kindly to being reminded that on the domestic front Hitler was a model of the left. Huge state spending, state corporatism etc.
I’m not sure why the Nazis ever got the tag of extreme right wing. (Or really why moderate leftists have to put up with Stalin, Mao and Pot being attributed to their ideolgy).
Extremes are extremes. Left and Right don’t really cut it, and are used as token point scoring. (I am guitly of this for amusement). Surely extreme Right is technically anarchy as that is as small as goverment can get. No Government. And extreme left is absolute state control of everything.
What is right wing about race discrimination? It’s moronic wing surely. I know one of the very few things the left can ever be proud of is fighting against race dsicrimination, and the right should be ashamed of itself for not acting quickly enough, in the past. But does the right have to tollerate Hitler still? He was a nutter. The lesson was an example of not to impoverish a country to the degree that is turns extreme. So the EU obsession with its toy rouble is not aiding Greece. Obviously EU fantasists won’t take heed.
September 24, 2012
Let’s not forget the National Socialist party either.
September 25, 2012
http://www.ukpublicspending.co.uk/
The above site is very useful for comparison purposes…..I wonder what outside influence could have affected the UK’s ability to start businesses and compete effectively on world markets…?
zorro
September 24, 2012
Apparently Mr Clegg is entitled to an EU pension following his years in Brussels, but no one can find out whether it is being paid to him, whether it has been suspended, if it has, whether payments are still accruing, how much it is or will be, and what the tax rate will be. (Lord Kinnock apparently pays only 8% tax on his £96,000 EU pension, which added to his House of Lords expenses puts him in a rather better position than the average Welsh Labour voters who originally elected him.).
Apparently too, payment of EU pensions is conditional on continuing support for the EU, which constitutes an enormous conflict of interest and explains much of Clegg’s behaviour.
Would Mr Clegg like to compare his income and taxation with those of the average Briton?
Isn’t Mr Clegg’s political stance on taxation modified by the knowledge that he will likely be personally exempt from any of the taxation measures he wants to impose on everybody else?
September 25, 2012
Firstly Communism and Socialism aren’t the same thing.
Secondly since when has the rich getting richer be seen in any Communist country? Other than members of the Government getting rich.
September 25, 2012
In Soviet times, the ratio of the average CP member’s income to the average non-members income was 21:1. (That’s right TWENTY ONE to ONE). Of course, it wasn’t all in cash. A lot of the Party member’s income was in terms of freebies, perks and subsidided prices. Certain leisure facilities were only open to CP members or only discounted to CP members. High ranking CP members qualified for a weekend country dacha.
In CUBA, everybody got a bottle (or was it a glass?) of wine with their lunch. But the workers got plonk and the vising European Engineers got the good stuff.
The diffrence between rich and poor didn’t disappear in the Soviet system; it just took a corrupt form. The reason I know is that I worked with people from Poland and Bulgaria in 1995 and took the trouble to talk to them.
September 26, 2012
Lindsay McDougall: “the ratio of the average CP member’s income to the average non-members income was 21:1 ”
No, that’s not possible in the egalitarian socialist workers paradise.
Odd, how that sort of pay discrepency is mirrored in this country where the gods of socialism , demand huge remuneration for themselves, while their minions get minimum wage.
You’d think Bazman would be on the case?
[pin drops …]
September 26, 2012
Huffington post? Really. Their payments are a pin prick compared to most large companies and you assume that they should wear hair shirts. Most large companies hate unions as they force them to pay, this is not disputed, but as many large companies make massive profits from the efforts of their workforce this is fair enough as they will not share in any other way and are always bleating poverty. The directors are relly just managers in many cases and the employment rule of taking as least as possible for the good of the company does not apply. If you took a subscription 10p a week from every unemployed and benefit claiming person in the country and used the hundreds of thousands of pounds collected to pay a top businessman to represent them and their interests. Would you be against this? Pin drops…
September 27, 2012
Bazman: “Huffington post? Really.”
Good god, if I’d put up a Daily Mail link you’d come out to say, ‘Daily Mail? Really!’, do try to be original.
Huffy post is a US leftie blog site, you can find the same story in any UK broadsheets archive.
The issue is, do you defend the salary discrepancy between the cleaners you so admire, and their Union top knobs?
Just for laughs, why can’t a union boss do the same work for a third of his current remuneration? After all, as a socialist, he ain’t motivated by money is he? He is motivated by the welfare of his union
subscriptionsmembers.Bazman: “large companies make massive profits from the efforts of their workforce this is fair enough ”
No, they pay a market rate for the labour, and they make profits out of their customers.
Bazman: “If you took a subscription 10p a week from every unemployed and benefit claiming person in the country and … ”
Oh my god, why would you want to do that? We’ve already got MPs that are supposed to do that, but mostly don’t.
September 28, 2012
It’s a good point that we pay MP’s the represent them often you would not think so. Just because you are a socilst doed not mean you are not motivated by money or reward this is your own fantasy. Undeserved and excessive reward for failure for sure. The naive part of your post is that you think large companies like supermarkets pay the market rate. They set the market rate.
September 26, 2012
Russia was and still is in my opinion a gangster state. If you look at the old Soviet guard they were in many ways like the Mafia in their appearance and attitude to money and power. It was like a conveyor belt with the leaders dropping off the end. In todays Russia (some? ed) politicians have gathered billions and now have the problem of legitimising this cash. If they where to just flee abroad the next rulers would try to get them and the money back with pleas for the Russian people, but really meaning themselves. (etc)
September 24, 2012
It is well known that the Libdems won a large majority of the the protest vote up to 2010, but we have to thank Mr. Clegg for leading that Party’s charge into oblivion with hopefully Ukip filling the void.
September 24, 2012
@A.Sedgwick: Try reading the two manifestos, they are chalk and cheese!
No LD supporter is going to vote UKIP, no UKIP voter would have voted LD. If the LDs do go into oblivion then their share of the vote will almost certainly go to either the Green’s or (back to) Labour, it even just possible that the SLP vote might benefit also…
September 24, 2012
A simpler and more transparent system for raising tax is needed. I have just returned from Bulgaria – not the richest country in Europe and not without its problems but like one or two others it operates a simple flat tax of 10% and seems to be growing nicely.
One can debate the percentage – perhaps ~20% is close to what the majority here might accept – but a flat tax still leaves the rich contributing in absolute terms more than the poor. Spreading VAT uniformly over all goods might also enable that to be reduced. One could also combine it with a tax free allowance for everyone if need be. Simpler tax returns too!
Why did Mr Osborne lose his enthusiasm for this approach? All these proposals from Clegg are complete lunacy. The sooner he is ejected at the ballot box the better.
September 24, 2012
A flat tax rate and increased personal allowance is UKIP’s policy.
September 24, 2012
I agree a flatter tax system is better, with very limited tax deductions, with a minimum effective tax rate as a percentage being set at the current 32% (basic rate 20% plus ee’s 12% NI).
If JR could discuss the effective tax rates of the various income bands it may be more appropriate.
Having to pay housing benefit to people in work is a fundamental problem which requires solving? The cost of living is too high or wages are too low, benefit withdrawal being a bigger issue than taxation.
Higher personal allowances may help as would combining paye/ni and a benefit/tax withdrawal rate no higher than the current top rate of tax 40% subject to an overall cap on housing benefit.
But fundamentally we have an unstable ponzi debt fuelled property market which is distorting the economy. Forcing earned income into paying the debt interest via rent or mortgage. If the btl market lost their ability to claim interest tax dedcutions on existing properties we would see a probable reduction in prices at the lower entry part of the market. Allowing btl advantages on say 25% of a block of new flats may be helpful in getting a scheme away.
A look at land value tax whilst dealing with the ‘low income’ can be managed by rolling up a deferred tax charge or with exemptions and generally high thresholds.
If interest rates were normalized and the money supply controlled directly by the state with some regard to purchasing power parity, land/property prices would not be as ridiculous as they are.
The politicians and the moneymasters/bankers are to blame for the fiat bubble.
September 29, 2012
Bulgaria leading the way in taxation. Get real a flat tax is a non starter as the middle would have to pay much more. Why do think a country like Bulgaria and other Eastern European countries have flat tax system. Have think…Errr..Because they are so advanced?
September 24, 2012
I see that owners of homes or other assets worth £1m or more will come under “scrutiny” (harassment) as part of Coalition’s new ‘anti-affluence’ crackdown. The only time I had any dealing with an inquiry it wasted a huge amount of the revenues time, my time and my accountant time. It distracted me from my businesses hugely and in the end actually resulted in less tax for the revenue. Furthermore many of the HMRC staff involved did not even understand the tax system they were dealing with I even had to explain it to them. The last thing you want to do is to distract and harass businesses and their top people from running their businesses and making money.
Especially not in these rather difficult times for many.
I imagine the new initiative will cost far more than it raises as usual and the new HMRC recruits will have a rather poor understanding of the tax system. They usually work by causing lots of hassle, demands for info and inconvenience until the victim just pays them to go away.
September 24, 2012
Presumably the ‘assets’ will include everything owned including savings and pensions, as well as property other than and including the family home. If this is so they may find themselves harrassing a very large number of taxpayers.
I personally found than over half the guests at a birthday party, mainly aged over 50, had invested in a buy to let properties as an alternative pension. many guests had large pensions as they were in education for a long period. Would these be included? These people are by no means ‘rich’ and lead modest lives, paying high income taxes than in most countries at a lower salary. Yet their assets may be a million or more. My bank manager told me that there is a common class of customer called ‘capital rich-income poor’.
The Treasury has probably analysed the areas of possible taxation and realised that borrowers are not a source, but savers can be squeeded until they have to sell and pay extortionate capital gains taxes on their unreal gains.
