Unfunded promises and hypothecation – let’s talk about some big numbers

The election debate has got tangled up in discussion of a few billion extra spending, rather than a sensible analysis of the  £742bn of total spending this year.

Worse still Labour and some in the media seem to think if you wish to propose any additional spending you need to show hypothecated new revenue to pay for the item.  They rarely propose offsetting economies in public spending and never discuss the overall  balance of the budget and the rate of increase in tax revenues. Uk government does not of course work on the basis of hypothecation.  Most revenues are aggregated in the Treasury and used to pay for whatever bill comes up next in the general public spending budget. Thus NI contributions, Road licence fees, Vat, Stamp duty and the rest are just part of the general pot.

Conservatives say they will increase Health spending by £8Billion a year by 2019-20. It will be paid for out of the general rise in tax receipts likely over the next five years and already in the Treasury budget figures from economic gr0wth. The Conservatives point out that health spending is up £7bn in real terms over the last five years, paid for out of rising revenues,so the deficit was still able to fall. Over the next four years the Treasury forecasts an increase of £124 billion a year in tax revenues on present tax rates.

Labour say they will increase health spending by £2.5bn a year paid for out of specific new taxes. In practice anyone running the government will end up spending  more than an extra £2.5bn a year for the NHS.

There are two important  issues  to discuss. How quickly can tax revenues rise? With more growth and lower tax rates there should be faster growth in total tax revenues, which will help. That is why the main deate should be about how to sustain the current good gr0wth rate of the UK economy. Higher taxes as in France will not do that.Labour knew that in office but has forgotten it in opposition. How can total spending be brought under control and how can we secure more value for the large sums now being spent and promised?

Debating the odd  additional billion is debating the rounding errors or ralatively small changes in total public spending. There is too much sound and fury over a few billion of “new” money and far too little debate about how to spend the bulk of the money wisely. I will deal with these issues in future posts.

 

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115 Comments

  1. petermartin2001
    Posted April 13, 2015 at 5:29 am | Permalink

    Yes, Labour has got it all wrong. All Govt spending comes back as taxation, eventually. Where else can it go? So, there’s no such thing as “unfunded promises” or “unfunded spending”.

    Accusations along the lines that an opponent’s sums “don’t add up” , or “they haven’t done their costings properly” are quite silly in the extreme. They show a lack of knowledge of how both Govt and the economy works. We hear this kind of thing from all parties but Labour is much worse than anyone else at the moment.

    Either the £8 billion pa extra spending won’t cause inflation to exceed the BoE stated target band, in which case it can be afforded, or it will cause inflation to rise to unacceptable levels. In which case, it cannot be afforded. That’s the only way to decide on the question of affordability.

    • Edward2
      Posted April 13, 2015 at 7:34 am | Permalink

      All govt spending comes back as taxation……that statement is wrong Peter because tax is not 100%.

      • Hope
        Posted April 13, 2015 at 11:44 am | Permalink

        It does not matter to the politicos if it does not add up they borrow more and tax more without any conscience about it. Look at the Tories. We were told the economy was the main reason why they went into coalition. The Tories negotiations were extremely poor and gave the Lib Dems equal say over everything. Balanced structural deficit by 2015, resoundingly failed. Spending cuts versus tax rises failed? If this is the economic plan Cameron and Osborne keep ranting about they need to remember what they promised five years ago. Even though the economic figures are appalling they have made it a legal certainty to waste £14 billion in overseas aid while 900,000 use food banks and the elderly die from the cold! We now read the EU demands the UK pays anothe billion to overseas aid! EU contributions aree now higher than ever before, look what could be done with that money and the reduction of costs that emanate from EU regulation and directives to business! The coalition was more about changing the Tory party. I think Nadene Norris had it right, two posh boys who do not know the price of milk, why risk trusting them again after wasting so much of our hard earned taxes.

        • Timaction
          Posted April 13, 2015 at 2:40 pm | Permalink

          The massive annual rise in our population because of the 623,000 they let in will certainly mean more overcrowding, not able to get a timely appointment at your Doctors, A&E overwhelmed, no school places for our children and more building on the greenbelt to accommodate them. Roll on 2020 as whoever is in will place the Country beyond patience, particularly the English! All the lies for even the most ill informed will become obvious.
          Only one party cares about the British people and want our sovereign democracy returned. Milliband simply dismisses the EU question whilst lavishing the Scots with English taxes.

          • Hope
            Posted April 13, 2015 at 4:47 pm | Permalink

            I suppose the one of many Cameron broken promises to have a bonfire of quangos would have saved a billion pound fortune- enough to help the defence of the country or help crime and disorder. Police stations closing by the day, no wonder crime figures go down when people cannot report them to the police! The public simply gives up trying.

          • fedupsouthener
            Posted April 13, 2015 at 7:04 pm | Permalink

            Couldn’t have put it better myself. Why do all political parties apart from UKIP tell us that immigration is good? I don’t see much good coming from it. The health service in Sussex is in dire straits with people having to wait for ages for basic treatment. Housing is in a mess with more people having to rent in the private sector and rents going sky high because of demand. I just cannot bear to watch our leaders on tv at the moment because most of what they say is just childish bribes meant to woo the voter with no substance. Had to pour myself a strong vodka and coke when I saw Nick Clegg. That got turned over very quickly! Same as the SNP on tonight going on about austerity and how Westminster is to blame for all Scotland’s woes. Pathetic! God help us all.

    • oldtimer
      Posted April 13, 2015 at 7:39 am | Permalink

      I suggest there is another way to look at the problem of the public finances and what to do about them. The first is to determine the taxable capacity of the economy (GDP), say 38% at the very maximum. Over time public spending should not exceed this level. Achievement of this objective would eliminate the annual deficit.

      The second is to determine the rate at which you aim to reduce the national debt. This requires annual spending below 38%, say 35% of GDP. This would permit a gradual reduction of the national debt in good years and provide a 3% point margin to cover higher public spending in the bad years. This would provide a clear, understandable framework for discussing (a) the most efficient way to raise the taxes that governments need and (b) how to spend the revenues raised.

      That is not what we get. Instead we get marginal trivia which, for the most part is irrelevant to the main problem (the dire state of the public finances). Alternatively, because it serves a different, politically motivated agenda, it is likely to make the central problem worse not better. The consequences are a very inefficient tax system and very inefficient public spending.

      • libertarian
        Posted April 13, 2015 at 4:54 pm | Permalink

        oldtimer

        Absolutely

        So the only way to generate more money for public services is to increase GDP. To increase GDP we need to encourage the wealth creators , risk takers and the business people i.e. the very people the politicians continually attack and demonise . Talk about cutting off your nose to spite your face

    • Denis Cooper
      Posted April 13, 2015 at 8:44 am | Permalink

      “All Govt spending comes back as taxation, eventually.”

      Isn’t this inconsistent with one of your previous hypothetical scenarios, the one in which the government of an island has to keep issuing more money year after year because some of the people are taking some of the existing money out of circulation by saving it? And did I not reply at the time that “eventually” those savings would be spent, typically because those individuals had grown old or sick and could no longer earn their living through work, and so they had to draw upon what they had prudently saved in previous years, and the money they had saved would then go back into circulation?

      Of course it does depend upon what is meant by “eventually”. Over a long enough time period the currency could cease to exist, or the government could cease to exist, in fact the country itself could cease to exist, perhaps because the island had been washed away or had sunk into the sea, perhaps because it had blown up in a massive volcanic eruption.

      “Where else can it go?”

      Well, apart from being kept under the mattress or in a biscuit tin for many years it could also be lost for many centuries in buried hoards, or it could leave the island altogether and maybe never come back. As I recall this was a recurrent problem with English silver pennies, that is when as issued they were of fine quality and good weight and there was a troublesome tendency for the best coins to get exported for their bullion value leaving behind the poorer coins.

      But much the same thing could happen with paper banknotes, they could also leave the country of issue and never come back for various reasons, and it could also happen when some foreign entity was electronically credited with the right to receive banknotes. Maybe the foreign holders of the currency would return it to its country of origin, by buying assets or lending it to the government, or maybe they would not do that and then “eventually” they would be left with worthless old currency when the revolutionary government decided to issue a new currency without allowing people to exchange their holdings of the old currency for the new currency, or only allowing them to exchange a small amount.

