The paper summarising the general case for selected exit of countries

 

         This paper could draw on the arguments presented before on this site. It would summarise why under the present Euro regime certain countries are unable to get their debts and deficits down to anything like the reference levels in good time and good order. It would explain the large trade and commercial imbalances within the zone that are proving difficult to finance.  It would remind member states that the original criteria over debt, deficits, inflation and currency ranges were there for a good reason, to improve the chances of currency success. It will be essential to give hope to the unemployed, those with near bankrupt businesses, and those in public sector employment fearing for their jobs owing to the shortfalls in tax revenue, in the badly affected Euro  member states.

 

         The meeting may have to deal with the problem that country like Greece may not wish to leave the Euro. Under the Treaty there is no way of enforcing her withdrawal. However, the Treaty permits the status of candidate member whilst a country is preparing to join and trying meet the requirements of the union. As Greece (and Portugal, Spain and others) did not meet the requirements by a long way on entry day, the other member states could jointly request that Greece withdraw to prepare again and to sort her economy out.  If appeal to her own interests and reminders that she neither met the requirements nor presented honest figures on entry is insufficient to persuade her, then the Union can simply say they are no longer prepared to finance the Greek state through the special loans the EU and IMF are making available. This should be sufficient for the Greeks to accept they need to follow the EU’s advice.

 

           The Member states would then resolve that Greece had agreed to accept the status of a candidate country and currency under the Treaty, and to act under the derogation from Euro membership, all the time she was unable to meet the debt, deficit and other requirements of the Treaties.  A unanimous resolution of all member states with the consent of the exit country should be sufficient.

 

The paper setting out the legal and administrative steps to be taken to allow exit

 

            The member states need to resolve that they will take all necessary legal measures to ensure the smooth and legal transition of all contracts, assets and liabilities in Euros into the new currency of any exit country according to an approved procedure. I will provide details later of the arguments over which contracts, assets and liabilities should be compulsorily converted and which may stay in Euros. The Heads of  Government should be presented with a preferred version, but be able to debate the options. They should be reminded that if the compulsion applies just to people and companies within the jurisdiction of the exit country, the legal and administrative tasks are easier. The exit country needs to prepare and clear rapidly the necessary domestic legislation to regularise the position.  If the EU wishes to convert contracts and assets held by other EU citizens outside the exit country, then it needs to resolve accordingly and to commission rapidly the necessary supporting legal texts preferably by directly acting regulations that can enforce these decisions.

 

             The Heads of Government  need to give general  authority to officials, to the ECB and the other central institutions, to take all appropriate measures to ensure as favourable a reception as possible of the new policy. Heads of Government  should understand that the ECB needs to keep the markets liquid whilst this is going on, and needs to offer assurance by word and probably by deed as well that it stands behind the main commercial banks in the exit country until that country’s own Central Bank can and does take over the task.

 

The press release covering the meeting

 

         Heads of Government, being politicians, are likely to be most interested in what they can say about the new policy when their meeting breaks up and the world is told of their decisions. The draft document might include the following:

 

      “  At a meeting in Brussels over the week-end, the Heads of Government of the European Union have decided that they need to bring to an end unhelpful market speculation and pressures on individual member states within the Euro. They recognised that several member states are now encountering difficulties with raising the money they need to carry on their normal operations, and understand that there are serious trade and financial imbalances within the Euro zone that are proving difficult to sort out. There are limits to how much austerity countries can accept in trying to meet the requirements of the currency zone.

 

         The Heads of Government have therefore decided that it is in the best interests of European harmony and co-operation, and of the Euro itself, if the member states most badly affected by the current configuration of the currency leave the Euro for the time being.  XXX will set up their new currencies, the YYY, in time for the markets opening on Monday.  The creation of these new national currencies will enable the exit countries to regain competitiveness, dealing with the large imbalances they have on trade and capital account with the rest of the Euro area, and will ease the burden of their debt by the amount of any devaluation the markets think necessary.

 

           This will, in the view of the Heads of Government, leave a strong and united Euro zone with a group of countries whose economies have come closely together and who can live with the tough budgetary and inflation discipline which was always designed to be central characteristics of the single currency.  The exit countries become countries with a derogation from belonging to the Euro for all the time their debts, deficits, inflation and interest rates remain outside the Treaty values  required for new members.  They are free at any time to become members again, but will need to satisfy fully all the criteria. We realise it was a mistake to relax the requirements as much as our predecessors did in their enthusiasm to have so many member states in the original Euro.