September 24, 2012
Squeeded is not a new word but a mistake. Maybe it would be a good new word though.
September 24, 2012
thieves. never pay for them.
p soakell
bournemouth
September 24, 2012
No country has ever taxed itself out of recession. In fact, every single country which successfully reformed its economy and created lasting high growth, preceded it by dramatic tax cuts.
September 25, 2012
No country has ever cut itself into prosperity. Also following the Great Depression the USA got out of the depression by raising taxes, not by cutting them.
September 25, 2012
No it didn’t….it was WW2 that got the USA out of depression….If you don’t believe me listen to Henry Morgenthau…..http://bsfootprint.com/quotes/us-treasury-secretary-henry-morgenthau-jr/no-gentlemen-we-have-tried-spending-money-we-spendi
zorro
September 25, 2012
Err… “no country has ever cut itself into prosperity”…wrong again, Argentina, Brazil, Singapore, Australia, Canada …. I could go on if you want….
September 29, 2012
These countries cut their economies as they grew. The idea that they grew because they cut is a fantasy and cutting back the public sector is somehow going to cause the private sector to grow and fill the gap is another. The reverse is true.
September 26, 2012
Nonsense, lots have it is the only way but you have to release the private sector at the same time.
September 24, 2012
Because you are a logical chap John, you make the entirely understandable assumption – sometimes – that others behave logically too.
This latest blast of hot air has absolutely nothing to do with increasing the tax take. If it were, then logic would dictate something like the course you propose, or perhaps something even more radical such as a ‘flat-tax’; either of these would increase the amount of money available for the Coalition to … to give to Europe for example, or to give to the corrupt governments of other nations, to give to IT firms whose expertise in computing is in inverse ratio to their ability to squeeze untold billions out of a gullible HMG, or simply to prop up a foreign currency whose lifeless body is being continually injected with snake oil and monkey glands.
No – this latest wheeze is pure gesture politics designed to engage and entertain the gullible masses. It has absolutely beggar-all to do with improving the nation’s finances.
My apologies for this somewhat acid post … I am self-employed and this morning I am engaged in calculating how much tax I will be handing over to Mrs. Osborne’s little boy next January. I do not expect the money to be spent either wisely or well.
September 24, 2012
@Caratacus
The moochers will be cheering Clegg the looter to the rafters, and as far as he is concerned, their vote is as good as someone who doesn’t sponge off the state. And by the time the government run out of other peoples money, Clegg will have retired to sunnier shores. He cares nothing for laying the foundations of a sustainable economy for posterity.
September 24, 2012
“to give to IT firms whose expertise in computing is in inverse ratio to their ability to squeeze untold billions out of a gullible HMG”
Having worked along side such an organisation, I had concluded that their recruitment of Oxbridge Arts graduates meant that they were brilliant at selling their services and brilliant at explaning why their results did not conform either in cost, delivery or performance terms with what had been promised, and why such results were due to factors entirely beyond their control, but poor at the ‘techie bit’ ie what they were purporting to produce. (Some were astonishingly bad at this, in my experience).
September 24, 2012
Caratacus, Did you mean “beggar-all”? In my lexicon the ‘e’ is a ‘u’ (don’t want to get moderated!) but I hope you did because it is both apposite and amusing.
September 24, 2012
The issue is not the headline rates of tax, it’s whether people actually pay tax at that rate. If I earned £100k a year as a salary, I’d be paying a very high rate. If I earned £10m, a) there would be ways of making sure it wasn’t all salary and b) I wouldn’t be paying as high a percentage in tax. e.g. Jimmy Carr. The issue is getting a reasonable amount of tax out of everyone.
The left call for higher taxes on the rich because it appeals to their supporters. They don’t care whether that results in the rich paying any more tax.
September 24, 2012
No government has ever taxed their way out of recession. Clegg and Co have no idea whatsoever they are just looking to points score at the expense of hardworking people.
They are taking aim at the middle class who earn 50K plus per annum and apprently are confident that the government will support them.
Will they be supported Mr Redwood ?
Anyway it will all be academic at the next election as Clegg will be out. I live near his constituency and the students are just waiting to take revenge on him. It will be his ‘Portillo moment’.
September 24, 2012
Mactheknife
I think Mr Clegg may well frustrate those who wish to vote him out at the next General Election by falling on his sword just before it takes place, he could well become the sacrificial lamb for the Party, in order to give them a chance of some more votes.
Rather than trying to cosy up (behind the scenes) with the Labour lot who got us into all this debt, they should be broadcasting from on high that present polices would not be needed if the Country had been run sensibly during their 13 years in office.
The handwritten note “Sorry no money left” should be in huge letters over every speaker at both the Lib Dems and Conservative Party Conferences for the next 3 years, just as a reminder !
September 25, 2012
If they wrote “Sorry no money left” over every speaker people might question where all the money for events such as the Olympics, free schools, HS2, and other pet projects kept coming from.
September 25, 2012
uanime5
Its borrowed, that is why our debt is growing, we are still spending more than we are getting in, in tax receipts.
Trouble is too many people do not yet have a clue it is still going on.
September 29, 2012
alan Jutson: “Trouble is too many people do not yet have a clue it is still going on.”
Many people cannot even manage their own bank account. So have no clue when it comes to the finances of a company or country.
A sad indictment of our education system.
September 25, 2012
Do you not understand how governments fund these projects?
zorro
September 25, 2012
Well the USA taxed themselves out of the depression by raising the taxes on the wealthy to over 90%.
September 25, 2012
…on the other hand “uanime5” in the UK the Wilson government of 1974-79 attempted to impose a similar super-tax but all it did was drive the wealth off-shore together with the people whose money it was!
September 25, 2012
No Jerry, that rate solved all the UK’s problems and paid off the debts, and the UK was about to enter an economic nirvana in 1979 until the cruel, wicked Tories stole the election and impoverished the nation……
zorro
September 25, 2012
Sorry, I mean really the US got out of depression by raising tax rates to 90%…..!! LOL
zorro
September 25, 2012
What rate did that kick in at, and how much did it raise?
zorro
September 24, 2012
As usual the emphasis is on more taxation rather than reducing spending. The politics of envy is always an easy one to employ. There is a paucity of ability amongst our polticians and particularly amongst the leadership of the three main parties. The country’s economy is being ruined but they only want to think of their own parties and careers whilst disguising the truth.
September 24, 2012
I am Fed up with being in the “squeezed middle”.
“There was a real terms decrease in disposable income between 2009/10 and 2010/11, with the largest fall being for the middle fifth of households. The proportion of disposable income paid in indirect taxes increased across the income
distribution in 2010/11 compared with the previous year. This is largely explained by the increases to the standard rate of VAT in 2010 and 2011.”
http://www.ons.gov.uk/ons/dcp171778_267839.pdf .
September 24, 2012
Off topic, but current and very important to how Tories are viewed by the public….Mr Mitchell’s explanation was not good enough at all. He appears to being economic with the actuality…He has just denied saying some words, but not stated what he said…..This will not go away…..
zorro
September 24, 2012
According to the policemen’s notes taken at the time Andrew Mitchell called them “[profanity deleted] plebs”, but he says he didn’t use the word “plebs”.
Someone is lying.
Will Mitchell sue the police for defamation?
Or is he hoping that he can tough it out until the clamour dies down?
Maybe Mr Sorry can make some more foolish statements to draw fire from his foreign aid inflating chum.
September 24, 2012
Clearly he has to be careful so no one sue him either. But why on earth are the police free to make all this public do they have no duty of confidentiality. It is possible no one has lied but they were mistaken.
I do not care what he called them, in a fit of peak after a hard day, are the police just silly cry babies, surely they have been called far worse. I notice the police are not always all that polite to the public themselves on occasions.
Andrew Mitchell should just shut up, until the BBC are bored of it all. David Laws return to power is a far, far more serious issue than a brief fit of anger to a police gate attendant who could not be bothered to open the big gates it seems.
September 24, 2012
Indeed, there was a time, long ago now, when if a person in uniform was asked to do something simple like open the gates to let someone through, they would do their job with a smile, but not now.
You see the same attitude in other areas from the Police of “we are in charge, do as you are told or you will be arrested” at airports, public demos, football matches, pop concerts and in traffic control when they close roads trapping drivers for many hours.
They need to remember they are there to serve us. We are not here to bow down to them.
Has anyone asked the officers outside Number 10 why they refused to open the gates?
Or is that not allowed under “section 5 public order” which they keep using as a threat to anyone who dares to question their decisions ?
September 25, 2012
There is without doubt validity in what you say, and I agree that the police are public servants. However, they should not be subjected to foul mouthed abuse for no reason….even if Mitchell had a hard day at work….or at the Cinnamon Club.
zorro
September 26, 2012
@zorro – no they should, of course, not be abused but it is hardly as bigger deal as the BBC think it is.
September 24, 2012
This ‘logic’ would also apply to a Labour whip in the same position. You know it would not.
September 24, 2012
Don’t try to tell me what I think Bazman, my views apply to anyone who wants a gate opening regardless of their political affiliations.
September 24, 2012
Lifelogic – As an ex cop I tend to agree with you.
One of the conditions for being posted safely away from places such as Tottenham and Dalston is that one must keep confidentiality.
This is a storm in a tea cup.
The Police Federation seems to be milking this for all it’s worth.
September 26, 2012
Yes indeed they are milking it.
September 24, 2012
@Bob: You [profanity deleted] Plebs vs. You [profanity deleted] Plods perhaps?
September 25, 2012
The political class do view us children as plebs .
I find the position of “whip” objectionable and would wonder what sort of person would be prepared to do such an immoral job .
