What could the Chancellor do to boost tax revenues?

In the 2010 budget the Chancellor forecast Income tax receipts of £158.4 bn from PAYE and £35.1bn from self assessment for 2014-15. In March 2014 these forecasts had fallen to £142.2bn and £27.2bn. This decline of £18.4 bn reflects the decision to raise Income Tax thresholds more, cutting Income tax receipts from lower earners. It also reflects the higher top rate of tax which has collected less revenue than expected, and less than a lower rate would have collected.

In 2010 the government forecast £1.6bn of Petroleum Revenue Tax for 2014-15, recognising the likely fall in oil tax revenues.Today we must be looking at a figure of practically nothing, given the decline in output and in the oil price.

In 2010 the forecast was for £33.4bn of fuel duties. They are now forecast at £26.8bn following successful campaigns to cut the rates.

Value added tax was put up, and this has both increased the revenues and resulted in outperformance of the forecast for money raised. National Insurance is £10 bn down on the 2010 estimate for 2014-15, despite the increase in employment. Offshore (oil based) corporation tax is down by a massive £6bn, and total Corporation Tax is down by £18bn overall, in part owing to the cuts in rates.Capital Gains Tax remains way below the £7.8bn it reached at the 18% rate in 2008-9, owing to the large increase in the rate.

When some of the main taxes in the country yield in excess of  £50bn less than forecast it is time to ask some questions about tax policy.

In a minority of cases – CGT and the top rate of Income tax – the rates are too high. Cutting the rates would increase revenues by increasing the number of rich people based here, and changing their behaviour to undertake more transactions and to receive more dividends and other remuneration.

In other cases like tax thresholds and fuel duty the revenue is lower thanks to tax cuts. Personally I support those cuts, but they do mean you have to spend less as a result, or find something else to tax.

The interesting question is Corporation Tax. The idea of lower rates should be attractive to companies looking for a place to invest. However, the rate cutting has clearly taken the rate below the optimum rate for maximising revenue. There is a feeling in the country that large multinationals should make a proper contribution to the UK as host country for part of their operations. The interesting question is how could this be done without deterring investment or driving them out of the country.


  1. Mark B
    December 2, 2014

    Good morning.

    When some of the main taxes in the country yield in excess of £50bn less than forecast it is time to ask some questions about tax policy.

    Alternatively, you could just reduce spending. But that would be going against the Chancellors Socialist-Lite instincts.

    Why not raid the Public Sector Pensions. I mean, it has worked well in getting cash from the Private Sector ?

    1. Lifelogic
      December 2, 2014

      Indeed a special state sector/private sector pension equalisation tax is needed. Start by setting an example with the hugely over generous MP’s scheme. Brown mugged the 80% in the private sector time to redress the balance perhaps.

      1. Hope
        December 2, 2014

        Does not Maasticht allow capital movement and help big business avoid tax? How changing the the Maastricht treaty? Working tax credits helps big business pay low wages which are subsidised by the UK taxpayer. No wonder mass immigration is flourishing and the Polich Minister stating he will veto any proposal to alter it. The UK subsidise EU by its contribution home and abroad. Withdraw from the EU would that help reduce tax? The EU now imposing caps on bankers bonuses how will that help our tax take or the finance industry in the UK? Note to Cameron: tax increases continue to be wasted tofund EU membership, the EU increases its spending without any consent from the public and is freely given by Osborne s we witnessed recently with the £1.7 billion additional payment. What did the UK get for this? The country cannot afford to be a member. Taxpayers have had enough.

    2. nick
      December 2, 2014

      There is no money in the civil service pension.

      The other schemes have major black holes. But you could nationalise them, flog off the assets, and then default on paying them.

      As for Johns original post. Since when is the idea extracting more money from people?

      Tax is the price of government services. Here John is just talking about raising prices and giving nothing back.

      1. Mark B
        December 2, 2014

        Good point.

        1. Hope
          December 2, 2014

          With over 509 tax increases since Cameron came rot office it appears obvious that spending cuts need to be a priority.

          This is now too late because of the coming election, therefore Osborne could resign or move over to let a person take over on a FULL time basis. He has failed as a chancellor and as a strategist for the Tory party.

          It strikes me that any of the LibLabCon will carry on increasing taxes after the election.

          Interesting piece by Hannan that any thought of treaty change has been dropped. What a surprise.

          1. Lifelogic
            December 2, 2014

            Amazing, so the renegotiation is just another no if no buts, cast iron, IHT threshold, repaying the debt, long grass/fraud against the voters. Well who’d ‘ave thought that. Cameron not telling the truth – you could blow me down with a feather!

            The only solution is UKIP holding the balance of power otherwise we might as well suffer Miliband.

      2. David Cockburn
        December 2, 2014

        JR has to talk about raising more revenue because we still have a big deficit and a huge state debt. The LibDems won’t let him talk about cutting expenditure so you will have to vote for a Tory majority if you want things to change.

        1. William Gruff
          December 2, 2014

          Voting for the least worst option is no longer an option. Voting for the Conservatives, or either of the other two, simply says to those causing the problems and making the mess carry on as you were.

          I’ve had enough and I’m voting for anyone but the Conlaberal candidates, and I don’t think it matters whom.

        2. Lifelogic
          December 2, 2014

          But half the Tory party and the leader are clearly Libdems anyway occasionally pretending not to be near elections.

          Pro EU, for green crap, 299+ tax increasing, anti-road & car, pro HS2, tax borrow and piss down the drain. Just LibDums to the core.

      3. Lifelogic
        December 2, 2014

        We know that! But there is a huge over generous government (tax payer) commitment which needs addressing. They should introduce a special state sector pension equalisation tax to take state sector pensions down to the level of the private sector ones which last time I looked were about one sixth many people having none at all.

        Needless to say the MPs 1/40 per year pension scheme is funded and so MP’s they can access it under the new rules from Osborne assuming they are not reversed by Miliband/Balls.

        Reply The MPs’ scheme which has been altered with higher contribution rates, will be altered again to change the balance more against the members in April 2015.

        1. APL
          December 2, 2014

          JR: “The MPs’ scheme which has been altered with higher contribution rates, will be altered again to change the balance more against the members in April 2015.”

          Is it the case that an MP only has to serve two Parliamentary terms to qualify for full pension rights?

          That is ten years?

          Reply No of course not! A “full” pension – two thirds salary – requires working for 34 years ( based on fiftieths)

          1. Hope
            December 6, 2014

            Working in the loose sense of the word as it is only a part time job and Goedon Brown’s record shows how little attendance is required to be given £74,000 per year plus expenses. A part time job that requires no academic qualifications, no standards or accountability to be recalled by the public.

            Reply The salary is £67,060 not £74,000. At least every five years an MP has to ask if voters want him or her to carry on doing the job, which is a very accountable way of proceeding.

        2. Lifelogic
          December 2, 2014

          Indeed bit it is still far more generous than almost anyone else’s. Worth almost as much as the salary again for some – depending on the MP’s age and longevity.

      4. Mitchel
        December 3, 2014

        The government has of course nationalised the Post Office pension fund-it had to to get the float away-grabbing its assets whilst tossing its not inconsiderable liabilities into the great black hole of unfunded future state liabilities.

    3. DaveM
      December 2, 2014

      “Alternatively, you could just reduce spending.”

      That’s way too simple!!! I tend to apply the rule that if I have little money left at the end of the month I don’t get out a payday loan to buy a new car and then give it to the next door neighbour who can’t afford to pay me back.

      We’ll be told that we can’t reduce spending because of the enaitchess and the need for social housing and improvements to schools and infrastructure to cater for the growing population.

      But the population is growing disproportionately due to out-of-control migration.

      As always, it comes down to the same thing – the EU and control of borders. Our host knows all of this, of course. Which makes me beg the question (again) – is there nothing he can do?

  2. Gary
    December 2, 2014

    We have got ourselves into such a bind, there is no painless way out.

    All debt is a claim on future production, and we have passed the point where current debt can be serviced by future production. (deflate future incomings and outgoings and you see an unbridgeable fiscal gsp)

    Increasing credit lowers rates and lower rates increase the liquidation cost of existing debt and this erodes existing capital and drives already capitalized businesses out of business.

    Risk free bond trades underwritten by the central bank(QE in all its forms) leads to hyperdeflation(currency and loan scarcity) outside of the bond market. Decimating tax receipts and driving businesses to the wall.

    Keep growing the debt and you kill the economy, stop growing the debt and the financial sector and the govt collapses, and right now those ARE the economy.

    The economy is trapped. You politicians in cahoots with the financial sector, by facilitating unlimited expansion of the latter’s loan books, sowed the seeds for this debacle right from Thatcher’s time and The Big Bang. You people must be held responsible legally and not just at elections.

    1. Hope
      December 2, 2014

      Well said.

  3. Gary
    December 2, 2014

    How do we stabilize interest rates, which we require to facilitate long term business planning, preserve capital and prevent the govt growing like a cancer ? We need to fix currency exchange rates as a first step, and better still, freeze the growth of currency by counterfeiting(adding additional units), but rather fixing the number of currency units and growing the money supply by dividing the currency units down(constant number of units, infinite fractions of units).
    This ensures that there is no currency inflation but always enough currency.

    The implications of this is an end to financialization , the inexorable growth of the financial sector at the expense of the productive sector.

  4. Narrow Shoulders
    December 2, 2014

    Mr Redwood,

    There are three interesting points raised by your piece today.

    1 if revenue is down government needs to cut spending by the same amount, not look for other revenue streams.

    2. Corporations must pay their way. A flat turnover tax seems better than corporation tax this will reward lean organisations who do not bloat costs.