      • petermartin2001
        Posted April 13, 2015 at 2:54 pm | Permalink

        Denis,

        You’re right to notice the word ‘eventually’. In economic speak it’s sometimes called the ‘long run’ or a mathematician would put it as ” as t → ∞ “.

        Of course ∞ is a much too big a number! But we can make the numbers look more manageable if we consider the number of economic transactions involved rather than looking at the time involved for those transactions. If taxation is 100% of any sale price (as Edward2 notes) all spending will return to government after just one transaction. If we reduce that to a more sensible 30%, half of it will return after 3 transactions. Then it will halve again after another three transactions etc. 20% means that half of it will return after 5 transactions. 10% – half after 8 transactions etc.

        So reducing the tax rate increases the number of transactions it takes for Govt spending to return to Govt, and therefore causes an increased level of economic activity – which is good for increasing business activity and reducing unemployment but comes with the attendant risk of causing inflation within the economy.

        Theoretically it could be argued that someone might deliberately burn a banknote, or be bury it and the forget where, or whatever, which would mean that it would never return as taxation. That’s effectively the same thing as it being removed from use. That is just what happens when government removes money from circulation by taxation. So therefore that can be considered to be taxation too.

        If the person later remembers where he’s buried it, or deliberately saves it somewhere, it’s just like temporary taxation until he spends it again. That could have an inflationary effect, and be a signal to government that it would need to reduce its spending to compensate.

        • Edward2
          Posted April 14, 2015 at 6:27 am | Permalink

          What if citizens spend their money on things which are not taxed?
          How does their money return to the Government in that example.

          • petermartin2001
            Posted April 14, 2015 at 8:21 am | Permalink

            Edward2,

            Most legal transactions are taxed in one way or another. Even if there is no VAT on the transaction, as with the sale of basic foodstuffs, the transaction will contribute to someone’s income which will be taxed.

            Of course there are illegal transactions. Drug dealing springs to mind. No income tax, no VAT , etc . But then the money is of course respent, hopefully legally, and tax will be applied on the next transaction. As of course it should be.

          • Edward2
            Posted April 14, 2015 at 12:37 pm | Permalink

            If I am not registered for VAT and neither are you, we can pay each other for goods and services without any tax being paid back to the State.
            Hire me to dig your garden, or clean your windows or repair something, etc and no tax is created.
            If I earn less than £10,600 pa no income tax is due.
            Higher level of earnings if I were self employed and able to balance my expenses against my income.
            This is how money circulates endlessly between citizens without the State getting any tax at all.
            Quite legally too.
            Have you never been to a car boot sale?

        • Denis Cooper
          Posted April 14, 2015 at 7:56 am | Permalink

          Somebody burning a banknote can only be considered the same thing as taxation if you accept the batty idea that the government would burn it anyway once it had received it as taxation.

          • petermartin2001
            Posted April 14, 2015 at 8:59 pm | Permalink

            You’re still having a problem with the notion of a fiat currency then! A fiat currency, in digital form, is intrinsically worthless. A unit of fiat currency (like any other IOU) is just an asset/liability pair. Bring the two together and they self destruct. Its just like adding +10 to -10. Result = 0

            If the physical tokens of the fiat currency , like coins or banknotes, have a small amount of intrinsic worth then there’s no need to regularly destroy them on collection, unless they are damaged or worn.

            That’s the only economic consideration.

          • Denis Cooper
            Posted April 15, 2015 at 4:07 pm | Permalink

            No, Peter, I’m having a problem with your whacky notion that the Treasury instantly destroys all the money it gets in, and then creates new money to pay the government’s bills. It didn’t do that when taxes were paid in gold and silver, or when taxes were paid in banknotes, and it doesn’t do that now just because the transactions are (almost entirely) electronic rather than involving any physical medium.

            If you look further down the thread you can see my reply to acorn about the Consolidated Fund and the National Loans Fund, and quoting this passage from the accounts:

            “Both the CF and NLF are administered by the Treasury, with the bank accounts maintained at the Bank of England. The CF can therefore be regarded as central government’s current account, whereas the NLF can be regarded as
            central government’s main borrowing and lending account.”

            Even though you may be correct to visualise asset/liability pairs mutually destructing they must come into contact to do that; and as far as money is concerned the liability is on the balance sheet of whoever issued the money, in this case the Bank of England, while the asset is on the balance sheet of whoever owns the money, whether that is the Treasury or some other entity or an individual; the two do not share the same balance sheet, the same accounting space if you like, so they cannot spontaneously cancel each other out.

            This actually relates to something I have tried to explain in the past: that while the Bank of England could agree to forgive the Treasury its debt and tear up the £375 billion of gilts that it holds as an asset, it could not unilaterally cancel the corresponding liability on its balance sheet, the £375 billion of money that it put into circulation when it bought those gilts and which is now owned by numerous people and organisations around the country and rest of the world.

          • petermartin2001
            Posted April 18, 2015 at 7:02 am | Permalink

            Denis,

            Yes you’re right about the BoE and the £375 billion of gilts that it holds as an asset. If the Govt sells a gilt, that gilt is counted as part of the National debt when the gilt ends up being owned by the private sector. But does it get included when it ends up being owned by its Central Bank? The Central Bank has both an asset of the gilt and the liability of the issued cash too so isn’t any more or less in debt than it was previously.

            The national monetary base isn’t included in the ND but treasury bonds are. So, according to that accounting practice the ND could simply be reduced to zero if the Central Bank issued enough money to buy back all bonds held by the private sector.

            The rules may be slightly different in the USA. You may have heard of the idea of the “trillion dollar coin” which the government could strike if Congress doesn’t vote to increase the debt limit. That’s simply a work-around. Apparently coins aren’t included in their National Debt. Why not? Is this just an oversight?

            It’s all a very illogical way of looking at it. Everything only makes sense if we consider that all issued money (including coins) and all gilts(and other liabilities) are part of government’s debt or liability. Therefore it doesn’t matter if it’s issued £375 billion of cash or £375 of bonds. It should be added to government’s total liability in exactly the same way.

      • acorn
        Posted April 13, 2015 at 5:35 pm | Permalink

        A nice example of Purple Prose Denis, typical of politicians when, on the doorstep, they realise they have lost the argument.

        • Denis Cooper
          Posted April 14, 2015 at 7:57 am | Permalink

          Criticism of style rather than substance, acorn, typical of someone who has no argument.

    • acorn
      Posted April 13, 2015 at 9:36 am | Permalink

      Exactly so Peter. A government that issues its own fiat currency can never run out of it. There is nothing, priced in its own currency, that it can’t afford to buy. Its only worry is spending faster than the economy can supply goods and services, resulting in inflation. Mind you, continuous real-time “no-budget”, spending and taxing; is a long way off yet.

      This is certainly the season for silly numbers, which will be meaningless to most, including the politicians. It is just like a local Council, alternative budgets will be proposed by opposition parties, but they will only ever be tinkering with three or four percent of the budget, if that.

      The vast majority of the spending is locked in by statutes and regulations. Our Punch & Judy parliament will never sit still and think deep enough, without trying to knock lumps off each other, to overhaul a sclerotic legacy system of a self-serving government, they created.

      BTW. If you like your economic statistics with pictures, the ONS Beta site http://visual.ons.gov.uk/tag/uk-perspectives/ is recommended. Relevant to today, “Personal and household finances in the UK” and “Spending on public services in the UK”.

      • Edward2
        Posted April 13, 2015 at 11:59 am | Permalink

        If you debase a currency by endless printing it will become worthless.

      • libertarian
        Posted April 13, 2015 at 1:38 pm | Permalink

        Acorn

        What are you proposing to replace a fiat currency?

        • Denis Cooper
          Posted April 13, 2015 at 6:19 pm | Permalink

          Cowrie shells would be one possibility.

        • acorn
          Posted April 13, 2015 at 6:54 pm | Permalink

          I wouldn’t replace a fiat currency economy, it is a brilliant idea. The trouble is, we have a lot of dinosaurs to get rid of before we can make it work properly.