However , to vilify an individual for allegedly voicing what all the others think but are too dishonest to openly state seems a bit petty .
September 24, 2012
Zorro
I viewed all this from afar when on holiday with some degree of amusement.
It would seem to me that his so called (reported) actions sum up nicely the feelings some politicians have (I exclude our host) of us the masses.
They really do think that we are here to serve them, rather than how it should be, they are there to serve us.
Perhaps some of them should have to be reminded of this every morning before a cabinet meeting starts, or before a debate when sitting in the HOC.
I agree with you, he will go sooner or later, better to resign now, rather than be dismissed kicking and screaming in a few weeks time.
Its all dragged on for far too long already.
September 24, 2012
Storm in a egg-cup Zorro, the only people talking about this are the media and those who wish to do damage to either the government [1], Mr Mitchell or both. There are many questions the police also need to answer, for example why Mr Mitchell was able to be allowed through the main gate the night before but not the night in question, who decided that the main gate would or could not be opened and how easy is it to actually get a bicycle through the pedestrian gate (some personal gates are barely designed to allow an average person through)? I don’t expect any of these questions to be necessarily answered, at least in public, for obvious reasons, but they are rhetorical questions that everyone should be asking.
[1] it is also very unfortunate that this incident is taking the spotlight way from police safety and how to protect them from things far more deadly than a late night case of sour tongue
September 24, 2012
Zorro, I disagree. Personally I had hardly heard of this chap. It sounds as though he verbally lost it in a minor fit of temper and what that should have to do with him resigning I have no idea. My read on it (disliking bikes as I do) is that he would have done better to have left his bike at home.
September 24, 2012
I quite like my bike, but they are, in London, 30 times more dangerous than a car and do not even save carbon (relative to a full car – if you accept the Carbon religion). Food production, preparation, packaging and cooking make food a very inefficient fuel source especially meat.
September 24, 2012
How much energy does it cost to produce and run a car? I’ll tell you. It takes about 73 Giga-Joules or 20277.77 kWh of energy to manufacture a vehicle. This is less than 10 percent of the total lifecycle energy consumption of a vehicle. Four humans on bikes are going to use more? Where do you get your silly fantasies from?
September 25, 2012
@Bazman: But how much energy does it take to make a tractor, the combined harvester, the grain silo, how much energy does it take to harvest the crop etc. Farming is now a very equipment intensive industry. Indeed some, old pop stars included, claim that beef production is a significant source of methane being released directly into the atmosphere -attempting to be polite- what goes in one end gets then converted by the Bovine into methane amongst other chemicals which then exists via the other end…
I’m not agreeing with the figures that “lifelogic” claims, I haven’t done the maths and I very much doubt Bazman has either, but lifelogic’s point is that there is a lot of hidden CO2 production in cycling that always tends to get (conveniently) forgotten about by the cycling fraternity – cyclists, no surprise, tend to burn, and thus consume, more calories than someone sitting in a car whilst driving along the road – even more so once car passengers are added.
Cycling is no doubt healthy, it is not necessarily ‘Green’ though, certainly not to the extent suggested by some all things considered.
September 25, 2012
@Jerry if you’re going to add the CO2 produced by harvesting and storing crops to CO2 produced when riding a bike you also need to include the CO2 produced by extracting oil and converting it into petrol for cars.
You also need to offset the CO2 that would have been absorbed by these plants and converted into sugars using photosynthesis.
September 25, 2012
@uanime5: Yes indeed, I was just pointing out that cycling is not free of being a source of CO2 its self, something the cycling lobby and media seem to forget.
September 26, 2012
Well a car perhaps does 200,000 miles over its life + how much energy is used in meat production, distribution, farming for bicycle fuel? I have looked at the figure and stand by the claim that walking and even biking are no better on carbon than many cars.
How much energy in making a bike which perhaps just does an average of 5000 miles before it is scrapped?
September 26, 2012
The whole ‘this process produces less CO2 than that process’ argument is utterly sterile.
The role of CO2 as a plant food is several orders of magnitude more important than its relatively minor role as a green house gas.
September 26, 2012
I agree but even if you accept the carbon religion exaggeration (I do not) the solutions do not work even on a co2 basis.
September 24, 2012
I enjoyed your brief exchange with the left-wing LibDem Evan Harris on Andrew Neil’s programme. No question you had the better of the argument, knowng the data – it was clear that Mr Harris had no clue what he was talking about. What was concerning about the discussion was to imagine how it would have been had you not been there and had there been a normal BBC-type interviewer, not Andrew Neil. Mr Harris would have been able to sit there, as so many Labour politicians, ‘Keynesian’ economists, union leaders etc are able to do, and assert that there have been ‘cuts’ and thats whats holding the economy back, and that higher tax rates would raise more revenue in a ‘fair’ way.
September 24, 2012
Indeed.
September 24, 2012
What you all forget is that EVERYONE pays indirect taxes such as VAT which is a regressive tax so the less well off pay a higher percentage of their income on it than the rich…
September 24, 2012
Mdr107
For just one hot second could we please do without the bloody percentages? To me as regards VAT, the rich are going to spend more so will pay more, possibly lots more especially given the exemptions for food, children’s clothing and whatever which we are endlessly told make up a higher dreaded percentage of the non rich outgoings.
September 24, 2012
What makes you think that VAT falls on the consumer rather than the producer? Business owners and workers probably get stung most by VAT. It’s more or less a tax on gross profits.
September 25, 2012
@Steven_L: Yes but were do those profits come from at the end of the day? After all without consumption there is no production (unless someone wants to also produce a loss), those “profits” you talk about don’t come out of fresh air…
September 26, 2012
Vat is regressive tax and is on most bought goods including food and drink. Just because you are rich does not necessarily mean you spend more. I once knew a rich guy who was trying to teach his horse to not eat to save money. The horse did learn eventually, but sadly died soon after.
September 24, 2012
I notice this morning that the Spanish are thinking of spending 22 billion euros on building a European version of Las Vegas near Madrid. Perhaps we could give Mr Cable his billion pounds and send him to the real Las Vegas to try his luck. We will lose the money anyway.
September 24, 2012
It is more and more obvious that most politicians do not have a clue about the tax system, what the rates are, how they impact on people and how people respond to them. The comsequence is that they are utterly irresponsible and incompetent in their handling of the state`s finances. In days of yore the “solution”, if it could be called a solution, was the state running out of cash and having to call in the IMF who imposed conditions on spending levels in return for extra funding.
Today the politiicans have discovered/invented the QE scam that puts off the day of reckoning. Such a measure is calculated to devalue the currency, devalue savings over time. So anyone with any kind of savings can be expected to be slowly boiled alive, victims of at best of incometence, at worst of downright dishonesty and outright lies.
September 24, 2012
Lets do what the Lib Dems want.
Introduce a Richard Branson Tax. We take all of his money and assets, and use those for the public good.
OK, it’s Monday. That’s plugged the deficit.
Now its Wednesday. Branson’s money has gone.
Now what? Who are you going to target now?
That’s shows just how bad the state of government finances are, just on a cashflow basis.
Include the debts that not even John Redwood will mention because it means admitting to fraud, and its dire.
September 26, 2012
Lord Blagger: “Now what? Who are you going to target now?”
How ’bout some of the wealthy political class? After all, we’re all in this together.
September 24, 2012
The question posed in your excellent article should be, “how much MORE tax should the rich pay”
The rich also pay more VAT, Capital Gains Taxes, Stamp Duty, air travel taxes, council taxes, etc and they probably pay for their own health and education costs.
This is why it is better to live in nations with many millionaires rather than nations with none.
But the real question is not how to raise more taxes but how to reduce the state’s increasing appetite for our money, rich and poor alike.
Some say we need every pound collected in taxes for vital services like health and education to work properly and that there is no room to cut without hardship occuring.
But Im not so sure this is correct.
My weekend newspaper tells me that a former chief executive of a local authority has left after 20 months with a pay off of £420,000, and has just walked into a new job paying £142,000 with central goverment.
Waste less, borrow less, tax less.
September 24, 2012
There wouldn’t be the calls to tax the rich if the incomes and living standards of the bottom 50% hadn’t been screwed down so low, and jacked up so high.
The fat cats who have had all the cream, and not seen fit to share it, only have themselves to blame. The problem is it is leading us into a statist society, where rather than people being able to earn an income to sustain their family, instead have to survive on state handouts, taken in taxes from the rich, like tax credits.
If you want a better spread of the tax load, where its not the rich who are paying a large chunk of it, and want to be rid of the politics of envy, then you really need to concentrate on why the incomes of the bottom 50% have at best stagnated or have been cut over the last decade, and here you have to start with mass immigration. A policy which is a boon for the rich, but a catastrophe for the poor.
It was said in our office, if someone was looking to vote Labour then they weren’t being paid enough. The problem we have in our country it that people at the bottom aren’t being paid enough, they have no stake in society, other then the handouts they get from the Government.
September 24, 2012
I’m a bit puzzled because in one respect the positions of the top 1% in the UK and the US seem rather similar.
UK – 13% of all income, 28% of income tax, 28/13 = 2.15
US – 17% of all income, 37% of income tax, 37/17 = 2.18
So does this mean that whether you’re in the top 1% in the UK or the US you’ll be paying about twice the income tax you’d pay under a flat rate tax?
The obvious difference is that in the US more of the income is concentrated in the top 1%, which is not necessarily a good thing.
September 24, 2012
Dennis Cooper
“Necessarily” is an odd usage (admittedly very common) if you think about it. Of course income concentration is not of necessity a good thing (at least not in our present state of knowledge) but who said it was? On the other hand it is not of necessity a bad thing either. Always and everywhere never a good word for the dreaded rich who in large measure are the risk takers, hard workers and brightest and best who employ the rest of us and pay most taxes (necessarily at least I think so).