    3. How nice must it be to choose which and how much tax to pay. Simplify and collect from all.

  5. Lifelogic
    December 2, 2014

    Essentially it is what governments spend that matters as this will either be raised in tax or borrowed (which is only yet more deferred taxation anyway). The UK government have always struggled to raise much more than about 36% of GDP in taxation. Yet they spend and largely & waste endlessly at around 45% of GDP. They further inconvenience the wealth creators hugely with daft employment laws, poor banking, endless daft over regulation, restrictive planning, lack of competition in banking, enforced pensions, equality drivel, expensive energy by design, misdirecting them with green and other grants…….

    Will Hutton (who can always be relied on to say something daft on the BBC) yesterday said he thought the UK was under taxed. This despite the huge increases in tax made by “I am low tax conservative at heart” Cameron & his IHT ratter and mugger in chief George Osborne.

    What they need to do is simplify taxation hugely, lower rates, stop nobbling the private sector with daft regulations and silly restrictions, stop wasting money hand over fist, cancel HS2 and all the other lunacy, cut the legal industry down to size, stop low skill (thus net loss to the government) immigration. Above all they need to cut wages in the 50% over paid and largely incompetent state sector and stop paying health people to encourage them not to work. Half of the state sector does nothing of much use. Much of it causes real active damage to the UK economy by inconveniencing and misdirecting the productive, pushing up their costs and energy prices or just stopping them through daft regulation or planning. Dyson claims he left due to not getting planning for his production factory etc ed

    Decent schools and a health system that actually worked might be good too. Vouchers are largely the solution here. Giving parent more choice, freedom and getting more competition going in both schools and medicine. Letting the good ones expand and the bad ones close down.

    1. Lifelogic
      December 2, 2014

      A real sense of vision – that we were at least moving towards a smaller, more efficient and less interfering, pro business government would have helped hugely. But from Cameron we got essentially Libdem big state drivel, tax, borrow, waste, open door low skill immigration, endless green crap and the prospect of Miliband (the voice of the state sector unions) to come very soon and repeat the Brown disaster in spades.

      At least Brown is to finally do. I tend to agree with Dr Vernan Coleman’s excellent and amusing short book on the subject of Gordon Brown.

      1. Richard1
        December 2, 2014

        The BBC has been providing a platform for eulogies of Gordon Brown by various Labour sympthisers. The latest was a monologue by Alistair Campbell, nominally being ‘interviewed’ by the Labour supporting James Naughtie. Campbell was allowed to assert without challenge that Brown had nothing to do with the financial crash and that he subsequently ‘saved the world economy’. Naughtie did not of course ask: why was there a 5% structural deficit at the height of the boom? Why was leverage in the UK banking system allowed to rise from 20x to 50x during Browns time at the Treasury (that’s the same sort of level as Leham Bros by the way)?. Why was Lloyds (allowed or encouraged? ed) to take on bankrupt HBOS? Why was £70bn spent unnecessarily on bank equity when the pain could and should have been taken by shareholders and creditors? Why was the gold sold at a 40 year low? Why is the tax system now the worlds most complex? On and on it goes. It will take decades to recover from Brown’s chancellorship. We are also informed that Brown would like a big international job – feels he is owed one. Why is abject failure in the public sector so rewarded? We don’t hear Mr Fred Goodwin demanding to be made CEO of some company – why can’t Brown retire with grace and humility given the shambles he left the UK economy in?

        1. Chris
          December 2, 2014

          The summary of Brown’s achievements by James Matthews on television news last night was equally biased, superficial and lacking in any rigorous analysis of what Brown actually did and the immense damage that he seems to have caused in so many areas. It was one long eulogy, free from challenge.

          1. DaveM
            December 2, 2014

            Aside from deflecting attention with regards to his diabolical chancellorship and premiership, the BBC keep calling him (with great reverence) “the man who saved the Union”.

            And that’s a good thing why?

          2. Richard1
            December 2, 2014

            In fairness to the BBC I caught a good interview on PM today, 2 Dec, (at about 17.10). David Smith, economics editor of the Sunday Times (one of the few economists to see the recovery coming), was asked when the problem with debt and deficit in the UK started. He said you need to go back to about 2000. In the late 90s the govt (ie the Tories) had got the deficit down, almost in balance and were looking at a surplus. Labour then went on a spending binge (he didnt say but could have that this was a huge vote buying exercise) so we went into the financial crisis with a large structural deficit – though we were at the height of the bubble & boom. Therefore we ended up with a deficit of 11% of GDP by the time Labour were done.
            It was an excellent summary and is worth taking 2 mins to listen to – it answers anyone who thinks Gordon Brown was anything other than a disaster as Chancellor.

        2. Mark B
          December 2, 2014

          Great post, Richard1. Great post.

        3. stred
          December 2, 2014

          Don’t forget his genius for keeping state debt off the books such as PFI (hire purchase) which has and will bleed the NHS and education budgets, and publicly owned private companies, which allow ex civil servants to award themselves commercial salaries and bonuses. And didn’t he love his Scottish banking whizzos.

          You can’t expect the BBC to mention this sort of thing when they pay themselves huge salaries to waste vast amounts of licence payers tax on failed projects such as the digital storage fiasco, plays where no-one can hear the words and moving all the London staff up North and then buiding new studios in London.

        4. Lifelogic
          December 2, 2014

          Indeed they keep saying he divided opinion. One assumes they mean by about 60 million people who thought he was a complete disaster (both as chancellor and as PM) to perhaps 50 people who liked him. I have yet to meet one of them. The way he tax borrowed and pissed down the drain and “rescued” RBS and the other banks was a complete and utter disaster.

          The BBC also seem to love (the also wrong on everything) Ken Clark. On yet against today (but who is alas not retiring). I suppose he feels very at home with Cameron and the barmy “BBC thinkers” as they too are clearly wrong on every issue.

          In politics is seems the more you are proved wrong on the ERM, the EU, the EURO, criminal justice, open door immigration, green crap, climate change act, high taxes and all the rest – then the more you airtime you get on the BBC.

      2. Leslie Singleton
        December 2, 2014

        Lifelogic–Wasn’t Brown the one who said (to the willing ears of the likes of especially Miliband and Balls, who, amazingly, have been allowed to shoo themselves in to his – very small – shoes) that we shouldn’t be scared of the debt?

        1. stred
          December 2, 2014

          His first comment upon finding things had gone slightly wrong was that we had to get the high leverage rate back.

        2. Lifelogic
          December 2, 2014

          I am not scared of debt, indeed much of my income comes from gearing my investment. The trouble with government is they never invest wisely. They just piss the money down the drain, divert it to their mates or use it to buy votes.

          1. stred
            December 3, 2014

            If the experience of investors borrowing from RBS and Lloyds shown on Panorama is anything to go by, they should be worried. At the first sign of a downturn in values they bring in the big accountants, who charge large fees to liquidate. Even businesses which were profitable were devoured and sold off, sometimes to firms with links to the banks. No more than 50% current value would be safe.

          2. Leslie Singleton
            December 3, 2014

            Not debt as such (of course): Brown (Financier to the World so he reckons at least so one reads) was talking about huge amounts of debt, hugely increasing, as being scarcely worthy of note, never mind fear.

      3. John E
        December 2, 2014

        Not to disagree re Mr. Brown, but he did keep us out of the Euro and his judgement of Tony Blair looks better with each passing year.

        1. formula57
          December 2, 2014

          A good point John E – but then liked a stopped clock, Brown was right twice.

        2. APL
          December 2, 2014

          John E: “and his judgement of Tony Blair looks better with each passing year.”

          Brown didn’t evaluate Blair and find his premiership wanting, it was.

          He just wanted his turn in the number one spot, which he considered his by right, since it had apparently been agreed as his for not ‘rocking the boat’ during his time as chancellor.

          We see the same thing going on between the Tory party and the Lib Dems.

  6. Sandra Cox
    December 2, 2014

    It looks as though George Osborne is going to need them to fund his latest secret plans to bail out the Eurozone. An extra £2 billion for the NHS is chicken feed compared to the UK’s risk involved in Juncker’s proposed investment fund of €315 billion – another €38 billion euros to you and me. No worries, in old money it’s only another £30.2 billion to pass on to future generations.

    Why don’t they just call it another donation to the EU project, and done with it?

    1. Timaction
      December 2, 2014

      Despite the rhetoric, nothing and I mean nothing, stands in the way of the EU political superstate project. The legacy parties just lie, lie and lie again. Today the Polish Prime Minister says he will object to the proposals to stop migrants getting either in or out of work benefits for four years. I may not like it but the legacy parties have signed us up to treaties which mean we CANNOT discriminate against other EU citizens, as that is what we ALL are now. So if Messrs Cameron/Osborne want to introduce these measures then they MUST also apply to the British people!
      I see that the Government are now building market towns to accommodate the migrant invasion, with no increase in infrastructure the health and public service cake keeps getting smaller for us.
      The Tory Government under John Major signed us up for the free movement of capital and peoples under the Maastricht Treaty and then wonders why the multi nationals locate to the lowest tax regimes and corporation tax falls or why we have the highest density of population in Europe! 485 million people from the EU have the right to move here. Those from poor former communist Countries are in great numbers and May can’t come soon enough. Analogue parties in a digital age.

    2. lojolondon
      December 2, 2014

      Because they promised they wouldn’t donate any more to the Eurozone, so they will call it a loan, and when the whole pack of cards collapses then we will get nothing back and they will say bad luck, it was a cast-iron investment that failed.
      And if you want to be treated for cancer they will say we don’t use the best treatments because that costs too much money, and if you need treatment like that little boy in England then you need to go to Croatia / Poland because the EU gives them the best!

    3. Alan_in_Derby
      December 2, 2014

      Add to that the £15billion needed for road infrastructure improvements, which coincidently seem to match the EU’s TEN-T project (Transport Network for Europe) requirements for the UK.

      1. DaveM
        December 2, 2014

        Whoa…I hadn’t thought of that! So, they do as they’re told by the EC, spend lots of money on roads without addressing the real problem of roads in towns and cities, and try to make us think they were doing us a favour re: infrastructure.