          BTW. I have been to a meeting this morning where Accountants were telling us that small businesses are getting away with £15 billion a year in unpaid taxes! So, I would keep your head down.

          • petermartin2001
            Posted April 13, 2015 at 9:35 pm | Permalink

            Acorn,

            Yes. There’s no sensible case for having any other than a fiat currency. The only problem is that having, along with the rest of the world, adopted the idea we then carry on in the same old way as before, thinking that the pound is somehow still on a gold standard.

            If it were we’d be right to worry about an increase in the money supply and levels of debt. We’d have to ‘fund’ promises with real gold. Potentially those promises and debts would all be redeemable in gold at some stage. But they are not repayable in anything other than pounds and we can create as many of them as we like.

            Not that we should. We don’t want to have high inflation. There’s no need for either high inflation or high levels of recession with a fiat currency providing we steer a sensible economic course in the middle of two potential obstacles.

          • Edward2
            Posted April 13, 2015 at 10:27 pm | Permalink

            If they really know this information then they should tell HMRC.
            Or is this a bit of a fantasy guestimation?

          • APL
            Posted April 14, 2015 at 6:11 am | Permalink

            Acorn: “The trouble is, we have a lot of dinosaurs to get rid of before we can make it work properly.”

            Spoken like a true totalitarian despot.

            Acorn: ” So, I would keep your head down.”

            There you go! Do as Acorn says, or keep your head down. A Socialist wolf barely disguised by a sheep’s fleece.

          • Denis Cooper
            Posted April 14, 2015 at 8:20 am | Permalink

            There is a problem with that “we”, Peter. As I’ve pointed out before, the MPs “we” elected never took a single vote on whether two successive Chancellors should authorise the Bank of England to create £375 billion of new money for those Chancellors to spend. There was not even a vote on the Order rushed through to exempt the blatant rigging of the gilts market by the Bank from the normal regulation, in fact that Order was just formally laid before Parliament but never presented for debate:

            http://www.legislation.gov.uk/uksi/2009/118/contents/made

            “The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2009”

            Nor was any action taken over the excess inflation caused by the creation of that £375 billion; the Governor of the Bank wrote his Open Letters to the Chancellor, as required by law, and the Chancellor replied just saying in effect “Carry on”, and that was it; MPs seemed uninterested, they didn’t press to know why the Chancellor wouldn’t adjust his inflation target if he wasn’t that bothered about it being exceeded, just as they hadn’t pressed to know why the previous Chancellor wouldn’t ask them to approve the activation of reserve powers if he wanted to give directions to the Bank on monetary policy as an exception to the normal practice established by law since 1998.

    • Stephen Berry
      Posted April 13, 2015 at 1:35 pm | Permalink

      “Accusations along the lines that an opponent’s sums “don’t add up” , or “they haven’t done their costings properly” are quite silly in the extreme. They show a lack of knowledge of how both Govt and the economy works.”

      In the state of nature there was no government and there was no taxation, but there was production. Some bright spark got the idea that he wanted to live comfortably with his chums, at the same time fighting the occasional war to add lustre to his escutcheon. But he did not want to work and finance all this by himself (who would?) and thought he would get other people to do the work and then forcibly take their surplus. Thus, the idea of government and taxation was born.

      That’s all there is to it, Peter. Government down the years has expanded considerably to take over many tasks which people could perform better for themselves, but the fundamental structure of compulsion has not, and could never change.

      So, I think the idea of costings is fine. How many resources does the government have to take from the people under its control to finance the things it wants to do? That’s what you will be reading in the manifestos – if they are telling the truth that is.

    • APL
      Posted April 13, 2015 at 8:13 pm | Permalink

      petermartin2001: “So, there’s no such thing as “unfunded promises” or “unfunded spending”. ”

      Obviously, the Greece has proven that statement incorrect.

      • petermartin2001
        Posted April 13, 2015 at 9:10 pm | Permalink

        Greece has proven that it’s incorrect for them, not that it’s incorrect for Britain.

        Greece is stuck with the euro. Greece doesn’t control the euro. The British govt was smart enough to keep the pound, and therefore doesn’t have to acquire the pound before its spend the pound. In fact it couldn’t anyway. It has to spend the pound into existence first before it can “acquire” it back in taxation.

        • Edward2
          Posted April 14, 2015 at 6:33 am | Permalink

          You seem to have discovered the solution to all our economic problems Peter.
          The UK’s state can make us all wealthy just by creating money out of thin air.
          I think there is a big catch in your ultra Keynesian theory but I understand you do not.

        • Denis Cooper
          Posted April 14, 2015 at 8:30 am | Permalink

          Then what do you think is the purpose of the Consolidated Fund, the government’s main account held at the Bank of England?

          http://en.wikipedia.org/wiki/Consolidated_Fund

          As I understand that is where “the general pot” mentioned in the article is located; and money goes into it and money comes out of it, as with any other bank account.

          • acorn
            Posted April 14, 2015 at 5:04 pm | Permalink

            Denis, the CF publishes its own accounts https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/345756/10459.Consolidated_Fund.for_web.pdf . This does not show the T&L accounts that the Treasury has with Commercial Banks.

            I can’t get much posted on this site at the moment for obvious reasons. Real UK financial and economic facts are “non grata” till after the election.

            Reply You keep trying to post other people’s websites that I have looked at that would require substantial replies . I do not have time to take them all on as well.

          • acorn
            Posted April 14, 2015 at 6:24 pm | Permalink

            Denis, you have probably worked it out by now from my post about the Consolidated Fund.

            The “magic money tree” is in fiat currency reality, the “National Loans Fund” https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/345780/10460-001_National_Loans_Fund_Account.for_web.pdf

          • Denis Cooper
            Posted April 15, 2015 at 3:28 pm | Permalink

            I’ve previously seen references to the National Loans Fund as well as the Consolidated Fund, acorn, and it’s useful to have those links to provide fuller explanations.

            They both confirm what I have said previously on several occasions, that the government has accounts at the Bank of England, and that one of those accounts is the Consolidated Fund, and that government tax and other receipts go into it and the money needed to pay the government’s bills comes out of it; what I didn’t know previously was that it ends each day with a nil balance, with any surpluses or deficits being offset by transfers to or from the National Loans Fund.

            However the main point is:

            “Both the CF and NLF are administered by the Treasury, with the bank accounts maintained at the Bank of England. The CF can therefore be regarded as central government’s current account, whereas the NLF can be regarded as central government’s main borrowing and lending account.”

            So how does this arrangement differ significantly in kind from the arrangements that many other organisations and individuals have, apart from the fact that the government uses the Bank of England as its banker while a company, or indeed a local council, or an individual, will generally use one of the commercial banks?

          • petermartin2001
            Posted April 17, 2015 at 5:19 am | Permalink

            Denis,

            It doesn’t really matter how many bank accounts the Govt has with the BoE. You ask

            “So how does this arrangement differ significantly….. ?”

            It differs when we look at the very nature of money itself. If we accept that it’s just an IOU we need to ask who wrote that IOU. It can’t be the BoE. It has to be the Govt. They all also issue “You owe me’s” or tax demands. They Govt accept their IOUs as a payment for their YOMs.

            So the Govt holding their own IOUs is just like you or I holding our own IOUs. They don’t mean much at all.

          • Denis Cooper
            Posted April 17, 2015 at 1:21 pm | Permalink

            It is the Bank of England, Peter, it says so on the banknotes; again I point out that Bradbury pounds were an IOU issued by the Treasury, and it said that on the notes.

          • petermartin2001
            Posted April 19, 2015 at 4:20 am | Permalink

            Denis,

            I’m sure you know this is all smoke and mirrors. If we take a look at the bank’s balance sheet.

            http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q309.pdf

            Sure enough it all balances to the penny. So the BoE is technically not in debt. Assets and liabilites are both £404 billion. If were to give you a £1 million in cash and took your bond for £1 million then my balance sheet wouldn’t be affected either – on a strict accounting basis. But would I do that for you, or you for me? What do you think?

            Most of that £404 billion is down to the £375 billion of QE issue. The bank generates the cash and the government spends it. But just because that cash has BoE written on it does that really mean the debt is theirs? That they’ve really written out the IOUs?

            I don’t think so. Do you?

