Author: johnredwood

 

I read in the papers that the Treasury is considering a merger of National Insurance and Income Tax. The logic would be that it could save money on collection to have a common system, and it would remind people that our tax rate on income is still quite high when you add the two together. The stories have been denied by Downing Street.

There are reasons why you cannot simply merge the two without other changes. The government would not wish to make pensioners pay national Insurance on top of their Income tax, as they do not currently have to pay NI. It would take time to exempt everyone on lower earnings below £10,000 a year  from NI, as there will be a revenue loss, just as it has taken time to get everyone  on less than £10,000 a year out of Income tax.

National Insurance is currently payable on earnings between  £7956 and £41865 a year at the full rate, and at 2% above £41 865. Presumably the reform would not be a device for increasing top rates of tax further on a merged basis.

Some might object to the ending of a special tax called NI, as it removes the last vestige of the idea that you pay in to get back pensions and certain contributory  benefits. As most will appreciate, the so called National Insurance scheme was never funded but was always a pay as you go scheme. Merging NI and Income Tax just makes it clearer that all of us who have paid NI over the years rest on future Parliaments continuing to pay us pensions, as has been the case through  the State pension years.

I would be interested in your thoughts on this proposal.

 

Mr Cameron succeeded at the summit in getting the following paragraph added to the conclusions:

“The UK raised some concerns related to the future development of the EU. These concerns will need to be addressed.

In this context, the European Council noted that the concept of ever closer union allows for different paths of integration for different countries, allowing those who want to deepen integration to move ahead, while respecting the wish of those who do not want to deepen any further.  etc”

 

This careful prose is a prelude to the renegotiation the UK is going to need, given the centralising drive of much else in the document and in the Commission work programme. In the Commons yesterday Mr Cameron reaffirmed that the UK does not wish to move to political union at a slower pace than the rest, but wishes to go in a different direction, with the restoration of powers to the UK . The UK wishes to see accountability and legitimacy for government through national Ministers  and elected national Parliaments, not through the Commission and European Parliament.

Elsewhere in the document the rush to more EU power and policies continued. Problems with migration gives us the statement

“the EU needs an efficient and well-managed migration, asylum and borders policy, guided by the principles of solidarity and fair sharing of responsibility… Europe must develop strategies to maximise the opportunities of legal migration through coherent and efficient rules…”

This is clearly a situation where the UK will need domestic control of its own arrangements.

The document also reaffirmed the need for an integrated energy market with more mutual dependence and connectivity between states. The aim is to share what we have rather than taking steps to increase supply of cheap energy sufficiently.

 

The UK’s exit from the EU is not unimaginable. The rest of the EU would get over it. Let me reassure my German friends . An independent UK would want to let German carry on selling all the goods to us they currently sell.

As the German Finance  Minister wisely said when he could imagine the UK’s exit, Germany would want a trade agreement with the UK on exit. As the  minority in the UK who want to stay in only ever argue about the need to preserve the trade, they should accept that it is in the rest of the EU’s interest to do just this!

 

 

UK foreign policy in recent decades has not been true to our history or our normal beliefs as a nation.  Instead of standing up for the self determination of peoples in Europe, the UK has gone along with those who wish to centralise power and control under an EU government. Instead of being the true friend and ally of the smaller countries and the outs, the UK has turned a blind eye – or has kept quiet in public – to a massive move towards Brussels control with one flag, one anthem, one court, one currency and one much else.

In the sixteenth and seventeenth centuries England, then  Britain, was a leading voice and power to allow people the right to choose their own religion. Britain backed the Dutch in their revolt against the Catholic hegemony,  and supported the smaller German states who wished to be Protestant. In the eighteenth and early nineteenth centuries Britain stood against French military conquest and domination of smaller counties in Europe, and fought wars to prevent French control. In the twentieth century twice the UK fought with allies to prevent German control of the continent. The UK did so because we have a long tradition of freedom,believing peoples and countries have a right to govern themselves, choose their own laws and settle their own beliefs.

Today mercifully we are  not called upon to fight wars for these freedoms in western Europe. All the main countries accept these things should be settled by arguments and votes, not by bullets. This does not mean we have to proceed by consensus or accept beliefs and laws we do not like or want. It should mean greater freedom and diversity for the peoples of Europe, safe in the knowledge that the large countries no longer wish to conquer and dominate by force of arms.

Post the Juncker vote I hope the UK can return to its historic role of being the voice and the votes for freedom – freedom for individual countries to govern themselves and choose their own laws if they wish. EU co-operation and common action should be neither coercive nor expected. If countries willingly want the same laws that is fine. The EU scheme seems to have gone too far in creating too much central control, then intimidating or coercing by words and threats of legal and economic sanctions too many countries and governments into accepting what they do not really want.

The UK in this post military EU world needs once again to free Europe by its exertions. Let small countries flourish. Let business thrive without so many laws. Let us celebrate diversity, rather than seek to impose a compromise driven conformity which could well end in fewer jobs, less prosperity and much more political frustration.