        How very, very sneaky. What bothers me more is that I’m not surprised!!

        Reply A better national roads programme is not an EU plot!

        1. Qubus
          December 3, 2014

          But HS2 is.

  7. Narrow Shoulders
    December 2, 2014

    Mr Redwood you write that income tax receipts are down on forecast in part due to the raising of thresholds to benefit the lower paid. Surely these thresholds were built into the forecasts.

    Is it not more likely that income tax receipts are depressed as a result of the wages pressure caused by oversupply of labour due to the availability of tax credit and housing benefit subsidised immigrants?

    Still as we are often told each immigrant contributes to our economy as well as enriching our society so that’s all good then.

    Just listened to the segment in Today about the local cost pressures caused by immigration. I see the left has changed its mantra on immigration. The benefits are now long term but the costs are short term. Jam tomorrow. At least he was challenged on this assertion albeit gently.

    1. Matt
      December 2, 2014

      The original plans from 2010, if I remember correctly, called for gradually raising the threshold to £10k. The government in the end went further.
      This is a good thing for the working poor, and most certainly laudable, but ended up reducing revenue. It does improve the incentive to work, and more work means more taxable income, but apparently not enough to compensate.

      1. Narrow Shoulders
        December 2, 2014

        The emergency budget of 2010 stated government policy was to take the threshold to £10k . The sums should have been forecast in my view. I believe it is not the effect of the tax threshold increase that is depressing income but the level of wages which was not foreseen as all in government know immigration to be good for the economy whereas we out here can actually see the damage.

    2. Mike Wilson
      December 2, 2014

      Is our society in need of enrichment? I quite like village greens, cricket pitches, pubs, morris dancers on a summer afternoon, fetes, cities filled with interesting buildings and museums, young lads playing football in the park at the weekend, literary festivals, music festivals, jazz in pubs … why did we need to be ‘enriched’?

      1. Denis Cooper
        December 2, 2014

        Because for about a century the UK government has been running various Ponzi schemes, all of which directly or indirectly depend on the working, and so net taxpaying, population continuing to increase.

        It started in a small way in 1908 with Lloyd George setting up an unfunded state pension scheme, but afterwards it got completely out of hand.

        So when the birth rate started to drop towards the death rate and there was the prospect of first the working population, and then later the total population, contracting rather than expanding, the government had to take some difficult decisions in its attempts to extricate itself from the mess that it had created.

        There were various options available, but the main one chosen can be summed up as:

        “If you British are not going to have enough children to sustain our Ponzi schemes then we will import other people’s children from abroad”.

        And that is what they have been doing for well over two decades, and they continue to do that, and they plan to continue to do that indefinitely.

        1. Mondeo Man
          December 2, 2014

          Denis – Except that the policy of importing other people’s children does not work either and so we are discussing today what we need to do to raise more tax.

          Truly. I don’t blame the Boomer generation their luck in cornering the housing market and securing for themselves early retirements and great pensions (a thing of the past for most of mine.)

          But what I DO blame them for (having been gifted the most polite, orderly, stable and secure society) is allowing Britain to be turned into a place that could quite easily go Mad Max within their children’s lifetimes.

          As guardians of that which was bequeathed them by the magnificent WW2 generation they have utterly failed and deserve contempt.

          Perhaps instead of raising tax some of their wealth should be liberated to rescue the country they helped to ruin.

          1. Denis Cooper
            December 3, 2014

            I think it’s too harsh to lay so much of the blame on ordinary people who simply took on trust what they were being told by their political, social and religious leaders in that “polite, orderly, stable and secure society”; it is surely those leaders, or more accurately in many cases misleaders, who should be held in the greatest contempt.

          2. Mondeo Man
            December 4, 2014

            Denis – Why is the onus (in most cases) on the cash poor buyer to pay the stamp duty and not the asset rich seller ?

            This would redress some of the imbalance between the generations.

            (The real question is why we all need to be taxed so much in the first place !)

        2. HORACE
          December 2, 2014

          All they had to do was make abortions illegal or provide incentives for indigenous folk to have kids

          1. Mondeo Man
            December 4, 2014

            The fact is that mass immigration – ostensibly to pay pensions – started during a baby boom in the 50s and 60s.

            There has been a long term policy – from all parties – to change this country.

          2. Denis Cooper
            December 5, 2014

            JR has chosen not to publish my reply to you; I can guess why, and that is not because there was anything extreme or unreasonable in my remarks but because they could provoke very unreasonable reactions from some extremists.

      2. margaret brandreth-j
        December 2, 2014

        So nostalgic but not rich enoughto be large glass buildings , grey suits , sitting in lines at computers reflecting computer speak . Home brews and country pubs not rich enough as gallons of cheap sliv and liver disease. Dust and grease blown take away wrappers not as rich as Roast beef and Yorkshire pudding and the occasional fish and chips on friday. Church choirs, School assemblies , guides and scouts not as rich as hoodies and the damp homeless attic dwellers . Rover , Rolls , Ford not as rich as continental lorries full of immigrants .!!

      3. Tad Davison
        December 2, 2014

        Well said Mike! The dream of a nation at peace with itself was an attainable goal and may not have been that far away. And there’s something to be said for ‘live and let live’ rather than ‘do as I say, not as I do’.


        1. Lifelogic
          December 2, 2014

          It is always do as I say not as I do for most politicians (with their pensions for example and expenses) and indeed the “fake green” Prince Charles with his (large ed) annual travel bills and Aston Martins.

        2. Mondeo Man
          December 2, 2014

          Tad – The point was to divide a country by destroying its ability to reach a cultural consensus.

          There is no point in a Conservative Party in a country in which nothing is allowed to be conserved.

      4. DaveM
        December 2, 2014

        Quite right Mike.

        We did OK for quite a long time really, and in all honesty English people will continue to do those things in spite of the PC loony lefties who want to destroy our culture and heritage in the name of “progress” and “diversity”. And spend great wads of our cash attempting it.

        Nothing’s ever been perfect, but as our country’s population has gradually expanded over the centuries, so has the infrastructure, etc.

        It’s only now – with uncontrolled migration – that we can’t keep up either practically or financially.

        Like I said – we did OK for a long time. It’s only now when we cling to the EU in hope of enrichment (whatever that means) that things seem to have gone badly wrong.

  8. John E
    December 2, 2014

    There should be a minimum corporation tax payable of 2% of turnover.
    The tax paid by a business in the UK would be the greater of this turnover tax or the usual corporation tax. This 2% to be a strict minimum – no allowances, no carry over or look backs, no more complications for the accountants to exploit.

    Then corporation tax regimes across the EU need to be harmonised to stop exploitative special deals being offered by smaller members acting as tax havens at the expense of the rest of us.

    As to the rest, ask not what can be done but what should stop being done. We are well overdue a Lawson type radical simplification of the tax code.

  9. British Nationalist
    December 2, 2014

    The two obvious geese ripe for plucking are: (i) multinational corporates who are channeling profit through tax havens by transfer charging – they would not decamp if forced to pay more tax, the UK is just too lucrative for them, and (ii) rich foreigners who own property in the UK. France and Spain are already looking doing this. Some of these foreigners would decamp, but since I don’t like the way the country is being bought up piecemeal by people who (did well financially in ed) their own countries I don’t mind if they do leave. We should not be hidey-hole-of-choice for ill-gotten gains.

    1. Mike Wilson
      December 2, 2014

      According to a program on the box last night, 75% of new builds in London are bought by overseas investors. And you get people like Boris Johnson celebrating this! The program was full of ordinary people born and brought up in London having to move out because they can’t afford to live where they grew up. And our politicians are proud of this! We, truly, are led by half wits. Who votes for these people? I don’t.

      1. Mitchel
        December 3, 2014

        That mantra beloved of the Osborne-Cameron-Johnson set “Britains open for Business” means nothing more than Britain’s up for sale.

        When you hear talk of inward investment it is easy to suppose it’s foreign companies building new factories and infrastrusture,etc when the reality is that the figures largely comprise the purchase of existing assets.

    2. lifelogic
      December 2, 2014

      Every time you pluck the geese you damage the economy and in the long run damage tax revenues. Especially as so much the government does is damaging or totally pointless.

      But there should be a level playing field for small businesses (such as individual coffee shops) that pay taxes in the UK and huge multinationals that often do not.

  10. Mike Stallard
    December 2, 2014

    Well, way back in the 1990s, the system worked fairly well. Mr Brown, however, did two bad things. The first was to mix the Excise with the Treasury. The second was to make the whole system impossibly difficult.
    I think the motivation could have been to bribe us with our own money.
    We urgently need a system which is fair to everyone – rich and poor alike and which is so simple that it is not worth avoiding it. Multinationals and penniless immigrants alike should contribute.
    Another things that would help is to make the sacred NHS completely self funding like a sort of national insurance scheme (:>. What is the cliche? Ring fence? Triple Lock?

    Mr Osborne seems to have adopted Mr Brown’s system, including the swelling deficit, lock stock and barrel. Maybe with all these new chums arriving from overseas to swell our population, it is time to get a bit more serious about making both rich and poor pay to support our creaking, bloated, inefficient, uncaring welfare system.

  11. zorro
    December 2, 2014

    Some good points here John, but the key one is that spending has to be controlled, or find other ways to fund certain public services. I see a lot of over the top regulatory activity which seems to be consuming a lot of money and some appalling and poorly negotiated IT ‘service’ contracts in the public sector.

    If people are taxed less, they have more money to spend/choose how to provide for themselves. The thing with corporation tax is that you are not necessarily looking to raise money from it but looking to encourage forms to set up and create jobs so there is a trade off about where the rate should be. The consumption tax, VAT, is the one that brings in the money in an economy which is spending/growing so we need to look at how we can more nimble in quickly varying/changing tax policy within the economic cycle.