            Furthermore the interest that should be due to the BoE from those gilts is never paid. It goes straight back to Treasury. If the BoE was truly independent why would it accept that?

        • APL
          Posted April 15, 2015 at 6:28 am | Permalink

          Petermartin2000: “Greece is stuck with the euro. Greece doesn’t control the euro.”

          Yea, but they were stuck with the drachma too. They were pleased to give up their devalued currency, and their economic autonomy too.

          But now when the chickens have come home to roost, Greece wants financial autonomy again.

  2. Mark W
    Posted April 13, 2015 at 5:32 am | Permalink

    Too little is ever done to explain the reduced revenue caused by high tax rates. The old chestnut (quite true I’m sure) of multimillionaires legging it abroad doesn’t ignite imagination and whilst most people can figure that their tax paid isn’t a lot lost they never hit the other side of that equation that it’s also not a lot raised.

    The real loss is the £50k to £121k per annum which are far greater in number and won’t go abroad. (Possibly beneficially effected by the IHT change proposed).

    Why can the spite and envy bedwetters never quite get their heads round the simple fact that a small business owner who’s doing quite well and near any of the thresholds where “secret” subtle tax rates take effect (60% from £100k to £121k) or the family allowance effect etc at £50k. Near any of these limits and it is a point where you say to yourself, no more expansion/development, just let things tick over and coast. No extra staff, no capital purchase, no extra product at market etc etc. When you also know many other people in similar boats I wonder how much the hushed up to media, reduction of personal allowance at £100k has really cost the UK along with similar thresholds.

    No simple sound bite for it.

    • oldtimer
      Posted April 13, 2015 at 7:23 am | Permalink

      I am sure you are right about this. In the fun and interest part of my later active business life I visited many SMEs looking to improve their performance. Many of them had established themselves as profitable businesses in well defined niches in the market. For many their principal aim was to stay out of the clutches of the banks, namely to manage their cash flows without resort to bank borrowings, and to manage business profitability and personal earnings to minimise the tax burden. The hassles of growth, employing more people, raising more capital were not for them. It just was not worth the trouble – and this was in the environment of some twenty years and more ago, not the even more oppressive regimes in place today.

      • alan jutson
        Posted April 13, 2015 at 12:56 pm | Permalink

        oldtimer

        Agree

        I operated the same way with my own small Company.

        Later they gave it clever words like work life balance.

        Never borrowed from the Bank, which you can manage small slow expansion if you have a profitable business.

    • David Murfin
      Posted April 13, 2015 at 8:13 am | Permalink

      In this computer age (with apps for all and sundry) why cannot these awkward thresholds be avoided by making the tax rate proportional to income?

    • Leslie Singleton
      Posted April 13, 2015 at 10:32 am | Permalink

      Mark–One little,very simple and admittedly perhaps not terribly profound point that nobody seems ever to want to bring in to any analysis is that the people who support Miliband and of course are trying to get or leave as much cash as they can in their own pocket could not care less about how rich or poor the rich and they are or are not BEFORE tax. What they see and what they massively resent (no matter how much the rich are taxed–up in to the stratosphere for all they care) is that AFTER tax the rich have giga multiples more cash than they do. This is a problem in a democracy.

      • bigneil
        Posted April 13, 2015 at 12:23 pm | Permalink

        Your comment of the rich and their tax. A recent item in the news said David Beckham’s fortune had gone up by a million a week during the last year. I am assuming that is after tax – -and it never mentioned what Victoria’s fortune was. No-one can sensibly spend that as a family.

        Reply People that rich usually invest their money so something useful is done with it – or they give it away to charity as with the Microsoft billions.

        • libertarian
          Posted April 13, 2015 at 5:05 pm | Permalink

          bigneil

          “No-one can sensibly spend that as a family.”

          Which just goes to prove you know nothing about money.

          Of course they spend it or invest it, both of which helps the economy.

          On a million pounds of pocket money per week to spend you hire, PA’s, assistant PA’s, nannies , chauffeurs, private pilots, yacht Captains and crew, head gardeners, under gardeners, personal chefs, housekeepers etc etc etc

          A staff of 25 would comfortably see off £1m per month in payroll costs alone. Then you have all the running costs of said stuff like exotic cars, private planes, yachts, households etc etc.

  3. Lifelogic
    Posted April 13, 2015 at 5:34 am | Permalink

    Indeed it is growth in the economy, productivity, international trade and jobs that are needed in the main. There are lots of no cost ways of getting this such as.

    Relaxing employment laws.
    Getting rid of all the pointless and damaging regulations like Cameron idiotic gender neutral insurance and annuities, the work place pensions, the three days paid voluntary work …..
    Firing the half of the civil service that does nothing of any use or worse inflicts actual damage as so many sections do.
    Cut state sector pay and pension to the private sector average (about 1/3 less).
    Get out of the EU and stop paying a fee just to be bound up in damaging red tape.
    Introduce tax relief for private schools and health care, so you lighten the load on state ones – better still give state education/healthcare vouchers that can be topped up.
    Have selective immigration so that we ensure that most immigration is a clear net benefit and not a net liability to the state as it currently usually is at least in the short term.

    As you say increasing the tax rates will almost certainly reduce revenues as we saw in France. The tax rates are absurdly high already. The foolish attack on the non Doms will certainly have that effect. They already pay far more than their share on average. Economic lunacy from Miliband but as a lefty politician working only on envy we rather expect that. Cameron has no such excuse or rather perhaps he has.

    • Bazman
      Posted April 13, 2015 at 6:54 am | Permalink

      Same old same old. Which employment laws need relaxing any law that prevents hiring and fire at will though that is pretty much possible now, so it must mean any health and safety laws and any discrimination legislation as well as redundancy payments. You have been challenged a number of times on this and even one employer says there is no need for any real changes, so one more time.
      Which employment laws BBC employment laws by any chance.and the more you cry about non doms and how they already pay far more than their share on average the more we know this is the right policy.
      Low taxes, no employment rights, anti EU position, subsidy free energy production except for nuclear without pollution limits, massive cuts to the welfare state along with a reduction in public transport and massive road building scheme across the country coupled with almost no planning restrictions or regulation on house building and no IHT.
      Is that what you mean?

      • libertarian
        Posted April 13, 2015 at 10:00 am | Permalink

        Bazman

        And I challenged you with 2 or 3 regulations that I asked you to explain. You didn’t, you went and hid for a couple of days.

        Your ignorant statement that employers don’t complain about this is just so far wrong that its laughable

        So I’ll ask again.

        1) what do you think of the flexible working legislation that led to more ZHC?

        2) What do you think of auto enrolment costing workers money

        3) What are your thoughts on the cost burden on SME’s administering regulations quite often that don’t even affect them & its detrimental effect on the money available to pay higher wages or employ more people

        4) There have been 9 new regulations concerning adoptive matching, surrogate parenting and shared leave since Jan 2015 what is the effect of trying to administer this on anSME

        5) Bazman what are your thoughts on the Fit For Work legislation and the new employer referral service

        6) Please tell us Bazman your experiences of administering the 100’s of employment regulations

        The reality is, that its not so much the regulations themselves, its the administration, overheads and the constant changes. Have you any idea how many regulation changes this year alone?

        Bazman…. Go run a business then come back and tell us all about it

        • Edward2
          Posted April 13, 2015 at 12:04 pm | Permalink

          Baz,
          Just try to calculate one persons maternity pay or statutory sick pay or lay off pay correctly and you would begin to realise how complex these areas of employee administration are.
          And these are just 3 examples of dozens I could give you.
          PS get it wrong and face a fine.

        • Mark W
          Posted April 13, 2015 at 2:43 pm | Permalink

          I wish the bookies would offer odds on you getting an answer. Cert.

          As I’m not alone in running a business I can cope with most legislation but it is a waste of time to legitimate employers.

          If there was some sort of law to prevent people not passing themselves off as charm and grace in an interview and then revealling themselves as fully paid up members of the awkward squad a few months down the line then life would be dandy.

          However careful following of proceedure will remove the odd bad apple. Some will always pass interview. But if you a running a business single handed then your energy is better employed at the coalface and not as a rearguard.