September 24, 2012
I’m not surprised by these comaparable figures with the USA. I was dissapointed that the squeezed format of the Sunday Politics didn’t allow time to close in on the ridiculous nonsense being sprouted by your opponent.
However tax rates never get discussed enough. Even at 20% tax it is a fact that an income of £1m would pay more than an income of £20k. So a flat tax is technically progressive, our current system is spiteful not progressive.
But the left do not wish to raise the highest level of revenue. What they really want is to satify the “wah wah wah, I’m so jealous of their money I want to take as much as I can off them”. It is as simple as that. There are votes in that. There are votes in banker bashing too.
September 24, 2012
“We are all overtaxed. That is one of the reasons the eocnomy is not performing as well as we would like.”
We are being taxed to pay ourselves. Even in the private sector there are businesses and workers who are dedicated in no small measure to serving those on state pay.
Cut the tax and you cut all of that too. What a sorry mess to be in.
We simply cannot afford wealth generating organisations such as BAE Systems to fall into foreign hands.
How typical of Mr Clegg to propose that pensions be used to fund grandchildren’s house deposits – anything but allow the housing market to adjust to its true levels.
Why ?
Because the housing market is all part of the great UK Ponzi scheme.
PS, I’ve more bad news for Mr Clegg. He really can’t sing.
September 24, 2012
Remember John I am one of your supporters…
But I don’t believe these figures. I personally know a number of people who are not resident here for tax purposes and avoid UK tax altogether but seem to be in the country quite a lot. I know of an awful lot of family trust (some international) funds and other shelter devices used to hide money from the tax man.
I don’t think the very top are paying too much tax because many of them have lots of accountants and lawyers playing the system for them.
I agree the bottom part of society are net recipients.
It’s the rump in the middle that are paying too much, the folk with too much in the bank to qualify for most benefits (even when they are out of work and in desperate trouble) who yet cannot afford the accountants and lawyers needed to play the system. (Why should your capital be protected if it’s in your house or pension fund but not if its cash in the bank? Where is the incentive to save when any savings ruin your ability to use state benefits? Why penalise those being honest when vast numbers getting benefits really have significant capital they just hide it from the benefits people?)
All parts of society need incentives to do the right thing. Tax needs to be simplified – get rid of national insurance and roll it into income tax, one income tax rate for everyone, and the same tax rate for income tax and share dividends. A higher tax allowance, a special one so that everyone not earning gets money given to them and not taken away, use this positive tax to replace benefits. Give everyone in the country who isn’t already on PAYE one quid a month through a PAYE payroll and let them get their positive tax rebates that way. (In doing this I have done away with masses of admin overhead of administering the social security system, and incentivised everyone to work).
Savings disregarded for all state benefits, encourage people to save! And encourage people to tell the truth about their savings.
Make all work visa holders pay the same tax and national insurance as Brits.
Taking out the massive amounts of overhead in administration by simplifying would free up money.
Yes make us more internationally competitive. Benefits accrued in the UK should be paid where ever you choose to live. Protection of British intellectual property should be tax deductible, and moving British intellectual property abroad should attract punitive taxes.
Done properly this could be sold as an improvement to all layers of society.
Importantly the incentives to do the right thing would be there.
Reply: You are right to say there are some very rich people who pay little tax but spend time here. They are the Non Doms who do not figure in these figures, as these figures are for registered resident taxpayers.
September 24, 2012
JR you say non doms pay little tax but they pay £30,000 (or £50,000 depending on length of residence – over 12 years) then taxes on their UK income. Plus all the usual stamp duty, IHT on UK assets, VED, VAT, fuel duty etc.
So they certainly pay at least 4 times the average UK tax payer and probably about 10 times. Even more if a married couple of nondoms. If we all paid that sum the deficit would be gone in no time.
September 24, 2012
I dont think so in all cases, not in the cases I am thinking about.
Plus there are lots of big companies earning big money here but paying their tax in Mauritius and other tax havens and not here.
Lots more money could be sorted for the public purse by addressing this than some of the wheezes ongoing at the moment.
September 24, 2012
Dear Iain Gill, Your argument is attractive but can have bad results. Is it better to ignore, say, Lady Green living in Monaco or crack down on Brits abroad and give the Green family a strong incentive to sell their retail clothing enterprises to a Swiss or Cayman company for more than it would be worth to them. There are many instances where attacks on UK companies over tax or executive pay have simply led to them being sold to foreign companies which, among other things, extract all the intellectual property.
September 24, 2012
My main problem is with Indian owned companies, registered in Mauritius or other tax havens, operating in this country and paying minimal tax here. Getting them to pay at least the same tax as decent tax paying British companies has no downsides.
September 25, 2012
Ian, that assumes they don’t just up-sticks, if we make it ‘difficult’ for them to operate in the UK (employ UK people) then there are other countries more than willing to make life easy…
September 25, 2012
Jerry,
I would be happy if they up-sticks. They are flooding this country with (overseas-ed) workers, moving British IP (abroad-ed) on Industrial scale, and so much more.
Companies like this are destroying this country.
They are not a benefit to the UK economy.
September 26, 2012
A general anti- avoidance principal would tend to mitigate these artificial devices and transactions which are there principally to reduce tax.
The basis of taxation could be changed to reflect where the revenue is earned/and sales are made. Most companies don’t usually decide to stop selling to their customers. It would leave a gap in the market.
Why is there not a level playing field? Why are laws drafted the way they are? Why are banks bailed out?
Why were they allowed to create money out of thin air and ignite a ponzi scheme? Why wont you get a vote on the EU? Why does it not matter if you vote LibLabCon?
So we are at £375 billion and we are worried about taxing the rich or paying free bus passes.
Our political and financial systems are corrupted and have not been purged. They are financially backing each other up and seem so intertwined. What do they have on each other? I wonder if we will get a whistleblower law like the US that pays out 10%.
September 24, 2012
Well if they are resident (broadly more than 90 days and other tests) they they either pay the same as a resident or they pay the £30K/50K non dom fee plus tax on UK income.
Or they are just cheating perhaps?
September 24, 2012
probably the later or some dodgy visa rules
September 24, 2012
It’s these two groups, non-doms and the internationally mobile, who mainly make up the London super-rich. They aren’t the 1%, or even the 0.1%, but the 0.01% – the few thousand richest people in the country. We go out of our way to entice them here: that’s what the non-dom rule is for. But there are almost no studies of their effect on the UK; of their impact on the debate about inequality and fairness; of their impact on the capital of having a group of people who simply don’t have to pay any attention to what things cost. One of the salient qualities of life in London, remarked on by long-term residents, by newcomers and by tourists, in short by everybody, is how expensive everything is. City pay is a big part of that, but the international super-rich contribute to it, too. The money they spend is obviously welcome, but it seems to me possible that it comes at too high a price to the rest of our polity. Inequality feeding down from the top of the income distribution is provably linked to a whole range of negative consequences for society, from higher rates of mental illness and incarceration and family breakdown to alcoholism, drug abuse and suicide. Ram it.
September 24, 2012
So Bazman, just deport them as they are such a danger to society.
Send the rich 1% away to other countries and we can all be left equally poor.
Another of your great ideas.
September 25, 2012
First Bazman was talking about the richest 0.01%, not the 1%.
Secondly if they’re mainly non doms they won’t be paying much tax so we won’t suffer a large loss of tax revenue.
Thirdly it will bring down the cost of living because there’s no point trying to make or sell things that only the wealthiest can afford.
September 25, 2012
Could always tax them in a proper way as we are the only country to allow this tax free regime. Not many Americans as non Doms. Wonder why?
September 26, 2012
Wrong again Bazman Ireland does and many other countries have other arrangement with the similar effects of protecting world assets from tax for a while or permanently Canada, Switzerland ………… or they have tax caps at say £100,000
September 29, 2012
You are seeing a society run for the benefits of non doms and not the population in general is my point. Tax exiles undermining democracy. A Tory weak point.
September 25, 2012
How many people suffering from mental illness, alcoholism, drug abuse or suicidal have heard say “My troubles would be over if only you got rid of the richest 0.01% of the population.”?
September 25, 2012
So unaime5,
It appears you would really like to deport these rich 1% or 0.1% or 0.01%, off to other countries, just because they have more money than you.
I think we see where we are heading if you ever had any power, God forbid.
It seems you feel paying £30,000 tax per non-dom is insignificant, well its a lot more than either you or I contribute annually.
Love the bit about “no point making or selling things only the wealthiest can afford”, very North Korean.
Try standing up in front of few hundred staff at Aston Martin or Sunseeker or Bentley’s factory and see what reception you get.
September 24, 2012
Dear Iain Gill,
You make some very good suggestions, particularly on savings and British intellectual property. Non-doms are a harder nut to crack. I have some very distant in-laws of in-laws who spent their married life as ex-pats and now spend most of their retirement income travelling round the world twice a year to avoid being domiciled for tax anywhere. Frankly, I pity them.
September 24, 2012
A lot of good common sense in there! But it seems to suit the political system so that the majority are divided against each other. Meanwhile EU integration continues apace and waste. Overseas aid and EU subs just for starters best part of £20 billion. Add in the BBC £3.5 billion. A serious look at CEO level senior public sector pay with paycaps and pension caps applied in the public sector.
September 24, 2012
The rich pay more tax as a group than the less rich, but less individually as a % of their income. In other words, their pockets are less hard hit than those of the poorer folk. As the rich enjoy the same services etc provided by the state – roads, police, courts, etc – then they should pay the same % as the poorer folk. Or should they? I dunno. It’s a difficult one. So let’s start with increasing government revenues by stamping on tax avoidance. And, more importantly, increasing employment with public works – jobs pay wages, wages pay taxes, taxes pay government bills. Simple isn’t it?