    Personally speaking, I doubt that the coffee firms or multinationals will decamp if corporation tax is raised, there are other advantages within the UK which would keep them doing business here rather than Europe or elsewhere. One of those reasons is the flexible money policy currently in place which is allowing people to have their daily latte!


    1. Mitchel
      December 3, 2014

      But it’s not just an issue of the corporation tax rate for many of these foreign companies,it is the way they can structure their businesses so their UK subsidiaries pay large royalties/commissions,etc for use of the parent’s brand,wiping out,for tax purposes,the underlying profits.

  12. Bob
    December 2, 2014

    That’s the wrong question Mr Redwood, it should “What could the Chancellor do to reduce the bloated state and stop government squandering?”

    With a public sector so full of people thinking up new ways to spend money in increasingly idiotic ways. They can’t give money away fast enough on unspecified uncosted foreign aid and vanity projects (HS2). In the news today a school in Birmingham in urgent need of repairs because £1 million was siphoned off to build a new state of the art school in Pakistan.

    At this rate there will never be enough revenue to cover their spending habit, especially with interest payments on the national debt outstripping the budgets for education and policing.

    1. lifelogic
      December 2, 2014

      Exactly start by spending what they get wisely for a change, and cut state sector remuneration+pensions by a third to match those in the private sector.

      1. lifelogic
        December 2, 2014

        Set an example by starting with MPs bloated pensions.

    2. agricola
      December 2, 2014

      Bob you are right on the money , if one looks at how government runs finances my conclusion is that they are in the cuckoo’s nest. Take NI, a tax in any other name. As it was designed to pay pensions, state health, and welfare for the genuinely disadvantaged, the methodology behind it was totally flawed. Having announced it and started collecting the tax why was it never invested for the first 5-10 years to create a fund to cover the outgoings after a designated period. The outgoings could then have been controlled commensurate with the success of the investment. At household level this is how prudent financing operates. Who were the overqualified civil servants and government members who thought they could play “Rob Peter to pay Paul”, which is the way NI was set up.

      Equally why has government not curbed the level of excessive state sector pensions, and why do state sector workers not have to contribute at the same level as the self employed, or the employed sector.

      You are right to highlight the vanity projects such as HS2, why not call it the conservative Dome. Normal commercial enterprises are not prepared to invest because they can see no return so why are government so dumb. They are because they are not spending their money, have they re-mortgaged their houses to achieve it, have they hell. It is only taxpayers money so it does not count in their warped logic.

      The post colonial world has had a good 60 years to sort out it’s various manifestations. Australia, Canada, New Zealand and Singapore got it sorted and are now doing fine. Most of Africa and Asia never got the message, why do they have to have annual bribes at our expense because they have no basic interest in their own people. How long do they expect us to help their people to survive.

      Face up to it we are in the hands of over educated idiots and until they are cleared out it is all downhill in a handcart to financial hell.

  13. agricola
    December 2, 2014

    Dramatically cut spending in two ways. Eliminate a whole swathe of government interference in the lives of the people, leave the political EU, and reduce overseas aid dramatically. Involve professionals in the spending budgets of what is left because the current civil service and government are useless in this area. If looked at critically, the conduct of government is one great irresponsible Ponzi scheme.

    1. Max Dunbar
      December 2, 2014

      Just eliminate a whole swathe of government and abolish the various regional assemblies starting with the Scottish one. Vast waste of money that only achieves disunity and utter financial chaos. Many Scots would like the so-called Scottish Parliament and its increasingly autocratic leadership removed; after all almost half a million of us voted Tory.
      Councils are also huge wasters of cash and I would like to see their powers of tax raising removed and their control over education taken away. Private Eye does quite a good job of scrutinising and exposing Rotten Boroughs but the trouble is that heads never properly roll.

  14. Mike Wilson
    December 2, 2014

    It is ironic – successive governments have embraced ‘globalization’. Quite why I have never understood. It always struck me as rather obvious that it would lead to a race to the bottom where multi nationals move production to the country with the lowest labour rates. And, as we have seen, would domicile themselves where they would pay the least tax.

    I am sure after the sweat shops of the Far East, the sweat shops of Africa will be next.

    Clearly, given present circumstances, the state is too large. But no political party is willing to grasp that nettle – as it would mean a fight with the public sector unions. Or, if the position is taken that the state is not too large – that a civilized country needs a large public sector to provide a good standard of living for everyone – then, clearly, we are faced with the simple fact that, globally, a small number of people have far too much of ‘the wealth’.

    There are no easy answers to this. But the government should shrink the state gradually by reducing budgets – in real terms – by freezing budgets for 20 years. And, sorry, but the sacred cow of public sector pensions must be addressed – on both a cost and fairness basis. Also, I think tax should be moved to consumption. You can’t avoid paying taxes on petrol but rich people can reduce their tax bills to almost nothing.

  15. lifelogic
    December 2, 2014

    What could the Chancellor do to boost tax revenues?

    He should stop trying to boost revenues, he should boost the economy instead. He should leave the money with those who made it and use use it sensibly rather than taking if off them and (usually) wasting it. He has more than enough money to waste already. First cut out the endless waste he presides over (such as the green crap and HS2). Also get (all) the schools, roads and the health services so they actually work efficiently and provide a proper service.

    More drivel from the UK space agency this AM. Trying to confuse (as usual) Earth orbit satellites that usually make economic sense with outer space projects that almost never make any economic sense. Plenty of scope to save there and save the £1Bn on the proposed expensive tunnel at Stone Henge. A wider road is all that is needed, there is no shortage of land there.

    Let people see these stones as they drive past them they are not that exciting. My wife once took some Italian English Language students and they were not very keen even to get of the coach (in the rain) after the long drive from London having glimpsed it!

    Why is the BBC so kind to Gordon Brown? He has not died after all, one person said he is going out on an great high – what complete drivel he was and is a compete and utter disaster. With Bliar he destroyed the economy with a huge bloated & incompetent state sector.

    He did at least stay out of the EURO and thank goodness he bottled the early election that he would have won. This when Osborne promised (or rather lied to) us about the £1M IHT thresholds he ratted on. A shame Cameron has totally wasted the open goal he presented.

    1. Mike Wilson
      December 2, 2014

      For heaven’s sake – pick the bloody rocks up and move them half a mile away – then widen the bloody road.

      Better still, just widen the road. Plenty of room there to make it a dual carriageway.

      1. boffin
        December 2, 2014

        Indeed – there is plenty of room on the falling ground to the south –

        Q – So why build a vastly expensive tunnel?
        A – To line the right pockets, of course.

      2. stred
        December 2, 2014

        With a flyover at the roundabouts and tree screen to stop lorries and cars ruining Druid solstice worship. At a cost probably less than 5% of a tunnel with a large and permanent electricity bill.

  16. alan jutson
    December 2, 2014

    Why should we automatically be looking to maximise tax take.?

    Surely we only need to draw in the amount of tax we need to pay for the use and supply of basic services.

    If your income is not enough then you simply have to cut expenditure.
    When doing this you draw up a list of:
    Absolute essentials.
    Sensible requirements
    Optional needs
    Nice to have

    Clearly the population seem to want:
    Healthcare, police, defence, education etc and these are then listed as essentials, but within those headings there are also a percentage of optional needs and nice to have elements which need to be looked at, and perhaps trimmed back.
    EG: Gastric bands, cosmetic surgery, treatments for drunks and drug users without charge, treatment of overseas patients without cost etc.

    Thus a complete simplification of all that is provided and spent.

    This should happen first not last.

    1. alan jutson
      December 2, 2014

      In short, Simplify everything.

      The complicated way is nearly always the most expensive way.

      Unfortunately Politicians always seem to prefer the most complicated way possible, just look at how many pages they need to explain our taxation system.

      What is it now 17,000 pages long.

      Absolutely Crazy.

      I wonder how many members of Parliament have even read it, let alone understand it.!!

      Likewise provision of benefits !

      1. Mike Wilson
        December 2, 2014

        And this lot have added 5000 if those pages – as admitted by Mr. Redwood when questioned a while ago by Andrew Neill.

        1. Lifelogic
          December 2, 2014

          Indeed complexity just creates endless pointless jobs for parasites. Another overhead on industry that renders it even less competitive.

      2. Eddie Hill
        December 2, 2014

        And I wonder whether ignorance of the (tax) law is still no defence?

    2. Lifelogic
      December 2, 2014

      Indeed we should look to have a state sector of the right size for the best outcome for everyone this is about half its current size. We should not be maximising the tax take at all. Aim for say 25% of GDP that is quite enough.

  17. Antisthenes
    December 2, 2014

    Certainly tax rates are important (Brown/Darling putting up the income tax top rate to 50% was not only disingenuous and vindictive it was also disastrous) and getting the levels right is important. However just as important are other measures put in place that encourage or discourage or put to flight investment. Labour costs; some improvement here as necessary internal devaluation has been taking place but of course tax revenues have suffered. Energy policies and other rules and regulation both from domestic government and the EU have created an environment that is making the EU and UK less competitive and therefore less attractive to companies. High costs in these areas not only discourage business they depress wages and taxes(lower profits). And of course the level of government spending is still far in access of what is prudent or sustainable.

    The way politicians think has to radically changed from how can we increase taxes to how we can cut spending. There is so much governments do now that they should not.

  18. Leslie Singleton
    December 2, 2014

    Do we not have any clever chaps in the Treasury any more? Do the chaps we are stuck with disagree with everything you say, most of which would seem unarguable? Best I can see, we should move wholesale back to a tax regime similar to that in force in Nigel Lawson’s day. I do not remember how much of the then regime was down to him personally (and of course he got a lot hideously wrong) but I do remember that at the time there was a period when there was an annual surplus (remember them?) and the accumulated debt was almost completely paid off.