          But how many socialist states are flooded under the weight of people flocking to them. I don’t recall West Germany employing armed guards at its border with East Germany to shoot its citizens for wishing to leave. Funny that.

          Socialism fails everytime because it defies human nature.

      • Bazman
        Posted April 13, 2015 at 7:18 pm | Permalink

        So why is hire and fire at will possible then as it pretty much is most of the legislation is for employees who have been working for the same company for at least a year.I have worked at small companies where the boss is part of the workforce and he did not seem to have the problems that you bleat about. I have also worked for large and
        medium size companies whos main concern is about getting work and orders not you whining about regulations that on the whole are navigable by almost all companies.
        I have pointed out to you that zero hours contracts and flexible working are not the same.
        What employment laws do companies have to go through when employing through agencies as a large number do to circumvent employment laws?
        If you want to make workers rights even worse than what they are and I have pointed out to you that we have some of the most lax employment laws in the world do not be surprised to find that for many like myself these tinpot, low wage, no rights companies can take a running jump.
        You wonder why these need to employ desperate workers from the EU. There is your answer nobody else will work for them under their terms of employment.
        No amount of appeasement will work.
        I have worked for cash in hand and declared the income how many regulations did this need. To many you would say, so how would you deregulate this?

        • Edward2
          Posted April 13, 2015 at 10:35 pm | Permalink

          Employers generally don’t moan to their employees as its a waste of time.
          They just get on with running their busineses and doing all the admin that has to be done.
          By law, with penalties if you get it wrong.

          Its just a general simplification that is needed.
          Not a reduction in employees benefits or protections.

          Having to spend many hours each week doing all this work for the Government diverts you away from more valuable work.
          Thats all Baz.

        • libertarian
          Posted April 14, 2015 at 8:13 pm | Permalink

          Bazman

          Total drivel as normal.

          people employed by temporary agencies have the same FULL employment rights as everyone else.

          Every employer has a trial period where they check that the employee lives up to their cv, is capable of doing the work they claim etc. Therefore some workers are let go at the end of this period because they don’t cut it. Once a full time contract is in place employees have full protection rights.

          I pointed out to you with a link to the ACTUAL data that show we have some of the MOST employment protection laws. You just took part of one small element of one facet of employment for that incorrect statement.

          You see totally unaware that there are 31 million people in work in the UK , the highest number ever.

          Fexibile working can ONLY be implemented in one of 3 ways. Part time work, job share or ZHC. You whine and moan constantly about that too. So give us an example of flexible work that doesn’t fit that

          There are 5 million businesses in this country, your experience of one employer who as well seeing stupid enough to employ you and pay you in cash didn’t seem to worry about the burden of regulation ( you don’t say !) Try checking the Federation of Small Business survey of employers to see how they report that red tape is in top 3 problems of running a business.

    • Lifelogic
      Posted April 13, 2015 at 8:54 am | Permalink

      Lots of other no cost ways to boost the economy, growth, jobs, tax receipts too:

      Sort out defence procurement so you do not buy white elephant “air” carriers etc.
      Stop starting pointless and counter-productive wars.
      Stop much of the health and safety – so much is just another parasitic industry with no real benefit to real health or safety.
      Stop all the green crap subsidies and energy lunacy and go for cheap half price energy.
      Stop HS2 and stop the electric car subsidy nonsense. Make cars, buses, coaches, flights and trains compete on a level playing field.
      Stop deliberately congesting roads and build some new ones, over passes, tunnels and bridges.
      Speed up and relax planning and the OTT building controls.
      Stop trying to run businesses from central government when they have not got a clue.
      Stop pretending government is some kind of Father Christmas, with a magic money tree.
      Get some real competition in banking, energy.
      Sort out the over protected scam that is the legal system/profession and indeed much of the medical one.

      • Bazman
        Posted April 13, 2015 at 7:21 pm | Permalink

        What would you know about health and safety as a desk jockey?

        • Bazman
          Posted April 16, 2015 at 7:58 pm | Permalink

          Make cars, buses, coaches, flights and trains compete on a level playing field?
          I have had this one out with him before as one example.
          Everything on the roads would be the result and air fuel would have to be taxed to level up as it is not now.
          We could build enough roads to cope with all the commuters and lorries? Simple ‘logic’.
          He is spider writing fantasist and you are defending him.

          • Edward2
            Posted April 16, 2015 at 10:05 pm | Permalink

            Whats wrong with giving people what they want?
            Nearly 90% of teansport movements, freight and people are by road.
            Deal with it.

          • Bazman
            Posted April 18, 2015 at 11:48 am | Permalink

            The commuters London are to travel by road as the rest of the world and Europe stupidly invest in ever larger rail links? Why are they doing this are they deluded socialists with no idea or expending infrastructure to compete.

      • Bazman
        Posted April 13, 2015 at 7:44 pm | Permalink

        Low taxes, no employment rights, anti EU position, subsidy free energy production except for nuclear without pollution limits by a massive gas/oil deal with Russia, massive cuts to the welfare state along with a reduction in public transport and massive road building scheme across the country coupled with almost no planning restrictions or regulation on house building, get rid of the BBC to start with then crack down on other media outlets, restrict access to the internet by a Chinese style fire wall with mass surveillance, Get rid of IHT, restrict voting to millionaires, abolish the NHS and replace with insurance/charity.
        Private landlords to administer all housing needs and building plans, education to include to foolishness of global warming and any science that defies right wing logic and religious beliefs, all discrimination and child labour laws to be repealed.
        I will come up with some more vote winners soon to get this country back on its feet and ready to compete with Europe and in particular third world countries and tax havens.

        • Edward2
          Posted April 14, 2015 at 6:36 am | Permalink

          This is your deluded fantasy of what Lifelogic said.

  4. Gary
    Posted April 13, 2015 at 5:40 am | Permalink

    bureaucrats arguing over spending other people’s money, leaves me cold.

    let’s have a debate over how people can spend their own money (or save it) ?

    • petermartin2001
      Posted April 13, 2015 at 8:56 pm | Permalink

      Gary,

      “other people’s money”?

      You possibly could create the “Gary” which would be your own unit of currency. That would really then be your “own money”. You’d just have to come up with a way of making those “Garies” worth something.

      If you mainly use ££, then it is only partially your own money. You own the asset, the Government accepts the liability. Indeed if it didn’t do that, there wouldn’t be any assets. Those ££ in your wallet (unless they are counterfeit) are there because the government spent them into the economy.

      You may disapprove of their spending them in on health care, but they do have to spend them in on something.

      • Edward2
        Posted April 14, 2015 at 6:43 am | Permalink

        The Government doesn’t “spend the money into existance” it just prints.
        (it prints via the old method or the new electronic method)

        The value is accepted by others in return for goods and services because of confidence.
        Confidence in the Government itself and confidence that the currency has stability.
        Once the currency is debased by overprinting that melts away.
        Economic history has many examples.

      • Denis Cooper
        Posted April 14, 2015 at 8:51 am | Permalink

        Once again, a hundred years ago, when the Bank of England was still a privately owned bank, the Treasury resorted to issuing its own Bradbury pound notes alongside the notes issued by the Bank of England, and indeed by other private banks, and it could have been said then that those Bradbury notes were in somebody’s wallet only because the Treasury, a department of the government, had spent them into the economy. But that cannot be true of the sterling banknotes in my wallet now, all of which say very clearly that they have been issued by the Bank of England which is not in fact part of the government even though it is publicly owned.

        • petermartin2001
          Posted April 17, 2015 at 6:03 am | Permalink

          Government spends more ££ than it receives in taxes. We can assume that very little, if any, of that spending is in the form of issued banknotes but even in digital form they are still the IOUs of government.

          Because there is that spending imbalance, the commercial banks have a surplus of government issued IOUs. So, for example, when the government pays a serviceman’s or civil servant’s salary , most of that money ends up in the bank’s reserve account at the BoE. Later it will be converted into bonds to obtain some interest payment. When the serviceman looks at his bank account statement he sees the IOUs of the commercial bank.

          The bank will also need some BoE notes for its ATMs. So it converts some of that digital cash into real cash from the BoE. That’s where your banknotes come from. Because the BoE is now government owned all government/ BoE pounds are essentially the same as the old Bradbury pounds. There will never be any need to repeat the exercise of the Treasury issuing its own currency.