September 24, 2012
Why should they pay a % of their income (let alone a higher %) government is just like a service charge on a flat you pay for the “services”. If you pay £100K PA you are already paying 10 times your fair share. And the rich use the state services far less too in general.
September 24, 2012
A symbiotic relationship tends to work out better for both parties , a parasitic relationship ultimately kills the host and unless the parasite has been able to move on its the end for the parasite.
I think what is optimal for both should be pursued and those that do well out of the economy should be applauded but still taxed at a similar minimum effective tax rate, after all most people have used their talents to extract that wealth from society as a whole.
September 24, 2012
A democracy is supposed have a progressive tax structure that is in proportion to the means to pay. We do this because those who get more from the system do so because the democratic system offers them that ability. Their wealth is because of our system and therefore they owe back to the system in proportion. Thats why and the undermining of the democratic principles by your fantasy is unacceptable to most ‘sensible’ people.
September 24, 2012
I looked up democracy but it said nothing about progressive taxation. This is just your view of the world and I for one don’t agree with you.
September 25, 2012
Can’t have one without the other.
September 25, 2012
Bazman, as Jon said, that is not the definition of “Democracy’, it is a very good definition of Socialism though…
September 25, 2012
Adam Smith also supported a progressive taxation of the rich. Does this make him a socialist?
The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
Wealth Of Nations V.iie.6: p 842
September 25, 2012
@uanime5: There is progressive taxation and then there is spite! No one has suggested that the rich (leaving the issue of the 0.1% of non-doms to one side) should not pay tax and most are quite prepared to do so. What they are not prepared to be a part of, and thus will take what ever steps to avoid, such as to leave the country for tax purposes, is a level of taxation that is born out of a past age of “class-war” inspired spite….
September 25, 2012
Adam Smith also said this, does that make him a conservative?
“taxes should cost no more than necessary. They should
not require a great number of expensive officers to collect. They should not discourage industry nor destroy capital. They should not encourage evasion (as high excise taxes encourage smuggling) nor should the penalties ruin those who are driven to evasion. And they
should not require frequent, odious and vexatious visits from tax gatherers in order to collect them.”
The Wealth of Nations, Book V, Chapter II, Pt II, p. 827, para. b6
September 24, 2012
The HMRC can certainly stamp on tax evasion but quite how they stamp on what is allowed in their own tax code beats me, surely first they need to do less stamping around and a little more work on the tax code!
September 24, 2012
Any further raising of tax receipts will do no more than accelerate the recession by reducing growth. With the government now spending in excess of fifty percent of our annual product this is no longer a case of finding new ways to raise tax revenue. Now is the time to find ways to reduce tax revenue.
Cameron should dispense with the services of the LibDems and if he does not do so he should forget any prospect of growth in the economy.
All so easy to hit the headlines when in opposition with such phrases as “bonfire of quangos” and “war on waste” but now, or better still four years ago, would be a good time to action some serious cuts without the interference of the LibDem lobby.
Thre is no light at the end of the tunnel and there can be no green shoots of recovery until resources are returned to the private sector. No growth will exist for any country that practices such a foolish economic strategy requiring yet more government spending.
The government is a consumer and the more it consumes of the total product the less there is for the productive sector.
The welfare state shows us clearly what happens when there is consumption without production so why is it the politicians are unable to see it?
September 24, 2012
Once the debate goes to “fair share” one knows there is a major problem. The traditional approach to tax was to question whether the tax payer pays what is legally due. We are now well towards it being accepted that avoidance equals evasion. At that point we should all, rich and poor be worried because that means that he state will decide what anyone is allowed to keep. Eventually it will be very little.
September 24, 2012
Mr. Redwood, a splendid argument, expressed in terms so simple that even Mr. Clegg might understand it.
However, I beg to take issue with you over the effect of UK ‘National Insurance’ (which is arguably the greatest and most successful con trick ever foisted upon a nation); whoever ‘pays’ the NIC to HMRC, the ’employer’s contribution’ must always be EARNED by the employee (or else a P45 happens, at least in the private sector).
Thus, the true rate of tax on earnings must include that part of the ’employer’s contribution’ which cannot be set against taxable profits … if there are any.
Hence, in your example, that 2% should really be 15.8% (reducing to 12.5% only if the employer has taxable profits).
September 24, 2012
Many years ago I wanted to display the Employer NI on payslips. I was told this wasn’t permitted. I never checked to see if this was the case as I didn’t really have the time to get involved with messing around as such, but I did and still do put a copy of the table up so anyone can see what their Top Line would have been if this slight of hand tax did not exist.
It is a shame that unscrupulous employers would not follow this, but what a great effect it would have if Employer NI was scrapped on condition of it funding a direct pay increase at the time. That would certianly flood into the economy.
September 25, 2012
@Mark W
The government really are quite dishonest in keeping taxes hidden away from plain sight.
Employers NI should be clearly printed on all payslips, furthermore VAT should be clearly displayed on all receipts and alcohol and fuel duty should also be displayed, so that the plebs can get a better idea of how much the state is costing them.
Support the Taxpayers Alliance!
September 24, 2012
A slightly biased view as it only really considers income tax. When NI is added a different picture emerges.
When one takes into account the higher proportion of the spend of the lower earners that is subject to VAT, the proportion of incomes spent on council tax etc. the relative proportion paid by the rich reduces considerably.
September 24, 2012
The LibDems do not really care if a tax on the rich brings in less money – they are more interested in punishing the successful than revenue raising and much of the media sympathises with this view. Can anyone say exactly what is the difference between LibDems and Labour
September 24, 2012
The next time that you speak to Nick Clegg (after his stupid Party conference is over) do remind him of a few home truths:
– Deficit reduction measures are at most 40% complete
– We’ve had tax rises but the bulk of public expenditure cuts is yet to come
– The incomes of people not working have risen than those of people working
– A top income tax rate of 40% will increase the amount of income tax received
– The 40% income tax threshold needs to be raised to £50,000 if votes are not to be lost
– The only acceptable wealth/mansion tax is to split the top council tax band
– Overseas Aid, particularly EU overseas aid, is being misapplied
– If the LibDems don’t agree to further deficit reduction, they are of no further use
September 24, 2012
“If the LibDems don’t agree to further deficit reduction, they are of no further use”
That depends on whether someone wants a general election before 2015 or not…
September 25, 2012
I want to ditch the LibDems after the 2013 Finance Act is safely on the Statute book. That gives us 9 months to create an alliance with UKIP, which should be enough.
September 25, 2012
But UKIP doesn’t have any MPs, so that means an early elections, which means in all probability a Labour government… What you propose is called cutting your own nose off to spite someone else’s face!
September 25, 2012
Also, if the LDs start to think that they are going to be cast aside like a used rag they can still scupper 2013 Finance Act, possibly regaining some of their electoral credentials back from disaffected supporters – you know the ones,those who would have preferred the LDs to be in coalition with Labour…
September 25, 2012
The alliance with UKIP would be for the 2015 election and the NEXT parliament, not this one. You no doubt heard Vince Cable say that at some stage the LibDems would want to leave coalition government and reassert their own identity. Well, what’s sauce for the goose is sauce for the gander.
September 26, 2012
Lindsay, it doesn’t take nine months to form a coalition, well I hope not! It is great that the LDs are apparently committed to not bringing the government down in the run up to the next election but let me rephrase what I said; UKIP have got to get MPs elected [1], in all their years they have not managed to even come a distant second (not even in that usual place for protest votes, the by-election), so statistically this means that should there be another coalition it is far more likely to be between either -once again- the Tories and LDs or the LDs and Labour (with perhaps others), with the latter being far more likely should the Tories cast the LD aside like a used rag as you suggested. You seem to forget that whilst the LDs need the Tories the Tories also need the LDs.
[1] and if UKIP do make surprise gains at the polls – then all bets are off, why, because the most likely seats for UKIP to win are marginal Tory ones, thus any Tory/UKIP alliance might only end up with the same number of seats between them in the Commons had UKIP not stood at all
September 24, 2012
“… you need to have a tax system which attracts more very rich people here, and which tempts rich people to invest, venture and spend in ways which trigger more tax revenue from them.”
Not necessarily a tax system, there is also the asylum system that classifies certain categories of (people including those with a criminal record-ed) as victims of political persecution. Somehow such people are able to come to this country with shed loads of other peoples’ money and buy up mansions staffed with people who are not of native stock, whilst those contemplating a semi-detached bungalow have to demonstrate the legitimacy of their possession of the enormous wealth entailed.
Being able to acquire business assets (by dubious means-ed) in other countries does not demonstrate an ability to create legitimate businesses here. On the other hand, since the Industrial Revolution and until the advent of permanent socialist government and the necessarily very high taxes to pay for it, spontaneously there had been entrepreneurial activity to benefit from each scientific and engineering discovery as it occurred, and this country had been in the vanguard of such developments. Such activity has now been diverted into ‘engineering’ toxic financial ‘products’ to cheat individuals and organisations, to rig markets, concocting ways of extracting taxpayers’ money from the government for value destroying white elephants, creating ever new ways of regulating and taxing, of living a whole adult lifetime, including a fat pension, to the detriment and the expense of taxpayers.
Never mind attracting crooks, how about some proper education for science and technology together with supply side reforms to unlease endogenous entrepeneurial wealth creation, rather than looking at the Germans and their engineering achievements as though they belonged to a different species?
September 24, 2012
It is quite likely that Clegg knows enough economics to know that tax rates are likely to be beyiond the Laffer curve peak and that increasing tax rates will not increase revenue.