  19. Brian Tomkinson
    December 2, 2014

    What happened to the smaller state and economic prudence? Abandonned, I fear. Reading your comments it is increasingly clear that even you would have no intention of delivering on those promises. Not surprising, since you stood on a manifesto which has failed to deliver, amongst other things, on eliminating the deficit and controlling immigration and yet you can see no further than loyally supporting your own failing party.
    You often write in connection with the EU that you are not our problem. That may be so but you give succour to those who are and therefore you cannot be the solution.

  20. dumpling
    December 2, 2014

    This piece asks more questions than it answers. Narrow Shoulders makes a good point with turnover tax – you cannot escape that one. I also agree that governments should look to cut spending rather than increase taxes. I believe the number of employees on the public sector payroll increased by 2 million under Labour. They must be got rid of. I do appreciate that paying all of these people redundancy would put an immediate burden on the country’s coffers. Natural wastage and redeployment to necessary jobs would be a fair solution.

    The message must be – government spending has never created a net single job. Any job created is one or more diverted from the private sector. Also, the point JR repeatedly makes is that we need cheap energy to drive the economy and make it competitive.

    Finally, Osborne’s pledge to reduce the deficit to zero by 2017-18 is unachievable unless he gets a real grip on spending and persuades his colleagues to adopt a sane energy policy. Sacking Ed Davey would be as start.

  21. majorfrustration
    December 2, 2014

    When a company’s income stream dries up it either looks to cut costs or develop a new income stream. This shower at Westminster just borrows more. If I followed this approach my bank would soon decide to call it a day. The politician are spending money they don’t have and clearly show that they have no ability to look ahead and appreciate the financial implications of their policies – two three years out. Could somebody please take this Government into a dark room and explain that debts are always 100% and income should always be discounted. Manage the economy better than Labour the jury is out. If you take Government spending out of GDP whats the real GDP growth?

  22. sm
    December 2, 2014

    1. Simplify the tax regime, both for ordinary people and for those with huge incomes; make it more fuss than it is worth to try and avoid/evade taxation.

    2. Stop thinking that the NHS needs more money – it doesn’t, it needs to be properly managed (I speaking from weeks of current experience at major hospitals). If Gatwick and London Airports were run by NHS standards, almost nobody would be able to get on a plane, runways would be clogged up with luggage and planes would crash into each other very frequently, killing not only passengers but unfortunate residents who carelessly live under flight paths.

    1. Lifelogic
      December 2, 2014


    2. HORACE
      December 2, 2014

      Point 2 = Nonsense.

      Potential healthcare costs are a bottomless pit. Uk pays low proportion of GDP compared to other EU countries.

  23. Bert Young
    December 2, 2014

    The topic today is a follow up to the one yesterday ; the response I made ( unpublished ) referred to the tax dodgers using Luxembourg as the means to reduce – and in some cases , prevent the paying of taxes in this country . The amounts involved are huge . It is unfair competition to allow this evasion to occur ; tax laws should apply equally to all corporate entities . I also pointed out the unfairness of individuals being able to use the tax havens of Monaco , Switzerland , Gibraltar etc . Those who rely on this country as the prime source of their income , should not be able to escape the liability of paying taxes here .

    In the past I have mentioned the high cost of collecting tax . It would be far simpler to pay a tax on every item purchased and abolish the system we presently have . The savings in the cost of running HMRC and other directly involved bodies would be enormous . We need a dynamic force at work in the economy – I suggest this approach could be one of them .

    France is typical of a country that drives away investment and enterprise . It is not just the approach of soaking the rich that lies behind this , it is also its ridiculous labour laws and conditions . Recently a takeover of the Goodyear tyre manufacturing facility in Amiens was turned down because of the restrictive labour practices and working times . If a country does not attract inward investment and reward enterprise , it will fail to grow and pay its way . We must not fall into that trap again .

    1. Roy Grainger
      December 3, 2014

      “In the past I have mentioned the high cost of collecting tax . It would be far simpler to pay a tax on every item purchased and abolish the system we presently have”.

      We have that. VAT. It is widely evaded. I doubt the cost of PAYE is higher.

  24. formula57
    December 2, 2014

    Despite the unpopularity of such a measure, the Chancellor could increase the basic rate of income tax to 40 per cent. – and then following Labour’s Mr. Balls, close off any debate by explaining that it is appropriate as the money raised is needed for the NHS.

  25. David L
    December 2, 2014

    I’m sure there must be many major companies operating, and very profitably, in the UK but based in other countries (Eire, for example) to minimise their tax liability in the UK. It would be good if the British public were inclined to boycott these firms, but I guess the smart phones and tablets (for example) are far too essential for that to happen!

  26. oldtimer
    December 2, 2014

    The Chancellor would boost his tax revenues if he paid more attention to the efficiency of the tax system and less attention to pandering to the politics of envy and s0-called “fairness”. For example raising the rate of CGT from 18% to 28 % was a stupid move because it has reduced the amount of tax revenue raised by it. He would raise more tax revenue if he reduced the rate to say 20%. The same is almost certainly true of the higher rates of income tax which should max out at say 40%. When Lawson was Chancellor, tax revenues increased significantly when the top rate was reduced to 40%.

    Unfortunately, in the Alice in Wonderland world of the Westminster bubble, stupidity trumps common sense. It seems we can expect no more from those in charge of the three main political parties in Parliament.

  27. Sandra Cox
    December 2, 2014

    John, no matter how hard they try, Cameron and Osborne can’t get away from immigration – from Conservative Home newslink re the Autumn Statement:

    Will Osborne get the whole day to himself? Not so fast. Here comes Bill Cash with an immigration control bill…

    “His proposal is co-sponsored by prominent Tory MPs John Redwood, Bernard Jenkin, Sir Edward Leigh, Chris Heaton-Harris, Sir Gerald Howarth, Steve Baker, John Baron, Peter Bone, Jacob Rees-Mogg and Christopher Chope. As an angry backlash grows against Mr Cameron for buckling to Germany boss Angela Merkel, the rebels claim it could get the support of 100 Tories MPs if they can push it to a vote.” The Sun

    Well done John, but I’d like to know where the other 200 odd Tories are – booking their seats on the EU Gravy Train Express?

  28. Peter A
    December 2, 2014

    To improve the economy the Chancellor could quite simply veto £34b of extra payments to cover EU profligacy and the blackhole.

    It seems to me that we pay benefits on both micro and macro levels to EU. What is also astonishing is the complicity of the mainstream media, led by the BBC who refuse to report it.

  29. Denis Cooper
    December 2, 2014


    “In graphs: How George Osborne learned to stop worrying and love the debt”

    And graphs are quite appalling, except for those on the left who think it’s fine for our politicians to be addicted to “borrow and spend” as well as “tax and spend”.

    1. A different Simon
      December 2, 2014

      What is wrong with the other option ; print and spend ?

      Also it is Spend and Tax , not Tax and Spend .

      Govt must spend money into the economy before it can take tax out of the economy .

      1. Denis Cooper
        December 2, 2014

        No, it’s tax and spend, and always has been from time immemorial, your analysis is quite wrong; if they weren’t taking fiat currency from you now they’d be taking your gold or silver, coined or otherwise, or your corn or your cattle or your land, to pay for their spending, as they did in the past; and print and spend is actually the same as borrow and spend except that the borrowing is indirectly from the Bank of England rather than from private sources, but it will still have to be repaid by the government to the Bank as promised or the Bank will go bust.

        And why anyone other than a politician should think that politicians ought to be allowed to just print as much money as they want to spend and waste is quite beyond me, do they really want to live in a dictatorship?

      2. Brian Tomkinson
        December 2, 2014

        I never realised that the economy was all based on government spending. Perhaps you could tell us into which economy the money earned and spent by private businesses and individuals goes and how it is that the government has no qualms about taxing it?

        1. A different Simon
          December 3, 2014

          Brian ,

          I didn’t say that an economy was all based on Govt spending .

          I am making the point that public services cannot be funded from taxation because that would eventually extract all the money from the economy .

          Ultimately all that money earned and spend by private businesses and individuals was once issued by Govts .

          Please see Petermartin2001’s December 2, 2014 at 10:55 am post .

  30. nick
    December 2, 2014

    Taxation is theft which makes the State criminal and illegitimate but lets not talk about that bur rather how we can boost the money it is purloining.Elephant,room,Mr red wood.I refuse to accept that this state is either normal,acceptable or moral and that we should challenge the idea that the role of the state is to steal from its citizens and then seek to appeal to them at election time with offers of money which have been taken from them in the first place.Who needs Lewis Carol in this theatre of the absurd?

    1. Mark B
      December 2, 2014

      Taxation by the State is not theft. The State has the right to demand monies from the citizenry to pay for basic costs. eg Defence, Police and Judiciary, Government and Civil Service etc.

      What it does not have the right to do, is to compete in the market place against private business. eg Schools, healthcare, transport. It also does not have the right, to send monies to other countries. Either in the form of aid or payments like we see with the EU.

      If Government just stuck to its core job, there would be more competition, less waste and far fewer issues, both social and economic.

      Government is NOT our friend.

    2. petermartin2001
      December 2, 2014

      In a democracy, the role of the State is what the electorate consider it to be.

      The role of taxation in establishing a value to the currency also needs to be recognised. No State means no taxation, which in turn means the currency becomes worthless, as happened when the GDR and the Confederacy suddenly ceased to exist.

      That doesn’t mean we should be over-taxed though!

  31. petermartin2001
    December 2, 2014

    You can’t boost overall tax revenues unless the economy itself is boosted.

    Government creates money as a currency issuer when it spends. That money then passes into the hands of the currency users who spend and respend it. If taxes are finite it will all eventually end up back with the government as taxes are levied at each stage. Where else can it go?

    That money can only be temporarily reprieved from its ultimate fate if it is saved. Those savers can be you or I, or the Central banks of the big exporters. This is why the UK Government isn’t getting back all the money that it issues. Why do we expect it to?

    Trying to close the deficit by cutting spending and raising taxation revenue is a futile exercise as we can see from our own observations. It can only succeed if it makes everyone so poor that they can’t afford to net save or buy imports from the exporters.