          • Denis Cooper
            Posted April 17, 2015 at 1:35 pm | Permalink

            No, gilts are a form of IOU issued by the Treasury, while our normal, familiar, money is a form of IOU issued by the Bank; and once you have accepted that they are separate you can see that as practised in the UK QE was a mechanism for the two of them to exchange their respective IOUs so that the Treasury could be sure of being able to pay the government’s bills in normal money rather than having to issue its own abnormal money, like Bradbury pounds, or persuade people to accept payment in gilts.

  5. John E
    Posted April 13, 2015 at 5:42 am | Permalink

    In general the challenge to say where money will come from seems a step in the right direction in that at least it recognises that resources are finite and choices have to be made.

    But for me the whole debate so far has been hopelessly trivial. The post WW2 world order is collapsing around us and this campaign is sleepwalking. None of the major challenges of our time are being even spoken about.

    • libertarian
      Posted April 13, 2015 at 10:03 am | Permalink

      John E

      Exactly 100% right.

      Our tribal politics is locked in the distant past. All around them massive changes are happening and they haven’t recognised it. They all harp on about economic theories developed before the invention of the computer as if ANY of them were still relevant today.

  6. Roy Grainger
    Posted April 13, 2015 at 6:45 am | Permalink

    “Worse still Labour and some in the media seem to think if you wish to propose any additional spending you need to show hypothecated new revenue to pay for the item”

    Strange comment given that Labour are campaigning on the basis that the Conservatives will make savage cuts (not new revenue) to pay for their various promises. You are saying the Greens (say) needn’t discuss how they will fund their policies ?

    Incidentally, who will pay for price freezing rail fares for 5 years ? The same people who’ll pay for Labour’s energy price freeze I suppose. Seems like our choice is between two statist, unworkable, identical economic policies.

  7. Ian wragg
    Posted April 13, 2015 at 6:53 am | Permalink

    742 billion pounds is a disgraceful amount for the government to be spending. If they stuck to essentials there would be scope for massive tax cuts.
    All that money and inadequate defence of the nation.

    • libertarian
      Posted April 13, 2015 at 10:06 am | Permalink

      Ian Wragg

      Absolutely agree, we need far better value for money from our public services. I can never understand why no political party has never worked out that if you stop squandering money on pointless, fringe, interfering activities you would have vastly more to spend on the essential services of Health, Education, Welfar, Defence & Law and order.

      • DaveM
        Posted April 13, 2015 at 2:31 pm | Permalink

        “I can never understand why no political party has never worked out that if you stop squandering money on pointless, fringe, interfering activities”

        Could it be because they’ve made such a dog’s breakfast of the voting constituencies that they spend all their time trying to appease the odd loony left voter in marginals rather than pursuing populist policies that please the masses?

        Manifesto: minimum spending, minimum interference, lower taxes, low waste, good defence, good policing, sensible lawyers, good healthcare, good education, common sense policies.

        If any party could come up with something as simple as that they’d probably win.

        But then that’s presuming politicians want to actually do a service to their country rather than just getting rich.

        • libertarian
          Posted April 13, 2015 at 5:18 pm | Permalink

          DaveM

          I agree with your manifesto, I genuinely don’t think politicians do it to get rich, I think they do it to get popular. Its the same with comedians and people off the telly and anyone speaking at a public meeting. Power to the people type slogans can’t be shouted down, attacking a mysterious them ( rich, immigrants, tax avoiders etc) is easy, requires no thought or justification. Its a problem we suffer in this country that our politics are class based, yah boo & tribal.

          There is no leadership. Politics is all about ego.

  8. Richard1
    Posted April 13, 2015 at 7:24 am | Permalink

    Labour’s numbers are plucked out of thin air. £7.5bn from cutting tax avoidance and tax evasion. Why not £15bn or £25bn? There is no basis for this nonsense and the public should ignore it. Ed Balls has just said he will have the ‘national debt falling’ even though he will still have a deficit of at least £30bn due to ‘investment’. This obvious contradiction was not picked up by the BBC (note to BBC: if there is any deficit at all the national debt goes UP!). We all recall how Gordon Brown would use the term ‘investment’ to describe any spending at all by govt. Labour means tax borrow and spend. It means chaos and another bust just like last time (and the time before).

    • Denis Cooper
      Posted April 13, 2015 at 11:19 am | Permalink

      But haven’t you read that Labour has just turned over a new leaf, and it is now not only the party of change but also the party of responsibility?

      Or, as the Guardian reported in what is being described as a Freudian slip:

      http://order-order.com/2015/04/12/freudian-slip-on-guardian-splash/#_@/Nd9L6K1tilD_LQ

      Miliband will say:

      “Labour is now the fiscally irresponsible party”.

      We all need that kind of light entertainment in this dreary election campaign!

      • Richard1
        Posted April 13, 2015 at 6:08 pm | Permalink

        Indeed, many a true word…

        It’s too late for Labour to change their spots, it’s not credible. In any case their policy is incoherent, the carve out for ‘investment’ allows any amount of spending on anything given their record.

  9. alan jutson
    Posted April 13, 2015 at 8:11 am | Permalink

    The sad fact is they are all arguing over money (future tax take) the Treasury does not have, all assume growth, when records show little per capita has happened or will happen.

    Most of our so called growth has come because we have more people here, just like a football or cricket team would score more runs than the opposition if they were always allowed more players on the pitch at the same time.

    The problem with more people is that your costs also go up, infrastructure, housing, schools hospitals, sewerage works, benefits, state pensions etc, etc.
    They may not all go up at once, and as soon as they arrive, but eventually go up they will as they get older.

    The only true way to really budget is to work on the basis of last years income (tax take less a percentage for repayment of debt)) and work your figures from factual information to balance the books year on year.
    Then as income rises you can then either choose to spend it on repaying the debt or improving the infrastructure of the Country and its people.

    Once again we have shameful pie in the sky politics, with people not even being bribed with their own money any more, but with their proposed future income and that of their children.

    Politicians please grow up and grow a pair.

    • outsider
      Posted April 13, 2015 at 3:29 pm | Permalink

      Dear Alan, You are right. Sadly, politicians of all parties have been seduced into believing that the Government is the nation or at least that the Government’s interest is the national interest. Implicitly, the main purpose of the private sector is to generate taxes for the Government to spend.
      So the Government and Opposition are only interested in maximising the nation’s GDP, the size of the cake so that there is more to spend or “give away” in tax cuts. The people are interested in pre-tax personal incomes growing, real income per head not the size of the cake.
      Under Mr Brown’s Chancellorship (with Ed Miliband and Ed Balls as his advisers), the Treasury’s spending plans were based on GDP growth remaining above the long-term average thanks to continuing large-scale immigration. Without large-scale continuing net immigration, it is unlikely that GDP will grow – sustainably – at more than 1.75 to 2 per cent a year.

  10. Atlas
    Posted April 13, 2015 at 8:49 am | Permalink

    … especially when the sums concerned are sometimes ‘per year’ and othertimes ‘over the term of a Parliament’… I suspect quite few politicos are innumerate – cf the difference between the deficit and debt.

  11. Brian Tomkinson
    Posted April 13, 2015 at 8:57 am | Permalink

    Please don’t try and bamboozle us with selected statistics which are in any case forecasts. Tax take may be forecast to increase by an average of £30bn per annum for each of the next four years but the expenditure is forecast to drop next year and barely rise the year after. Please explain how this will be achieved, as you haven’t done it in the five years in office. Just repeating, what Osborne et al say, that there will be £12bn of unidentified and specified welfare cuts won’t do.

  12. Nick
    Posted April 13, 2015 at 9:04 am | Permalink

    Big numbers. There was I thinking you were going to make good on your election promise to publish the state’s pension debts. But after reading the article I see that’s still a promise that you haven’t made good on.

    Instead 8 bn is a big number.

    Oh dear. The scale doesn’t quite work does it.

    You inherited a 5,010 bn pension debt. 850 bn of borrowing. PFI lets ignore it, its chump change.

    You’ve doubled that pretty much. Borrowing is 1,415 bn, but you could make a case that QE is money you owe yourself, so irrelevant.