 

The recent reactions to Mr Cameron losing a vote in the EU sum up one of the main reasons so many UK people do not like the way the EU  works. It is not democratic. Opposition is  condemned and public disagreements are unacceptable to the true believers. What we need is an open and active opposition within the EU constantly challenging the need for new laws and the form those laws take. Instead we have a conveyor belt to federal control, a machine for putting all of human life under EU law.

In the UK the Labour minority in Parliament regularly disagree with the government, push it to a vote and lose. The media do  not then run endless stories saying “Labour isolated” or ” Labour a pariah”. When Labour do it they are simply doing their job of providing opposition. Often I think them wrong in their view, but I think them right to press it to a full argument and vote. Occasionally  I agree with them. Opposition gives MPs choices day by day, and gives the public choices election by election.

The UK’s view that we want to trade, be friends and have scope for political co-operation with other EU countries  happens to be our view as a country. No serious party now recommends joining the Euro or stands on a platform of more EU law and more EU control of our affairs. It is therefore imperative that our leaders put the UK view in EU Councils. It does not make us a pariah. It simply means the UK is a democratic country which wishes to be largely self governing. Judging  by the comments of others after the Juncker vote we are not alone anyway. There are forces within all the main EU countries that think the EU presumes and does too much, and there are forces within other member states governments that recognise the lack of democratic accountability in the way decisions are often taken by the EU.

I understand those parties peoples and countries that want to create a United States of Europe whose democratic accountability will come from its own elected Parliament. We are not there yet, as member states governments and Heads of government still have more democratic legitimacy and accountability than the various blocs of votes in the European Parliament.  We are arguing over how the hybrid structure we have today can work, and how it can straddle the wishes of those who want a United States of Europe and those people and countries like the UK who do not.

 

The government is struggling to collect enough CGT. Maybe the 28% rate is a turn off. Maybe they should have listened to those of us who argued to keep labour’s lower rate of 18%, as the best way to maximise CGT revenue. The government should ask itself why is CGT the vanishing tax?

You would have thought CGT should be surging. After all the Stock Exchange is at a new high, and property prices especially in London have been booming. Instead CGT revenue has been falling – from £4.337 bn in 2011-12, to £3.927 bn in 2012-13 to £3.908 bn in 2013-14.

The Treasury and OBR forecasting models are clearly far too optimistic. Just look at the way they accelerated the forecasts for CGT revenue for 2013-14 as the economy started to recover more rapidly:

June 2010   estimated £3.3bn

March 2011   estimated £3.7bn

March 2012   estimated £4.9bn

March 2013   estimated £5.1bn

Current outturn  £3.9bn

In other words the CGT revenue actually received on latest figures (after the year end) is down £1.2bn or 30% of the achieved total compared to last year’s forecast. It is still under half the level reached in 2008-9 with a lower rate.  (£7.852bn)

The Treasury do now accept a Laffer effect on CGT. They agree that a higher rate than 28% could lead to lower revenues. It looks from the figures as if 28% yields less than 18%. It certainly shows their forecasting model is way off beam, as they think a stronger economy and higher asset prices leads to rapid growth in CGT, when it is still leading to a fall.

The reason the optimising rate for CGT is low is people can easily put off taking gains, or can find offsetting losses, when they think the rate is too high.

 

 

I am glad David Cameron has highlighted the system for choosing the next President of the Commission, and has tried to get others to see this is an important choice for every member state of the EU. It  will have substantial effects on how they are governed in the next five years.

As a result of his intervention there has been horse trading about the policies which the EU should follow. France and Italy have demanded less austerity from Germany as the price of their agreement to Mr Juncker. The centre left will demand one of their people for the next big post.  These compromises with what any given country wants, and the permanent erosion of national democratic accountability are all part and parcel of belonging to the Euro and the EU. The new President of the Commission will be very powerful, because he will be the master of compromises between individual member states and between the Council and Parliament, driving relentlessly forward with the usual centralising agenda. At the end of this new Commission, like its predecessors, member states will have lost more  power and the EU will have gained it.

Mr Cameron has reminded every other state that the UK needs a new relationship with the increasingly centralised and EU controlled Euro area, We should not worry that the UK is “isolated” on this. It would be surprising if we were not , as the UK is in a unique position of not wanting to go into the Euro, not having to go into the Euro, and wanting a far less intrusive way of trading and being friends with the rest of the zone than is currently on offer.

To those who say Mr Cameron should not have sought to block Mr Juncker because he could not win, I say you are wrong. This episode has reminded all in the UK that the EU is not “coming our way”, the new Commission is not about to respect national Parliaments and governments, the EU is not about to become the mere  trading area some UK people thought they were voting for in 1975. The  battle over Mr Juncker was but the first skirmish in a long negotiation of a new relationship for the UK with the rest of the EU.  If the rest of the EU continue to be so unsympathetic to UK requirements, more UK voters will draw their own conclusions about the desirability of our continued membership.