    1. A different Simon
      December 2, 2014

      Petermartin2001 ,

      What you say is true .

      The Govt must spend more money into existence than it extracts from the economy in taxation .

      The purpose of taxation has never been to fund Govt spending on an ongoing basis .

      We can expect the Govt to spend the money more wisely but overall it must increase expenditure .

      1. Denis Cooper
        December 2, 2014

        “We can expect the Govt to spend the money more wisely”

        You must be joking; and the more easily it can get money the more unwise, and wasteful, and corrupt, it becomes in the spending of it.

        1. A different Simon
          December 3, 2014

          Petermartin2001’s point remains true .

          Neither your post nor your previous post proves otherwise .

    2. petermartin2001
      December 2, 2014

      “You can’t boost overall tax revenues unless the economy itself is boosted.”

      I’ve just had slight second thoughts about my previous comment.

      It is possible to extract more tax revenue from individuals or companies who dodge their tax. If they’d otherwise have saved the proceeds of their avoidance/evasion, tax revenue would increase without the economy being boosted.

      If they would have otherwise spent the proceeds, the extra tax would have depressed the economy by preventing that extra spending, meaning that overall revenue would not increase.

      So taxation should be use to regulate the economy to prevent inflation, but not overdone to the extent of creating recession.

      I’m not, though, arguing that the reflationary effect of tax cheating should be used as a moral justification for that cheating, even though reflation is clearly what the economy needs right now.

  32. Simonro
    December 2, 2014

    So… Reducing taxes on the poor decreases tax income, but increasing taxes on the rich… Also decreases tax income.

  33. lojolondon
    December 2, 2014

    John, simplification is the answer. A low, flat rate on earnings is fair, for companies and for people. Scrap IHT. VAT is fine as it cuts across all levels. Totally remove tax on fuel and drink and cigarettes and any other ‘special cases’. Remove the singularly dishonest ‘tax credits’ and allowances. Make our tax legislation as simple and fair as Singapore’s example and watch tax revenues soar.

  34. Ian wragg
    December 2, 2014

    Interesting that the more in work the lower the tax take
    Extrapolating this due to your abject stupidity of importing half a million immigrants yearly, with the increase in in work benefits you should have us bankrupt before 2020.
    We really are governed by a bunch of financially illiterate morons.
    Roll on May.

  35. Max Dunbar
    December 2, 2014

    If the heading had read:
    ‘What can the chancellor do to reduce taxes and maximise value for money from the Public Sector?’, I would have felt more optimistic. After all, you still call yourselves The Conservative Party even if the Lib-Dem tail wags the dog.

  36. boffin
    December 2, 2014

    Corporation tax is indeed the interesting question – HMRC permits software licencing costs (recurring at < 2-yearly intervals) to be set against profits for CT computation.

    That money goes to overseas software houses, much to the detriment of the Exchequer.

    In July, the Cabinet Office bravely required that Government adopt Open Document Format rather than proprietary formats of commercial software houses (a move long overdue). In fact, non-proprietary and indeed cost-free software exists to do most things done by the commercial stuff (usually better IMHO). Just for instance, see the listing 'Users and deployments' for this one example … and note the cost savings…

    Removal of this unnecessary tax concession would benefit the Treasury (and the Current Account) in £billions … probably no official is capable of assessing the true figure properly, or it would be worth a Parliamentary question … but commercial vested interests (the big software merchants, mentioning no names!) would no doubt mount the most intense lobbying ever seen to maintain it.

  37. Gumpy Goat
    December 2, 2014

    Apart from the obvious getting the multinational pay their fair share. The problem appears that we have too many low paid jobs. This sadly something we may have to get used due technological change. many medium paid jobs are going to disappear die to rise of the machine – this has been predicted by many pundits and publication, The economist recently had a series of articles about this topic. I find almost criminal that our politicians are not bringing out policies to deal with this. I f you want to raise revenue, tax that section of the community that has seen their earnings grow the Pensioner!! We should be investing more in our young not loading them with debt to look after the old

  38. behindthefrogs
    December 2, 2014

    Reducing corporation tax would be a wrong move. Decreasing employers’ NICs would have a similar effect of attracting overseas business while at the same time reducing the cost of exports and increasing competition for imports.

    There are many socially needed tax increases which while each making small contributions cumulatively would have a significant effect. These include minimum alcohol pricing through both its resulting increase in VAT receipts and the reduce costs of the NHS and policing. Also we need taxation to reduce the sale of foods causing obesity etc.

    Council tax take should be increased by introducing extra higher bands, with government grants to councils being correspondingly partially reduced.

    Rather than raising the lower income tax bands the money should be used to raise the starting level for employees NICs. Thus helping those on minimum wage and increasing the attraction of work. At the same time the minimum wage should be increased with the object of matching the minimum living wage over a few years. This should increase the income tax take and reduce the spend on in work benefits.

    1. A different Simon
      December 2, 2014

      “Also we need taxation to reduce the sale of foods causing obesity etc.”

      Why ?

      What is wrong with just a health warning on the package and leaving people to take responsibility themselves ?

      If people choose to eat comfort food and die early thereby saving the country huge amounts of money and making way for the next generation then surely they should be encouraged to do so .

      The Govt is failing at the things it is meant to do like defend us , manage immigration etc .

      I can see no merit in expanding their mandate to cover every aspect of our life by getting involved in social engineering including telling people what to eat or what to drink .

      1. Mondeo Man
        December 2, 2014

        Taxing food that makes people obese is unfair on those who don’t eat to excess. As searching people at airports is unfair on old ladies who don’t bomb aeroplanes.

      2. behindthefrogs
        December 3, 2014

        The reason that I chose taxes that are social engineering is that I believe them to be preferable to taxes that have no other purpose.

    December 2, 2014

    We are informed by the Labour Party the vast majority of immigrants come to the UK to fill low paid jobs. Leaving aside for argument’s sake they also say the opposite: that the majority fill professionally skilled jobs which would mean they were earning rather more money, how then can immigrants be filling the nation’s coffers with tax revenue?

    Would not taxes they paid for several months at the beginning of their employments be refunded to them when their tax liabilities were properly worked out by the Inland Revenue?

    Surely immigrants return to their homelands when they reach certain total wage amounts, when they are eligible to pay more tax thereon and return to the UK within a another tax year? Actually in times gone by many British low-paid workers were accused of going in and out of employment for just such purposes. Are immigrants less street-wise albeit they be foreign streets?And would not their spending within Britain and therefore tax received via retail taxes by government be less, so too when perhaps they send otherwise disposable income regularly overseas and take their savings periodically to foreign climes?

    Do UK companies receive training and re-training grants or tax discounts for a quick turnover of workers in their employ?

    In the days when the Labour Party’s Mr Harold Wilson was PM. the percentage of total British population who ventured abroad was considerably less than today yet his government thought it most advisable to limit each Briton to £500 spending money, money they could legally take abroad and spend on their holidays. It was not a huge amount of money for an individual even then but was obviously thought enough to threaten Labour’s welfare state.
    So a general comparison of then and now of the export of capital by British people of all colours, creeds, ethnic groupings and also immigrants both temporary and permanent may very well prove interesting. etc ed

    Reply The limit was £50, not £500. We were a lot poorer as a nation then, and the siege economy they ran kept us poor.

  40. Roy Grainger
    December 2, 2014

    To raise tax I suppose you should go where the money is. As you say some sort of new corporation tax arrangement whereby the likes of (named multinationals ed) are taxed directly on their UK revenue before they can transfer it to Ireland or Luxembourg would be a start.

  41. Ale Bro
    December 2, 2014

    Here are some very simple measures that could be taken to raise revenues:
    – apply withholding taxes to money coming out of tax havens, e.g. Isle of Man, Liechtenstein, Cayman Islands.
    – raise significantly more revenue from non doms, £1m a year per person should do it.

    These moves would be very popular with the voters.

    Also why not tax internet data? This would be a great source of revenue, and would make the UK a world leader in data compression technologies!

  42. Kenneth
    December 2, 2014

    My answer is that the Chancellor should do nothing to boost tax revenues.

    Improve efficiency and yield: yes; but increase revenues: no.

    In my opinion he should be substantially reducing the tax burden.

  43. Stephen Berry
    December 2, 2014

    Forgive me if, with government spending north of £700 billion, I don’t take part in an effort to find ever more ingenious ways to better extract the surplus from the workers.

    The fall in the oil price is putting government spending in a number of countries into the spotlight. In Venezuela, the Wall Street Journal (28th November) reports that President Nicolás Maduro, the designated heir to the ultra leftist Hugo Chavez, has announced plans for substantial cuts to public spending, starting with his own salary.

    “I don’t take this blow from the drop in oil prices badly,” Mr. Maduro said in a televised address to industry workers at the Miraflores presidential palace. “I take it as an opportunity to end superfluous, luxury, unnecessary spending.”

    There is no leftist quite like a South American leftist, but Maduro is going to set up a committee to formulate a proposal for a “substantial reduction” in spending, beginning by revising pay for heads of government ministries and state-run companies. A cut of 10 per cent is also proposed in the pay of civil servants.

    Not such a bad fellow, this Maduro. When he has applied the medicine in Venezuela, would he consider a job over here, I wonder?

  44. ian
    December 2, 2014

    pension relief 50 billion, oil subsidies 25 billion, to collect 1.6 billion in tax, holiday lets 8 billion buy to let 8 billion, arms makers 1 pound bolt, they charge 10 pounds for the same bolt, drug makers the same, r&d billions, This country run on subsidies for jobs, good workers who pay good tax leave the country mainly because immigration, I have already my plan up, I would not have subsidies or grants, pension relief and who are not needed, it nothing to do with the people this country ,it to do with companies and the government they did it all with backroom deals. EU will be going to 16 billion a year from 9 billion, they do not even tell you the half of it. The companies and government keep telling us how smart they are, I would say stick to what you know and that filling up your back pockets

    1. Edward2
      December 3, 2014

      Not really true is it Ian.
      The subsidies you quote are not actual subsidies.
      They are the same tax breaks all companies and self employed properly have under the law.
      If you ran a business would you like to call all your sales profits and pay tax on that figure or would you like to be able to deduct your expenses, wages,purchases, resesrcg and development costs etc off that figure?