    But those pension debts. Even knocking 5% off for each year you’ve defaulted by raising the retirement age. Another 15% of default by going from RPI to CPI. So what’s the debt?

    Oh dear, it carried on increasing at 636 bn a year. And using ONS methodology, the problem is that the yield on AA corporate bonds has dropped.

    You currently owe 9,200 bn for pensions.

    So yep, Labour has got one thing right. You’ve doubled the debt.

    It’s now well over 10,000 bn pounds.

    Why worry about 8bn?

    Reply I have published the pension debts on more than one occasion.

    • Denis Cooper
      Posted April 13, 2015 at 11:09 am | Permalink

      Just as well that the Treasury doesn’t have to stump up all of that £9,200 billion this week, or they’d have to get the Bank of England to print it at such a high speed that the presses seized up. But as the payments will be spread over many decades they might be able to manage them without resorting to that.

  13. Denis Cooper
    Posted April 13, 2015 at 9:11 am | Permalink

    “The election debate has got tangled up in discussion of a few billion extra spending, rather than a sensible analysis of the £742bn of total spending this year.”

    That was pretty much my complaint last time, that the election debate centred on a few billion here or there and almost entirely ignored the most important basic facts that the Labour government was having to borrow about a quarter of all the money that it was spending, that over the previous year it had stopped asking normal gilts investors to significantly increase their total lending and had instead turned to the Bank of England as an abnormal, captive, gilts investor, and that this could not carry on forever.

    Except of course that some people now theorise that it could carry on forever, provided that the constant creation of vast sums of new money for the government to spend did not cause significant excess inflation, the addition of 6% or 8% extra to CPI through the £375 billion of “quantitative easing” we have already had not being seen as significant even though it has been a major contributing factor to the “cost of living crisis” that the Labour party likes to talk about.

  14. Bert Young
    Posted April 13, 2015 at 9:16 am | Permalink

    The “Robin Hood” approach to taxation has a social dynamic but in reality the opposite effect . The belief that the “rich” ought to be further penalised for being successful does not work ; those who are capable of generating wealth and employment should be given every encouragement to go on doing so – of course ,if in the process of wealth creation they use off-shore means of retaining their wealth , they must be exposed , punished and made to toe the line . The approach to taxation must be incentive driven .

    As things stand now Labour are wrong footed . The psychology of appealing to the “underdog” and waving the flag of “equality” ignores the underlying truth of success . A healthy and successful economy in both the manufacturing and services sector is the best way to attract votes . Neutralising the “Scottish” element and regaining independence are other ingredients in a successful meal package .

    • Roy Grainger
      Posted April 13, 2015 at 9:43 am | Permalink

      I think Labour’s attack on non-dom status is entirely reasonable and I could not care less if they remove it completely, how does it look for the current Governor of the Bank of England to have non-dom status ? (as reported yesterday) He is hardly an entrepreneur.

      • Graham
        Posted April 13, 2015 at 12:35 pm | Permalink

        Most of these are subject to double tax agreements which mean that their worldwide income is taxed somewhere. Of course some are not but the effect is not as dramatic as you would have us believe.

      • libertarian
        Posted April 13, 2015 at 1:43 pm | Permalink

        Roy Grainger

        Typical comment of the non thinking.

        So you wouldn’t care if the non dom owners of Tata Steel up and left shutting all their plants in UK ?

        You wouldn’t care if the nom dom owners of jaguar Cars shut their plants and upped and left

        Do you even know what non dom status is?

        • Narrow Shoulders
          Posted April 13, 2015 at 5:43 pm | Permalink

          @Lib

          One assumes that those examples you gave are delivering sufficient returns post UK tax to justify continued existence even if the owners decide to be more arms length by upping sticks.

          One might not lead to the other. These people tend to deal in return and not spite.

          • libertarian
            Posted April 14, 2015 at 8:19 pm | Permalink

            Narrow Shoulders

            Possibly, do you want to take the chance? Do you not think that Non Doms have businesses and employ people at all kinds of levels that may disappear if they went. Not to mention that 5% of ALL income tax revenue is currently generated from non doms

        • Bazman
          Posted April 13, 2015 at 7:33 pm | Permalink

          You seem to think you have exclusive knowledge of non dome status and one of the main points of it abolition is that it gives unfair advantages to an elite few and this idea that trickle down economics, what non dom status is based on is fore the birds as we have seen in the last 30 years. This country needs more.
          (named e.g.s)will just leave as their bosses is not allowed non dom status? They will not and if it is that fragile they can sling their hooks now. We do not respond to threats from non elected foreign oligarchs.
          Scaremongering from a right whiner and you still have not answered why mass unemployment did not happen when the NMW was introduced or why you are lying on holiday homes in the Lake District? Deluded right wing thoughts is the answer.

          • Edward2
            Posted April 13, 2015 at 10:41 pm | Permalink

            Next time I meet some people I know who work for (a company that may have non dom investors ed), Im showing them your post.
            Amazing bravado from you considering it will not affect your wallet or your family life.
            And considering you will never ever employ anyone else nor invest any of your money in a business enterprise.
            Saying sling your hook etc. dreadful comments.

          • libertarian
            Posted April 14, 2015 at 8:27 pm | Permalink

            bazman

            What advantage over who does Non Dom status give?

            Currently 5% of ALL income tax revenue in UK is derived from Non Dom’s so how do you intend to make that up once they’ve taken your advice and gone?

            The NMW is NOT a problem for employers its a problem for workers as I’ve told you many times.

            Do you know Bazman one of the Russian Oligarchs you rant about was one of the first employers in UK to guarantee workers the London living wage?

            The numbers I gave you on holiday homes were taken directly from the local council website, go look it up yourself

            You really are so consumed with rage and jealousy. If you directed that pent up energy into working you might actually be successful and make a contribution to society

      • Edward2
        Posted April 14, 2015 at 7:45 am | Permalink

        Roy,
        If you were a Canadian working in the UK for a while, would you think it fair to pay tax twice, once in the UK and once more in Canada?

        • Narrow Shoulders
          Posted April 14, 2015 at 9:43 am | Permalink

          As I understand it that is not how it works. The Canadian is expected to pay the difference in the two rates so the Governor of the BOE would pay the difference between Canadian tax and 45% on his Canadian earnings having used the thresholds on his UK earnings.

          He would not be expected to pay the full 45% on all his earnings. Obviously the rate would be at least 50% if Labour is returned.

          I don’t think any tax paid greater than 50% on earnings in other countries is refunded in Labour’s proposal, cake and eating it…..

          Reply Non Doms pay full UK taxes on all UK income

          • Narrow Shoulders
            Posted April 14, 2015 at 12:29 pm | Permalink

            Reply to reply

            I was only referring to tax on foreign income if Non-dom status were to be revoked. Apologies if this was unclear

            Of course Nom doms pay “the legal amount due” of tax on their UK earnings ,

          • Edward2
            Posted April 14, 2015 at 2:46 pm | Permalink

            Oh!
            So our Canadian theoretical person isn’t hiding here avoiding any tax after all.

            Reply. No. Non Doms pay full UK taxes on UK income and assets.

  15. A different Simon
    Posted April 13, 2015 at 10:35 am | Permalink

    So much discussion about how to spend the proceeds and none with how to make it in the first place .

    I’m not sure who the political class think they are kidding any more . They have never over egged the pudding to this degree before .

    It is revoltingly patronising to have expensively educated Cameron and Clegg talking down to the electorate as if they are presenting a slot on Cbeebies .

    Who the hell do they think they are ?

  16. Ian B
    Posted April 13, 2015 at 1:07 pm | Permalink

    It seems to me that with no real politics to talk about, the parties are just trying to find something to talk about because there is an election on. These are words that sound nice (to some part of the electorate or other) but mean nothing, like murmuring a lullaby to a baby. There is no real difference of opinion between the parties as we saw in the 1980s for instance; all have a vision of the future which is the Baby Boomer “Progressive” value system; all are internationalists, pro-EU, with a big state that manages every aspect however personal of the citizen’s life. All are primarily driven by the lobbying of the same well funded pressure groups. So, they just make noises and pretend the noises mean something significant, when we all know they do not. And then wonder why the electorate disengage more with every passing year.