However they do divert criticism from politicians and encourage the claims that rich people are in some way responsible for the recession while political leaders were somewhere else.
September 25, 2012
Given that the Laffer Curve says the peak is between 30-70% it’s entirely possible that the UK’s tax rate hasn’t gone over the peak.
September 25, 2012
It must be very close to (if not through) that peak, taking all taxes into account, remember that the rich tend to pay higher CGT, Stamp, even VED rates etc.
September 25, 2012
That is a “given” for which Uni, as ever, produces no evidence. Most depictions of the Laffer curve peak at 20-30%.
“Given” that all “left wingers” are equally contemptous of facts they must all normally be wrong.
September 25, 2012
The 2008 article by Don Fullerton in the New Palgrave Dictionary of Economics (2nd ed.) says the Laffer Curve peaks at 70%
http://www.dictionaryofeconomics.com/article?id=pde2008_L000015
The economist Paul Pecorino presented a model in 1995 that predicted the peak of the Laffer curve would occur at a 65% tax rate.
http://www.sciencedirect.com/science/article/pii/0304393295012249
Finally there’s the analysis by Trabandt and Uhlig which showed that Europe and America are not getting the maximum tax revenues because their tax rates are too low.
http://www.ecb.int/pub/pdf/scpwps/ecbwp1174.pdf
I notice that you couldn’t provide any evidence for your 20-30% range. Care to explain why.
September 25, 2012
DeaR uANIME5,
Addressing the “Laffer” question, the UK Mirrlees review, as memory serves, suggested that a top income tax and deductions rate of 50-55 per cent would be revenue-maximising. (ie we are about there) .
But there is also the question of what level is best for economic growth. The two need not be the same and I doubt if it would be higher than the revenue-maximising rate. Many here might suggest it would be markedly lower. The optimum rate might be somewhere between those which maximised growth and immediate revenue .
September 26, 2012
When offering evidence you may want to check the worth of references – it would would appear that the New Palgrave Dictionary of Economics is widely criticised for it’s acute lack of grounding in actual facts or data. I got that from the same primary source you used – Wikipedia.
The Trabant and Uhlig analysis states it is not supported by the ECB and in any case an EUphilic study is highly likely to complain about competitor tax advantages.
I don’t know about Paul Pecorino other than what is in the ‘academic research’ section of the same Wikipedia article that you looked at and I am not prepared to pay $31.50 to get through the pay wall. However, you neglect to include other statements from that wikipedia section such as “A 1996 study by Y. Hsing of the United States economy between 1959 and 1991 placed the revenue-maximizing federal tax rate between 32.67% and 35.21%.”
Care to explain why you didn’t include the Hsing numbers which aren’t far off the 20-30% range you question and no where near the 65-70% you promote?
September 26, 2012
Your first article does not say the curve peaks at 70% – it says it doesn’t know. Iy also says elesticity is the same across the board which woulkd obviously mean there is nio curve and suggests some ignorance of the concept.
I assume the other links are equally valueless.
Here are a whole range of such curves which, while far from total agreement, do cluster around the figure I gave. https://www.google.com/search?num=10&hl=en&site=imghp&tbm=isch&source=hp&biw=756&bih=433&q=laffer+curve+washington+post&oq=laffer+curve+washington+post&gs_l=img.3…4578.13563.0.15407.30.13.1.16.17.0.203.1564.2j9j1.12.0…0.0…1ac.1.d2Isvj0ZmFo#hl=en&site=imghp&tbm=isch&sa=1&q=laffer+curve+washi8ngton+post&oq=laffer+curve+washi8ngton+post&gs_l=img.3…27375.31938.0.32391.17.13.0.0.0.0.313.1954.0j6j3j1.10.0…0.0…1c.1.robiIGgaYW0&bav=on.2,or.r_gc.r_pw.&fp=62f64e77e4802577&biw=756&bih=433
Also note that the Laffer curve only shows what government gets. By definition the optimim point for government revenue is far higher than the optimim point for total productivity of the society. Those of us who care for society (call us “socialists”) more than for big government structure (ie “totalitarians”) would ideally wish taxes to be considerably lower than what optimises government grabbing.
To wish taxes to be so far above the maximising point that even totalitarians lose out, asi Uni wishes, is simply perverse.
September 25, 2012
@uanime5
Do you really not believe that higher tax rates act as a disincentive. It’s an interesting theory.
The best way to test it would be with overtime rates. Instead of having higher rates of overtime pay to encourage work, have lower ones.
Do you believe that pay rates over 35 hours a week should be offered at a lower rate of pay? (This is exactly the effect of higher tax rates at higher levels). Or do you think, as I do, that my staff would tell me to “ram it”.
September 25, 2012
I believe that the difficulty in finding a job that pays more money in another country acts a greater disincentive than a higher tax rate.
Well if overtime had to be paid at a lower rate it would lead to less people working overtime and more people being employed. So yes it would be better for the economy.
September 25, 2012
Thank you for agreeing. You do accept that if overtime were at a lower rate then less people would do it. I’m most grateful that you do understand the disincentive logic of higher tax rates.
September 25, 2012
Mark W, that is a very good analogy, because for decades unions argued that premium rates were needed to encourage staff to give up an hours leisure to work an extra hour beyond standard hours.
The unions also argued that to work on a Saturday or a Sunday or a Bank Holiday even higher premium rates were needed as an further encouragement to give up leisure time.
Tax percentage rates, on this logic should therefore actually reduce at higher levels or at least not rise as income rises so as to encourage earners to keep working and earn more.
So it seems to support a flat tax rate and that high rates act as a disincentive to the earning of marginal income.
September 24, 2012
Nobody understands the tax system it is too complex and should be simplified, but it won’t be because it is too important. In this country we are:-
1) Over governed
2) Over regulated
3) over taxed
Taxing the rich will not solve anything since they pay most of the taxes anyway. We await with apprehension the first European taxes which I’m sure can’t be too far away. In general tax is a bad idea it does not help anyone since governments always spend the money unwisely and waste most of it. The best person who knows what to do with the money he earns is the individual himself, and not the government. But all I see ahead is more of the same, more government, more taxes-when will the people in power learn that it does not work and change direction i.e less government etc., Unfortunately nothing will change because Governments erroneously are only capable in moving in one direction and that is more of the same not less.
September 24, 2012
Why is there no real attempt to control state spending?
September 24, 2012
Or more to the point why does this issue not make national news story number one everyday.
Libdems are sprouting some nonsense today that they will not back any further cuts without something in return. This implies there have been cuts. I wish I’d bought a ticket to this comedy show, not sure the smell of lentils would appeal too much though.
September 24, 2012
Of course the lowest income and genuinely needy groups should not pay tax but the problem with lifting too many out of taxation is to lose the link between taxes and value for taxpayers’ money. Those who do not pay tax are much more likely to wish, and vote, for big state and high taxes since they will not be paying for the high tax and spend we see at present. The current American election is being fought on that distinction between the state being the main provider for public services and benefits as opposed to individual aspiration and free markets.
September 24, 2012
We could start by removing NI contributions on earnings up to £10k. Why do we pretend that the low paid are being lifted out of paying tax while they are still subjected to the hidden NI tax.
It would make sense to get rid of NI completely and increase income tax to cover any lost revenue. This would at least mean unearned income was taxed at the same rate as earned income, and so the increase would be less than expected.
September 24, 2012
Interesting statistic about the bottom half paying 10% of the total income tax, being less than the amount paid out in Housing Benefit. So it does not take a genius to work out that one of the better investments these days is to become a landlord and rent that slum out to the Uk Govt.
September 24, 2012
I’ve just been listening to the Liberal Democrats conferance and I’m appauled at what they propose, they are becoming more left wing, as they see the opinion polls suggesting a Labour lead of some 10pts. Do they anticipate going into coalition with Labour? The Conservatives have to pull their socks up and get their brains in motion to counteract this, and smartly.
While the LD argue for tax rises on the rich, and they will exit the country their hundreds; we are spending billions on foreign aid, including within the EU, which we have no control over. It has been reported in the Express today, the money is going to rich countries not poor ones, which makes the whole system a farce. When will the Conservatives get the message once and for all, this expensive club over the channel has to go. Has for Hague talking about getting powers back, that’s even more farcical to hear. We all know they won’t get one back without the other 26 agreeing. So where does that leave Cameron’s ideas? Please, Mr R make it clear, this kind of spouting does the Conservaives no good whatsoever, the time has come for truth and a referendum. Sooner than later to settle this once and for all. Or lose the next election to a bunch of left wing fools.
September 25, 2012
Unless there are hundreds of jobs that pay the salaries that the rich currently earn don’t expect them to leave the country.
September 25, 2012
unaime5
You dont seem to realise that many of the high earners have very portable professions:- doctors, dentists, surveyors, lawyers, teachers, accountants, musicians, entertainers, sportsmen and women, writers, film makers academics etc that are in demand all over the world.
They can move and work in other countries that welcome them or work via the internet from another country.
I know a company with sales of £25 million in the based in the Midlands, the 2 owners of the business live in New Zealand and Jersey They run their company from there very successfully via the internet and the very occasional visit. By emmigrating they have saved hundreds of thousands of pounds in taxes compared to living in the UK.
It is a very small world now and the UK has to be both welcoming and competitive in tax matters compared to other enticing nations..
September 24, 2012
I’d love to know how much tax Cleggi-kins pays. We all know he used to work for the EU and has property in Brussels etc. and his wife works for the EU and earns a packet! I hate this socialist government which seems to hate wealth and wants to steal it from us. Isn’t that what we all aspire to? To be successful and rich? God help this country if we were all poor as the LibDims want – look what happened to Russia when the State owned and controlled everything. Cameron is no more ‘Conservative’ than his side-kicks, Vince Cable is.