      Pension relief is only temporary, you get relief putting money in, but when you retire and take your pension you pay income tax on what you get paid.

      Get yourself a book on tax law and accountancy and have a good read up.

    December 2, 2014

    Financial institutions, loan companies, landlords, companies of all kinds providing goods and/or services are forbidden by law even as a generalization, to reveal just what amount of money has been lost to them and the nation by migrants disappearing completely and in many cases migrants returning to known areas and even specific addresses abroad where it would be financially and organizationally impossible and impractical for those companies to pursue their debtors.

    I feel these amounts are in the hundreds and probably thousands of millions, not to mention the money expended by firms and time taken to establish such persons are no longer in the UK or who have disappeared within the UK or left the UK for countries not of their origin but to third countries.

    Surely it must be time for any government to grasp these figures, to speak the truth, revealing immigration from within and without the EU is most certainly a net loss to the UK economically on a very grand scale indeed,ongoing.

    1. stred
      December 2, 2014

      It would be interesting to compare the revenue from the Thames Crossing before and after the numberplate recognition scheme came in. I gather from some (EU ed) contacts that many Europeans do not link their names and adress to their cars and are untraceable when tickets are issued. Added to this is the problem of enforcing debt collection and court action in foreign countries. It seems odd that the Highways Agency could not operate a credit card toll like any other continental country with a lane for LHD foreign cars, vans and lorries

      1. stred
        December 3, 2014

        Unfortunately for users of the northbound tolls, the Highways Agency seems continues using the toll barriers, which stop every vehicle and cause them to slow and stop. On the other side there is a new road around the barriers. From Junction 2 northbound, lorries are directed to the left toll booths. The queue goes back to the previous junction when traffic is high every morning and evening. This is apparently for safety reasons. Yet they have traffic lights which could stop entry if there was a problem. And is there anything more dangerous than cars racing out of multiple toll booths when the barrier is raised and fighting for poll position as they race for 2 tunnel entries?

        Perhaps the Agency could address this problem, having spent a lot of money on the new system in order, supposedly, to reduce queues but still prefer to waste the users time and fuel.

  46. ian
    December 2, 2014

    Oh the grand old duke of York he had ten thousands men
    he marched up to the top of the hill then he marched them
    down again and when they were up they were up and when
    they were down they were down but when they were only half
    way up they were neither up nor down.

  47. Martin
    December 2, 2014

    Stop off-shoring well paid back office shops to Commonwealth countries.

    That way the PAYE and NI take will go up.

  48. A different Simon
    December 2, 2014

    “Personally I support those cuts, but they do mean you have to spend less as a result, or find something else to tax.”

    I was with you until you slipped this little gem in .

    Are you claiming that the purpose of taxation is primarily to fund spending rather than to combat inflation ?

    Do you not accept that Govt spending must exceed taxation ?

    If not are you advocating that the removal of money from the economy ?

    If so , how do you propose that this be offset ? by the expansion of credit ?

  49. David Cockburn
    December 2, 2014

    One interesting way to increase the tax on corporations while reducing the fragility of the economy would be to no longer have interest payments deductible from profits thus encouraging corporations to raise risk capital instead.

  50. fedupsoutherner
    December 2, 2014

    Now that we have enough useless wind farms everywhere why not tax landowners more for ‘unearned income’. In many cases these landowners have contributed not a dime and just sit and watch the money roll in from subsidies paid for by us. The land is not for single use as a farm anymore so farmers shouldn’t receive single farm payments as they are also power stations.

  51. Mark
    December 2, 2014

    Looking at the latest data from HMRC, available here:


    I note that if you subtract the offshore (i.e. oil related) CT receipts from the total, there has been an increase of 6.3% in the financial year to date (April-October) compared with the previous equivalent period. On the other hand, tobacco taxes show declining revenues as the high rates promote more imports – either legally taxed elsewhere in the EU for their benefit, not ours, or simply smuggled to evade EU taxes altogether.

    The most successful tax is Stamp Duty, fuelled by foreign purchasers of expensive property in London – up 28.7% in the YTD. Perhaps we should add another 10% surcharge for overseas buyers.

    1. A different Simon
      December 2, 2014

      Mark ,

      Land could be taxed a lot more efficiently and fairly than with a one off transaction tax like Stamp Duty .

      Surely it would be better to have an annual location value tax paid by everyone who owns land (i.e. most people) in proportion to the rental value of the location ?

      Gotta be better than taxing employment so heavily .

      Would provide a negative feedback into house prices and discourage mortgage lenders which cream interest off the value of the land from puffing prices up further .

      All Britons should feel they have a stake in the country and the evidence is that those who feel they will never own a home feel dispossessed .

      1. Mark
        December 3, 2014

        A land value tax works well in theory if you’ve always had one. If you haven’t, it produces a lot of distortions (especially if you seek to make it your main source of revenue) and economic dislocation. Imposing one would be as revolutionary as imposing Communism.

        1. A different Simon
          December 5, 2014

          We’ve got a massive distortion at the moment ; employment taxed to the hilt and land hardly taxed .

          I wouldn’t call Winston Churchill or Singapore communist .

          Then again , Winston Churchill’s attempt to introduce a land value tax failed .

          Capitalism requires monopolies to be broken up and land is a monopoly .

  52. AndyC
    December 2, 2014

    I’m firmly in the camp which says the government should spend less and live within its means. But Gordon Brown told us that would equate to taking money out of the economy, so I guess ever-rising debt is an orthodoxy which cannot be challenged. Not by the Conservative Party, anyway, it seems.

  53. ian
    December 2, 2014

    There”s no way out, you have to do away with the agreements and contracts and start again. I tell you again people who work for someone or company should pay no tax, that’s the starting point and the government pays people a pension for going to work, like getting 12 to 15 per cent at the bottom and in middle you get 8 per cent and up to 100 thousand you get 4% and over 1oo thousand you pay your own, Its like interest on a home loan, if you earn a lot of money you should pay the most interest not the less and elec per paid meters should cost the less money because your paying up front, you people in charge have got it all work out for your own good everything is back to front. Its the names of the company that should pay all the tax and not the people till you get that right your going nowhere. Its up to companies to fight it out with government to bring down tax instead of backroom deals.

  54. Terry
    December 2, 2014

    Why not ask the big Pharmas and the Oil Companies for the solution?

    Instead of worrying about taxation losses why not reduce Public Sector expenditure in line with the reduced tax income? That is precisely what the Private Sector have to do when their income falls..

  55. David Edwards
    December 2, 2014

    Rather than general corporation tax reduction or increase I would like to see targeted tax relief in specific areas to promote scientific endeavor and innovation, not only in its generation but most particularly in its exploitation. R&D tax credits and Patent Box are a good start in principle but are hampered by the complexity of the legislation itself, and the lack of its awareness by SMEs. It’s ok for multinationals with their legal and accounting teams but rather more difficult for smaller companies.

  56. turbo terrier
    December 2, 2014

    How sad it has had to come to this. Have our politicians learnt nothing over the last 50 odd years. We still try as a country to be all things to all men. We have to accept that we are not a world player let alone power and we should start living to our income accordingly. How can any government allow the millions that are in fuel debt and poverty and do nothing about it? The country has fallen hook, line, sinker, rod and boat for all this green crap which is nothing short of tax via the back door. We need people in power who understand processes and systems. All this money for flood defences. Go back to the planners and developers and haul them in. Renewable energy wether it be turbine, solar, wave, bio mass whatever madcap scheme they can come up with that attracts subsidies should be cancelled tomorrow. The DECC should be disbanded with immediate effect. All these new road plans will take out 1000s of acres of land as will proposed new towns, how long before our food importers wake up and realise we are running out of our most important commodity and then apply the screw to bring us into line. Why do we need all these houses too many people. Pay support for the first two children and then it is upto the parents. They want them for whatever reason they pay for them. The country needs to call time out on all this expenditure and rethink the whole process. They could start by listening to our host and some of his collegues who sit with him on the back benches. What country anywhere can survive when there are people working 16 hours a week earning with all these nonsensical on the side payments more than people working 35-40 hours a week. Some incentive to work that is. Not

  57. John Robertson
    December 2, 2014

    When Parliament delegated some pension policy making to the regulator it ended up effectively nationalising “guidance” not advice any more for the masses, just 10% can afford advice if they wish to pay for it. That’s not to mention the potential taxpayer liability if these unqualified populated bodies get it wrong which is likely.

    Auto enrolment contributions are set to escalate by legislation so employers have that cost to bare along with now having to pay cash for any services rather than it coming out of the annual charge. I don’t disagree with the principle but do when it comes to how the service is paid for. In the big numbers of the overall tax take it probably isn’t large but is another thing that will concern smaller employers or those on tight margins.

    Whilst the likes of the chaire of the Public Accounts Committee has done good work I have no time for her view that her preferred retailers are those that don’t pay tax. If I can avoid these certain companies then so can she and her like and that is all that it would take to change the tax revenue from those companies (I do use a certain search engine though).

    I understand that companies are sitting on large cash reserves so maybe real capital investment projects with potential for returns is a way forward.

    I can see further changes to pensions tax relief and at the higher end it does also affect public sector in the tax that is paid. That needs to be carefully done as there is cross subsidy from the higher contributors and could cause a mess if they go too harsh on that.

    Our problem is that we are paying around £70bn? a year in debt interest thanks to the member for Kirkaldy and Cowdenbeath who is stepping down this May to apparently end on a high!