    Reply This is just not true. This election is about big matters – about our relationship with the EU, about Scotland and England’s relationship with the Union, about how you control state debts and how much you tax. There are big differences between Greens, UKIP, Labour, Conservatives

    • libertarian
      Posted April 13, 2015 at 1:48 pm | Permalink

      Ian B

      Is absolutely right.

      JR you and I and others care about the issues you highlight. I can assure you the main political parties do not. In fact the EU and England haven’t been mentioned at all in this election, all 3 parties agree that there will be a UK with no representation for England, all 3 agree we will be staying in the EU, none of them has mentioned any meaningful way they intend to manage state debts, they’ve ALL announced plans to spend MORE money they haven’t got.

      For the first time in my life I probably won’t vote as there is absolutely nothing to vote for.

      • Narrow Shoulders
        Posted April 13, 2015 at 5:48 pm | Permalink

        @Lib

        Find a single issue party or spoil your paper.

        You may think you are sending a message by not voting but it is too easy to ignore.

        If everyone who doesn’t vote either voted single issue or spoilt their paper someone would take note.

        • libertarian
          Posted April 14, 2015 at 8:29 pm | Permalink

          NS

          I will probably spoil my paper, but I don’t think that really helps. They don’t take any notice

  17. ian
    Posted April 13, 2015 at 1:48 pm | Permalink

    In 2007/8 government spending at the high of the boom was 582 billion pounds, today 2015/16 it will be 742 billion pounds, that’s 20 billion a year extra spending a year for 8 year, have you seen any of this money ?.

    No mention of a down turn in the next five year, just like mr brown all bets on the housing market from 2002 to 2008, its a replay.

    Government spending going forward should come in at well over 800 billion pounds by 2020/21 with tax cuts all round, I wont go into government borrowing because like mr brown it look like they have done away with bust but I will say it will not go under 30 billion a year in the next parliament, that’s if every thing works out great.

    Wishing everybody a good election and hope you get what you want.

  18. outsider
    Posted April 13, 2015 at 3:39 pm | Permalink

    Dear Mr Redwood, you are right that the Exchequer pool system which allows all income to be used for any expenditure is by far the best (at least if asset sales are excluded). But, with apologies for repetition, this system will inevitably begin to break down in favour of hypothecation once Scottish income tax no longer goes to the Treasury.

  19. ian
    Posted April 13, 2015 at 3:41 pm | Permalink

    I forgot PFI, off the government books borrowing, debt so far 225 billion pounds, with no more building as of last year debt to go to 310 billion in 30 year time without adding any more building. If the parliaments had paid for this building as they go to date it would of come in at 70 billion pounds, so it would have been only a extra 70 billion on the book, that’s pay as you go but so far it cost an extra 155 billion pounds with another 85 billion to go over 30 year and if they start a another big building plan this year sky the limit, you can add on each year and pay 4 to 5 times as much as paying for building as you go, a big price has been paid for keeping spending off the book to make thing look better than they are, a lot more coming as they go forward, hope you can keep up and don’t forget the pensions.

  20. formula57
    Posted April 13, 2015 at 3:42 pm | Permalink

    Wholly persuasive though your point is that “Worse still Labour and some in the media seem to think if you wish to propose any additional spending you need to show hypothecated new revenue to pay for the item.” someone whom the Telegraph newspaper refers to as “David Cameron” reportedly : –

    “….said on Sunday that a future Tory government would use a raid on pensions to fund a radical plan to scrap inheritance tax for assets up to £1m. The move echoed a proposal unveiled by Labour in February, to limit pension tax relief to fund a cut in tuition fees.”

    So hypothecating for additional spending is very wrong, but doing the same thing for additional tax cuts is not! Four legs good, two legs better no doubt.

    (Quote from second paragraph @ http://www.telegraph.co.uk/finance/economics/11531391/Pension-tax-relief-plans-damaging-and-malign-experts-warn.html )

  21. Margaret Brandreth-J
    Posted April 13, 2015 at 4:01 pm | Permalink

    So rather than for specifics , say the mansion tax , you would rather have an across the board savings in all public departments .
    You have identified previously that you carry a fear of losing out to further investment by raising taxes for our private companies , but should we extend this to their owned properties?
    The extra spending will not work unless you provide quality workers with an incentive. For instance in the NHS numbers do not count. It is not any use talking in numbers and saying we will employ this extra number of staff. A few quality would be better , who did not pigeon hole themselves into specialities, thereby not understanding the body as a whole and having 10 or more referrals within a hospital admission. Spending extra , acquiring more supposedly qualified people will not improve services. The inept actually make extra work for the capable.

  22. fedupsouthener
    Posted April 13, 2015 at 5:10 pm | Permalink

    John, the title of the subject today is very relevant with the news that Germany is facing big problems with their energy policy. This is the same European policy being foisted on all of us except the UK has committed to more of this insanity than any other European country. You talk about uncosted policies. Well, nothing could be more uncosted than this madness.

    See extract from the Global Warming Policy Foundation today, which I know you support, and it is frightening. Cameron could do no better than to come out and tell the public just what we are facing. See extract here:

    Every second power plant planned in Germany is about to fold. The willingness to invest is decreasing rapidly as even the most efficient gas-fired power plants can no longer be operated profitably. 50 existing power plants could be decommissioned later this year. Germany’s green energy revolution is at a critical turning point. –Deutsche Mittelstands Nachrichten, 13 April 2015

    I don’t know about all of you but I feel Europe and the UK included is heading for a disaster bigger than anything we have known in years. Why isn’t someone in charge listening? It takes a brave man to admit they are wrong. Has anyone got the courage to stand up and be counted???

    • Edward2
      Posted April 14, 2015 at 2:48 pm | Permalink

      Its a religious belief.
      Sadly until the lights start going out regularly like they do in third world nations, nothing will change.

      • fedupsouthener
        Posted April 14, 2015 at 9:17 pm | Permalink

        Bring it on. It can’t come soon enough but I think it’s a sorry case if this is what it takes for our politicians to see the light.

  23. Denis Cooper
    Posted April 13, 2015 at 6:04 pm | Permalink

    Off-topic, even though today’s Guardian/ICM poll giving the Tories a 6% lead over Labour is at best an outlier and at worst a rogue, just out of interest I put its numbers into the election prediction facility on Electoral Calculus, along with recent numbers just for Scotland as is now possible on that site, and the prediction came out as the Tories still being 8 short of an overall majority. OK, you can’t read too much into this, but it gives some indication of the price the Tories will pay for not having made sure that the boundary changes went through. In 2010 they got 7% more votes than Labour but that was not quite enough to get them an overall majority, now according to this prediction a 6% lead over Labour would still leave them just short. The LibDems would lose 49 of their seats but would be left with 8, just enough for the present coalition to scrape back in.

  24. Kenneth R Moore
    Posted April 14, 2015 at 9:40 am | Permalink

    All the so called ‘fury’ over a few billion in spending ‘commitments’ is an invention by the Labour and the Conservatives to try to pretend there is any real difference between them.
    The BBC journalists go along with it as it gives them easy news stories and the cowardly Mp’s are happy too as they get to pretend they are debating matters of real substance when they are not. It spares them the trouble of debating anything of real importance in public that might offend their client vote.
    I would have more respect for them if they just said’ Look I like having the kudos of being an Mp, the money, the garden partys and the chance to get my face on the telly. Sorry but I can do little to help you….

  25. Kenneth R Moore
    Posted April 14, 2015 at 9:45 am | Permalink

    Is this the most boring, tedious and pointless election campaign in history – we all know the result will be a vote of indifference by the country followed by another stitch up by the left wing establishment. A battle between the heir to Blair and some bloke that supposedly can’t eat a bacon sandwich properly.
    Cameron could have given us a real choice but he is still wearing New Labours old clothes.

  26. Gyges
    Posted April 14, 2015 at 9:34 pm | Permalink

    When a Gov borrows money it provides an income stream and profit from whoever it has borrowed the money. Further, it does this by extracting money largely from the poor to give to these rich people. Why are Labour so eager to harvest the poor on behalf of the rich?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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