September 24, 2012
Look what happened to Russia.
Maybe the fact that the old Soviet Union has gone has taken away a shining example of true Socialism in action. Post 1989 there hasn’t been such a great example on our doorstep.
September 24, 2012
Reduce taxes overall and raise the thresholds
I remember a time when tax was 19/6 in the pound (shows how long ago this was) and when chided over paying a bar bill said this has actually cost me over £100 just for four drinks! He moved out of the country and took his money with him.
September 24, 2012
Clegg and his LibDem idiots are so limited in intelligence it is hard to believe that people actually vote for them. They have the same foundations as Liebour for all their policies , namely based on Greed , Envy and Malice .
Sadly the UK is now in terminal decline , soon to be swallowed up by Merckel and the rest of her EUSSR compatriots . We will either end up as a totalitarian state or an Islamic cliphate . Not much difference really , but I reckon there will soon be a mass exodus and we will be left with the scroungers and parasites on whose votes Miliband , Balls and Co totally rely.
September 24, 2012
You state the Uk is in terminal decline, you may find this book interesting.
Going South: Why Britain will have a Third World Economy by 2014
(I hope recommending a book is not impolite on this blog, if so I’m sorry)
September 24, 2012
It would seem that their intelligence level is actually higher than that of the other parties.
September 25, 2012
@DJW: Pity none of the members use their intelligence then! Sorry but listening to the LD conference speeches Graham is quite correct when he said that their policies are born from greed, envy and malice, whilst I might have added (for some delegates from the floor) ignorance.
September 24, 2012
All forms of direct taxation are wrong ; every effort should be made to encourage enterprise and not to discourage those who work hard and become well off . Indirect taxation placed at the point of purchasing is an alternative method and has worked effectively elsewhere . The Lib/Dems have made yet another gaffe and have exposed their deplorable maths. Why the media are giving them the exposure they receive is beyond all rational thought ; they lag behind UKIP in the polls but they are given substantial daily coverage .
September 24, 2012
Will the last one leaving the UK please turn off the light ?
September 24, 2012
What lights Graham, the electricity failed when the wind dropped, did you mean to remind the last person to snuff the candle out?!
September 24, 2012
It seems the government feels we are in its debt not the other way round. It applies Pareto analysis to the people in the country it estimates owes the most to the government in taxes and then seeks to chase them relentlessly to capture the 80% owed by the 20% in general terms.
What this exercise costs must be unbelievable, both to the “Debtor” and the government in collecting it. I appreciate the figures are based on mainly commercial calculation but just because I have managed to buy a big house and grounds and probably employ vast numbers of people, or given pleasure to vast numbers through my efforts, why should I be penalised by some money grubbing politician.
I go for the flat rate idea and vat equalisation, and when the government can satisfy us it knows what it is doing with our taxes, and has a proper mandate for borrowing and spending I would be a lot happier.
By the way I thought the USA was bankrupt, owes trillions in debt, and has no National Health Service and millions below the soup line. If their debt ever got called in they would be emigrating back here.
September 24, 2012
Regarding Thrasher, he is a marked man now, when two policemen who have just been abused write up their contemporaneous notes and both agree they have been called Plebians, I suspect they are right. Mix in a little anglo saxon for bad taste and its all over for the guilty chap. I do glean some personal satisfaction and though I am not a believer I do believe that everything comes to he who waits. I suspect many flat tyres await him.
September 24, 2012
David
Everything comes to [him] who waits surely only applies to good news. Why would anybody patiently wait for bad news??
September 24, 2012
When you first joined parliament I seem to remember that the free pay threshold was raised regularly by the Lawson/Thatcher government and this theme followed into the Lamont/Major and to a lesser degree into the Clarke/Major era. Removing lower earners from Tax was Tory policy and Brown was the one who began to erode it.
Why are your party letting the Lib Dems get away with taking the credit for making progress towards a £10k threshold when this is nothing other than a return to an old Tory policy?
Why are your party not banging on til they’re blue in the face that the top rate of tax will be 5% higher next year, after it’s cut, than all but a few days of the last Labour government. (Not that I agree with the rate, it should be lower).
Peter Mandleson made a great point. You have to say something over and over again until you are bored of it, until anyone will get the message. (I paraphrase a little). This is a skill Labour use time and time again. The only time the Tories tried this approach was with fixing the roof when the sun shone, the message hit its target and when elected this governemnt had backing for PSBR reduction. Since then Labour have returned to form and the Tories have given up with simple repatative messages. The Tories could learn much from Labour tactics. They work. Simple repatative messages work!
September 24, 2012
This is just a function of a sharply curved income distribution and a flat (above the top 10% mark) tax rate. (NB. it’s flat because income becomes progressively more unearned and offset (or capital & avoided, if you prefer) as you move through that income bracket – this is more apparent in the US than the UK).
The bottom 50% earn very little, and even at the top of that income spread – £18k – only pay a total of 20% of their earnings in income taxes (i.e. NI & income tax) leaving them with a not excessive £280 a week to spend.
At the bottom of the 1% range, even after paying all that tax, you still have £1750 a weeks to spend.
I don’t know how many people reading this blog are currently trying to live on £280 / week in Wokingham, I’m not sure I’d like to try it though, £100 of that would go on a room in a shared house for starters…
September 24, 2012
Debt fuelled living standards are the equivalent of Roman “Cakes and Circuses” for the masses to keep them contented. This means getting assets from whatever source to maintain the illusion.
I never used to understand the need of women (including my wife) to keep buying new clothes etc (often mainly unnecessary from a utilitarian point of view) until it was explained to me that it was part of their self esteem and the concept of “Aren’t I worth it?
Most of society has far too high an expectation of what they should get to satisfy the “Aren’t I worth it? concept. New cars (too often), expensive foreign holidays,
personal luxuries all in excess of a dispassionate glance at what they can afford.
Couple this with Politicians who lie to us, a Financial Services Industry that robs most people blind in fees on savings, insurance and pensions and a general feeling that right now an accountant somewhere in or out of government is looking at some figures and saying “they are getting this return are they, well we’ll have that”.
It is no wonder we are in a mess. Let us leave the EU, make people stand more on their own two feet and discard the green terrorism.
September 24, 2012
Dear Mr Redwood,
You are right that excessive taxes on high earners and/or the rich are bad for any free market economy. And as Mactheknife implies above, there is plenty of evidence that cutting a fiscal deficit by slimming public spending down achieves better results for the economy than raising taxes.
There is still scope for make the tax system “fairer”. We could, for instance, graduate Employers (not employees’) National Insurance Contributions to make them a bit lower at the bottom and much higher at the top. This could help in two ways by reducing the tax disincentive to take on young unemployed and giving companies and their shareholders an incentive to curb needlessly high pretax pay at the top.
Do you think this would be a good idea ?
September 24, 2012
Further to my earlier acid comments on Cable and his Business Bank I now realize that I had it all wrong and that OF COURSE (Silly me, Why didn’t I think of this?) the answer lies in the Government’s taking a (minority–a story in itself) stake in a Securitization lookalike. WHO’D A BELIEVED IT? There was I thinking that it was CDO’s (Collateralised Debt Obligations to those not in the know) and the like that had CAUSED the problems but in fact, per Cable, they are the SOLUTION.
This is pure American Investment Banking and I don’t mean that as a compliment. I hope Rothschilds were not involved in the advice. Anything to get a “deal” out of what were previously “relationships” so that a big swinging richard can get an immediate bonus on sale then forget it and walk away.
I declare my naivety and ignorance. How is this bundle of 10 year SME loans they are going to sell (BTW, Are they going TO FORCE our Pension funds and Insurance Companies to buy this stuff?), presumably each loan with its own covenants, given that on any basis we are talking Term Loans, going to be serviced? This, if it were done at all worth a damn (never been sure), was much easier at least in concept with (American) House Mortgages and the like (in that loans stayed “Good” provided payments kept up) but can our Government possibly be daft enough to be trying to do the same thing with business loans? And with more Government borrowing to do it, yet. These are going to be small loans remember, thousands or millions of them to each securitization.
Dear John, Are you on board this idea? Is there mitigation I’m not clever enough to perceive?? I have to admit the only information I have seen so far was one News Item. No doubt Lifelogic will have the answer! The BBC seem to think it’s a gr8 idea which must be the kiss of death.
Reply: £1 billion kicking in in eighteen months time does not seem to me to be significant item in a £1500 billion economy. I will keep saying you need to get the £1500 billion balance sheet bank, RBS, sorted out to get anywhere.
September 25, 2012
Dear Leslie Singleton,
£1 billion sounds about right to fund the pensions of ministers, MPs and the topmost ranks of civil servants. Payment by results, no guarantee. Just likew the rest of us.
September 24, 2012
I agree with that. One thing the government needs to be mindful of though is that stealth taxes hit the the low to middle income earners proportionately more making them more sensitive to tax rates paid. More tax on fuel, on smokers (20% adult population) hits people with low or no disposable income (NEST is on its way). FTSE Directors do not help matters by awarding themselves massive percentage payrises each year.
Mr Clegg had some daft idea about pension lump sums being used as a guarantor for mortgages for parents children. This is also mad for a number of reasons.
Also I’m getting even more irritated by Vince Cable.
September 24, 2012
…. Re: Mr Cleggs pension lump sum guarantor scheme idea.
I won’t (but could) go into some of the reasons why not only is it a bad idea but an Adviser and their compliance people would not touch it for say the middle income people that is suggested its for.
Where it does become a risk/compliance possibility would be for the very wealthy. I can see it being used as an additional tax efficient tool to extend a property portfolio for the very wealthy.