  58. John Robertson
    December 2, 2014

    When we were younger we saw wage inflation and properties that were affordable. Those rose in value so that asset growth that millions shared in fuelled further growth. More shared ownership measures?

    MMR is to be reviewed but is that the problem? It was priceless seeing Steve Webb get vexed about lenders taking into account pension contributions. He seemed to be harking back to the days of self cert and ignoring outgoings. That said self cert for the self employed, which is what it was originally for, was not a bad idea. It’s just when they rolled it out to the fixed income employed that was the problem.

  59. John Robertson
    December 2, 2014

    Here’s an idea, repeal the sin taxes to VAT or reduce to what it costs the NHS so a 2/3rds reduction. Research shows it’s lost effectiveness to reduce these problems and is causing more reliance on the state. Take the £1600 that a smoker pays in tax and let them spread that money around the economy more broadly in vacations and shopping etc. Such a direct tax takes the money out of the economy. Left in the economy it is shared with the full variety of businesses and employees across industries. Unlock the billions to be spent more broadly and give opportunities for more business growth.

    Apparently the government last budget trusts the people with their pension savings, well trust them, give more of their money back from sin taxes and let them spend it other things we all benefit from.

    1. John Robertson
      December 2, 2014

      The fastest growing economies don’t have punitive sin taxes that suffocate disposable income.

  60. BobE
    December 2, 2014

    I read so many sensible people on this blog each describing real solutions. But it falls on deaf ears. Why oh why are such fools in control when so many creative and clever people are available.
    There is no real point writing anything on these various blogs because nobody takes any notice.
    Very depressing….

  61. Eddie Hill
    December 2, 2014

    Interesting reading above, from which a few main themes have emerged:

    1. Don’t think in terms of increasing tax take, think in terms of reducing expenditure;

    2. Only spend money on providing services that the public needs but wouldn’t pay for itself (defence and street-lighting are the textbook examples), and get rid of quangos, regional governments, overseas aid, the EU and the many hair-brained social engineering expenditures and the burgeoning nanny state;

    3. This would free up millions of people currently employed on the tax-payers dollar and hey, guess what? This vast increase in labour supply might just negate the alleged “need” for the ridiculous levels of immigration we currently “benefit from;”

    Here are a few more thoughts:

    • I am constantly being told that we need immigrants to save the economy and the NHS, but the economy is diving deeper into debt every month and the NHS is confronting a new crisis every month. Exactly which of our various looming problems is immigration actually solving?

    • Simply increasing GDP doesn’t make us wealthier, since most of this economic activity redistributes wealth and doesn’t grow it; e.g. washing cars, selling coffee and waiting tables doesn’t increase national wealth (Economics 1.01);

    • Our allegedly “successful” economy (I assume success is being judged by the extraordinary standards of the EU, which regularly “loses” €hundreds of billions without trace) merely results in surcharges to pay off other EU members for their economic failure, so what exactly is the point of having a successful economy, even if we do actually have one?

    • If, due to the Laffer Curve, one can never accurately predict what the tax take will be given any change in rate or threshold, why does everyone waste so much time pricing up their manifestos?

    • Predictably (as I have previously posted elsewhere on your site) the EU has rubbished Cameron’s latest attempt to reduce immigration, with Poland now apparently able to tell us what we can and can’t do in our own country, along with France and Germany.

    • Uncontrollable immigration from the EU is bad enough, but we are still taking hundreds of thousands per annum from outside the UE, which we could stop, but don’t. I’m sure I’m not alone in wondering why we wasted £billions in Afghanistan and had 453 soldiers killed to save Britain from extremism, yet appear to be allowing hundreds of thousands of Pakistani, African and Middle Easter Muslims to come and live here.

    • In the year ending June 2014, a statistically significant increase to 583,000 people immigrated to Britain, and an estimated 323,000 people emigrated. This does not mean that immigration during that year was 260,000, it means that it was 583,000, twice the population of Newcastle;

    • It also means the ethnic mix changed by 906,000, since the 260,000 people that left were mainly British.

    I’m afraid that events very much appear to have gone beyond the control of this government and your rhetorical questions demonstrate that no-one has much of a clue as to how to restore control. It is also quite possible that there is no way back, socially or economically.

    You will consequently all be judged as wanting come May 2015.

    Reply Some of the arrivals were UK citizens returning home

    1. Mark
      December 3, 2014

      I gave a full breakdown of ONS data for migration by citizenship and reason for migrating when we discussed this recently:


      British immigrants were 83,000 out of 583,000, and British emigrants were 133,000 out of 323,000. On a net basis, 50,000 British emigrated and 310,000 non-British immigrated to give the 260,000 net total.

  62. Alex Smith
    December 2, 2014

    There is significant labour immobility amongst highly skilled workers due to stamp duty.

    This makes people in range of London unlikely to move away (stay in London and you can change jobs), and people out of range of London sticking in sub optimal roles, or spending their working weeks away.

    This could easily be fixed if the treasury allowed people to avoid stamp duty if they made the property being sold subject to CGT. This would ensure that the treasury gets their cut during inflationary times and that people could still afford to move during times of house price stagnation.

    I suspect that doing something like this would result in a large boost in competitiveness that could yield the growth and consequential tax receipts that the government needs.

  63. petermartin2001
    December 3, 2014

    How about this for a money making idea?

    The government is in a very advantageous position when it comes to doing anything in the economy. Unlike you or I, it doesn’t have to borrow money at high interest rates. It can either just create the money or borrow it via the sale of gilts at very low interest payments. Also unlike a private developer which has to pay taxes to government during the course of the development, government actually receives taxes. Therefore if a private developer can build at a profit, then government can do the same thing and make an even bigger profit.

    So say it decides to build a £100 million residential development. It hands out contracts to builders in the private sector and most of that money gets spent on wages. Either directly or in the process of the labour that goes in making bricks, concrete etc. So straightway some £30 million or so comes back as taxes and NI payments. The bricks and concrete attract VAT when they are purchased. So that’s probably another £10 million or so going back into government coffers.

    Then that £60 million gets spent and respent in the economy. At every stage taxes are levied. 20% VAT, corporation tax, capital gains tax, fuel taxes, alcohol and tobacco taxes plus lots more taxes too that we can all think of. The net result is that nearly all that £100 million has gone back to government. At the same time building workers who were unemployed have now found jobs so don’t need to be paid dole money any longer.

    Then government can take delivery of those £100 million worth of flats or houses , say about 400 of them at £250k each. It then sells them and gets all its money back. But it’s already got it back anyway!

    In other words it makes a tidy profit on the deal. And no its not inflationary because Government has created something extra for sale in the economy. Inflation has to be about more money chasing the same amount of goods not more money chasing extra goods.

  64. ian
    December 3, 2014

    Income tax receipts are down 23.9 billion according to your figures. Also we have just paid for the first world war last month, that mean from 1920 till now still on tick, so as you embark on a spend spree with scotish government now borrowing money under written by the bank of England and the English tax payer picking up the bill, for how much, which is not know yet. This will have the affect of the pound losing value and putting up inflation by 3 to 4 per cent a year with hardly any pay rises again. I should think when Scotland has had its fill and the SNP have over 60% of the vote in the scotish parliament in 2020 they will vote leave the union with out a referendum also the extra money for the EU which could be as much as 7 billion a year more and oversea aid which will be 13.5 billion next year with war and arms spending up, roads, NHS, housing and so on I can see a good extra 20 plus billion a year extra spending and with tax cuts promised of one and half billion a year no change in income tax receipts in the next five years. I see that 500,000 people are looking at losing their homes next year, so there will be a lot more children than the 100,000 now living temporary housing, food banks are still growing, were do I stop. What does it all mean. Well its just a case of more money being funnelled into fewer hands, as one mite say being kick up stairs with less to be shared out down stairs or with the same amount of money but with more people coming in to share it with. What about the new trade deal with the EU and the USA, all PMS are rubbing their with that one, so that must be going cost you all a lot money, that go with out saying.

  65. petermartin2001
    December 3, 2014

    Its the same story in the UK too. John Redwood has an interesting blog , (johnredwoosdiary) he usually lets my comments through. The titles of his recent postings have been:

    “The deficit is higher but spending is within the original plans from 2010.”

    “What could the Chancellor do to boost tax revenues?”

    “Autumn Statement and the deficit”

    I’ve tried to explain as simply as I can that government spending and taxation revenue cannot be treated as separate from each other. But, it’s hard going. Hardly anyone can see that the government’s finances aren’t at all like our own personal finances.

    It’s only slightly better on the Labour side. On Leftfootforward and Labourlist we have:

    “We need an honest debate about debt reduction.”

    “Today, Osborne will have to admit there’s a £50 billion hole in public finances”

    “Balls says government have ‘failed every test and broken every promise’ on the economy” (ie he hasn’t got the deficit under control!)

    It’s just so frustrating. I sometimes wish I’d never heard of MMT!

    Reply It would help if you understood the way in which money and credit is usually created through commercial banks, and would accept that countries which believe there are no limits to government spending, money creation and borrowing do end up bankrupt.

    1. petermartin2001
      December 3, 2014

      Aaah! I just realised I wrote out the above and posted it on the wrong blog! It was meant for Prof Bill Mitchell’s “Billy Blog.”

      Incidentally, if George Osborne wants to know what’s going on in the UK economy he only needs to ask Bill.

    2. petermartin2001
      December 3, 2014

      Commercial banks cannot create money which is the liability of the government. They can create money, in the sense of their own liability, which boosts the economy temporarily but as that money is sucked out of the economy in taxes, forcing the banks to make good their initial liability when it is issued, there is an increasing deflationary effect which can bring about recession if bank lending isn’t kept constant.

      Countries like the UK , the USA, Japan etc can never become bankrupt in the conventional sense. They can never run out of pounds, dollars or Yen. They can create too much inflation if they overdo their issuance of currency. No-one is denying that. But what happens if they underdo it? We need to address that question too.

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