If I take Mr Clegg at face value in that the above is not his intention but that he wants to shower the poor and needy with scented rose petals then it won’t be the first time that delving into pensions has resulted in a gift for the wealthy.
A large proportion of Stakeholders were used by the more wealthy. Grandparents took out plans for their grandchildren at a rate of £3600pa as the earnings requirement was removed. The grandparents with million pound bonds onshore and offshore were only too grateful that the tax payer would contribute £1440 pa to that contribution.
Business owners used to pay their spouses a certain amount to allow them to pay their spouses a pension contribution. The removal of the earnings requirement meant they could pay the spouse personal allowance sum plus the £3600 pa pension included within the nice contribution from the taxpayer.
What are we to do with these people Mr Redwood??
September 24, 2012
What is wrong with the very rich paying what they are supoposed to. It isn’t such a difficult concept. If they did, taxes could be reduced for all.
September 24, 2012
Sorry Credible, But again I see an example of begging the question (THE question that is, as against A question), viz are the rich going to leave so we lose their tax paid let alone their expertise in running companies, themselves paying tax, and providing jobs for individuals who also pay tax, and if they do is the overall effect greater or lesser than what you are maintaining?
September 25, 2012
So you are saying the rich will only hang around if they can get away with paying a lower rate of tax than ordinary working people. Perhaps you’re right, sad though.
In my experience, when the ‘best’ leave a company they get replaced, sometime for the better, nobody is indispensible.
September 24, 2012
What exactly are you suggesting? That all the ‘rich’ (might be interesting to elaborate on what you regard rich as) don’t pay their share and are all evading tax? If that was so, they’d be done for tax evasion wouldn’t they? Please do try to keep up.
September 25, 2012
Dream on.
September 24, 2012
… and with RDR the only people who can afford the advice to get these deals are the wealthy.
Any proposal now that requires advice will require the same type of payment that is made to an accountant or solicitor ruling out the masses. The government cannot bring in a measure that requires advice when the average can no longer afford it because of changes they are about to enforce.
September 24, 2012
Easy question, How much tax should rich pay? Answer none , How much tax should anyone pay? answer none.
All state services should be paid for directly
September 25, 2012
Given that in every country that tried this the result has always been that only the wealthy can afford education and healthcare it’s the fastest way to turn the UK into a third world country.
September 26, 2012
What would constitute a state service roads for example? I presume you are in favour of all roads being toll roads and if not enough motorists use them closed?
September 24, 2012
As Cleggy says, many do not put in a shift for Britain. They just sit on large piles of cash and assets. They bleat about how hard done by they are whilst trying to undermine this country with threats to leave and pressure on politicians supported by fantasists. Many of the workforce are on the same money they where ten years ago. On top of this it is a completely bogus argument being used in US too by Republicans. It compares percentage of population with percentage tax rather than percentage wealth with percentage tax. If you earn 30% of the wealth you should pay 30% of the total tax take. ie: a fair payment of tax would be everyone contributing the same percentage of their income so that their total contribution worked out the same as their percentage wealth. If the top 1% of earners only earned 1% of the total taxable income the article would make sense and the outrage about paying 30% of the tax take would be valid but they don’t earn 1% of income they earn around 50% of total taxable income, so they are getting a good deal only paying 30% of the tax take. The top 1% with all the tax “efficiencies” and legal avoidance can often end up paying almost no tax on their income. Whereas someone even on middle/low incomes pays around 30% of their income in tax. Ram it.
September 25, 2012
Bazman,
You complain about rich people “sitting on large piles of cash…” well you should ask yourself what you would do if you won a few million on the lottery.
Would you risk most of it investing in a business employing people or perhaps investing it in property development, or would you just put the money in a nice safe interest bearing account with no risk and sit back, relax and enjoy life?
You would need to get a much better return for your more risky business investment to make it worth all the extra work.
And that is exactly why many with “piles of cash” currently are sitting back and not creating jobs because the return versus risk is not attractive enough and high taxes have their part to play in this.
September 25, 2012
I would buy a yacht and cover it with woman and admire it from my plastic chair like a piece of art.
September 26, 2012
I respect your choice, its your money and you should be able to do whatever you want with it.
However I feel its a shame that you are put off investing your winnings into a new or established buisiness and thereby employing many people who would thank you for providing them with a good living, especially if they are currently unemployed.
Can I ask, is it a lack of potential return on your investment that you worry about or is it the high tax regime in this country or the burden and responsibility of meeting rall the regulations that makes you feel retirement is your best option?!
September 27, 2012
The name? Bazlass I. A new generation of luxury called Bazclass. All other yachts are now obsolete.
I would be employing yacht builders, helicopter sale/service, sailors, port taxes and personnel to service the yacht, helping young woman with often no way forward in life and others to put themselves through university and college. Age will not be a bar as many older woman will be employed as chaperones, guards, cooks etc. A ship of this size ain’t going to be cheap to run and top models don’t come cheap either. Celebrities from all walks of life will want to come and visit tourists will look in awe. The list goes on with wealth cascading to the very bottom of society in many countries. You seem to think I am going to spend my money on some sort of floating gin place when this is an entirely altruistic endeavour with lots of charity work being carried out in the name of finding a cure for malaria. The worlds biggest killer by far. There will be many hateful and sicking examples of spite, prejudice, not to mention the absurd PC brigade, and jealousy to overcome. I ask only for a plastic chair and a good view for my efforts. Hue Hefner will be in charge of day to day running and obviously most work will have to be done while I am asleep. Ram it.
September 25, 2012
Firstly the wealthy can invest in the UK even if they don’t live here.
Secondly it’s more profitable to encourage companies to invest in the UK than wealthy individuals.
Thirdly income tax is falling because the wealthy are deferring their income to tax advantage of the low tax rate next year (50p tax band is reduced to 45p). So expect income tax to increase in 2013.
Fourthly assuming an average state tax of 5% is arbitrary. Some states, such as Alaska and Florida, have no income tax but they have corporate income tax. Some states, such as Colorado and Massachusetts, have a flat state tax. Some states, such as Vermont and Oregon, have a progressive state tax so the more you earn the higher the rate you pay. Also some cities, such as New York City, can impose their own additional taxes on all the inhabitants.
You can’t just compare one tax in a country to another tax in a country because every country balances their levels of taxation differently. You’d need determine what effect all the taxes in a country have on an average family income to be able to determine whether a country has a low or high tax rate. For example the UK has nom dom status while the US doesn’t, yet you didn’t give the UK any allowance because of this even though it is likely to attract wealthy individuals.
Finally the richest 1% pay such a large percentage of the tax revenue in the UK and USA because so many people in these countries don’t earn enough to pay income tax, not because the wealthy pay more taxes or because these countries have a large proportion of wealthy people.
In the USA in 2010 48.01% of the population earned below $25k, 75.24% earned below $50K, 88.10% earned below $75K, and only 6.61% earned over £100,000. So it’s no surprise that with so many working people in the USA not earning enough to pay income tax that the proportion of income tax paid by the wealthy is high (the top 5% pay 59% of all income taxes). Though if salaries were raised so more people paid income tax you’d see the 37% of all Income Tax paid by the top 1% wealthy sharply decrease.
http://www.census.gov/hhes/www/cpstables/032011/perinc/new01_001.htm
Reply Usual silly assertions. Top level income tax receipts fell in the year before the announcement of a forthcoming cut in the rate. Wealthy individuals often use companies for their investments, but they want a sensible individual rate of tax as ultimately they wish to benefit from their company investment.
September 25, 2012
Which of the following are you trying to encourage wealthy individuals to do?
1) Encourage non doms to invest in UK companies without working in the UK.
2) Encourage the wealthy in other countries to close their businesses, fire their employees, go through all the hassle of setting up a new business in the UK and hiring new employees, and try to convince their existing customers to still do business with them even though most employees now speak a different language and they’re in a different time zone.
3) Encourage a company to set up a new branch/factory/shop in the UK.
Only in situation 2 will offering the employer better income tax rates get a company into the UK. In situation 1 the non dom won’t be getting paid income tax so the main tax they’ll be concerned over is CGT on their dividends and in situation 3 the head of the company doesn’t move to the UK so any lower tax rates won’t effect them.
September 27, 2012
Handy for anyone having to make a sharp exit with cash and assets from the second or third world. Like money laundering by banks. I’m sure all necessary checks are carried out..
September 25, 2012
Well said. I was impressed by your arguments against Evan Harris in your recent BBC debate, too.
October 8, 2012
Of course the comparison is meaningless. Tax take of the “top 1%” is based on many factors, obviously including the income distribution within that 1% and the various tax structures. The US is an entirely different society and it is a logically and statistically invalid inference that tax avoidance is a dependent variable of tax rate, unless the UK and US are identical in all respects apart the tax rate. Also note that the 13%:28% ratio is sufficiently similar to the 17%:37% ratio to assume that it cannot be used to draw conclusions except to say that the US is more unequal than the UK.
In order for your idea to be plausible, it would help if you suggested a mechanism to explain why the expected effect (as rates go up, take goes up) does not work. Your only suggestion for such a mechanism is migration between different tax regimes (although the other possibility is illegal tax evasion). How much evidence do we really have that deciding between a disposable income of $100,000pa and $110,000pa is enough for someone to move themselves, their family and their business to another country, breaking most social and cultural ties? Economic migration is expected under conditions of survival, but surely not under these circumstances.
Very unconvincing, and almost certainly incorrect, I’m afraid.
December 14, 2012
The real issue is surely tax avoidance rather than tax rates: see http://www.guardian.co.uk/business/2012/jul/21/offshore-wealth-global-economy-tax-havens.. It seems that there would be no recession but for freewheeling by the rich and multi-national companies.