 

             The legal basis for these decisions will be this high resolution of the Heads of Government set out below:

 

“The 27 Heads of Government meeting as the European Council have resolved that  xxx are allowed to leave the Euro zone, establishing their own currencies on ddd. These countries become member states with a derogation from belonging to the Euro under Article 139 of  the Treaties, and are free to reapply for membership when they meet the criteria laid out.”

 

            More detailed contractual matters affecting people and companies with assets, liabilities and contracts in the exit countries, will be governed by their domestic law. The exit member states will be setting this out at the earliest opportunity. The EU stands ready to pass any regulation or other instrument necessary to give good effect to these necessary decisions stated in the High resolution. “

 

The timetable

 

 

 

The timetable is of necessity rapid.

 

Day 1. Following a decision meeting  between the Heads of Government of France, Germany, and the exit countries to approve the necessary work, officials prepare secretly for the next European Council the specified papers.

 

Day 5. France and  Germany review these papers just before the Council, and contact the exit countries by phone conference to sound them out.

 

Day 6. European Council

 

Day 7. Announcement of results of Council

 

Day 7.5  All relevant bank accounts and electronic money in the exit countries is converted to the new currencies. Orders are placed for new notes and coin. Instructions are issued concerning continuing use of Euro notes and coin until new notes and coin are available in sufficient quantity.

 

Day 8 First trading day. Exit country Parliaments meet to debate and ratify the decisions of their governments . They cannot be given warning, so they will be in the same position as Parliaments were when faced with a devaluation of a domestic currency.  Exit country governments publish draft laws to enforce the changes to bank accounts, and set a tight timetable to legislate.

 

Day 8 and beyond   European Central Bank makes clear it is willing to assist Euro area banks with problems arising from bond and currency losses brought about by exits from the single currency. Domestic Central Banks in the exit countries make general statements of their proposed policies for their new currencies and their banking systems. They also make it clear they stand behind their leading banks and are willing  to supply substantial liquidity in their new currency.

 

Day 14   Central banks in exit countries make fuller statements of their intended monetary and banking support policies.

 

Day 15 Legislation completed in exit country Parliaments and in European Union, to confirm legality of actions taken and to be taken.

 

Day 22 Most notes and coin replaced by new issue. Successful trading continues in new currencies and in reduced Euro area Euros. Devaluation and revaluation values settle down in markets.

 

Day 30 Devaluing countries start to present revised national budgets, including measures to promote growth.

 

Day 50 Signs of stability returning to capital flows. Some people who had successfully taken their money offshore from struggling Euro members start to repatriate money into the new currencies.

 

Day 100 Improved balance of payments figures start to appear from countries that have devalued.

 

I have argued that the exit of one or more countries from the Euro is only likely in the event of an intensification of the crisis. This means that any exit has to be planned and executed rapidly against fast moving markets and political problems. Over the next couple of days I am going to set out how the EU might have to proceed if the crisis does become intense.

 

If the EU decision takers take too long about making the decision to let a country leave the Euro, or if they leak their decision making  process in advance, they will make it all much more difficult. It is best done at a single meeting of Heads of government over a week-end, with everything in place for when the markets open on the Monday morning following the decision.

 

The EU does not have a good record with such matters. Its attempts to talk its way out of the banking difficulties have forced them to revisit banking cash and capital on several occasions. Still they have failed to get ahead of the markets, and have been forced in cases like Dexia to stitch together solutions at the last minute. The stress tests or solvency checks were not sufficiently rigorous and the weaknesses were not followed and cured in an energetic way, leaving certain banks vulnerable to market moves.

 

Similarly, the EU has watched as  three countries have  lost their ability to borrow in the markets in the usual way to finance state deficits. Three countries are now on life support from the EU and IMF. Part of the reason was the way embarrassing conversations about their financial condition were leaked or briefed  as Euro area members argued over what to do to stave off the mini crises country by country.  Loose tongues followed by too little action make the problems worse.

 

If the EU allows the exit of one or more country to become a common talking point whilst they debate action, it will make the situation worse.  More people and companies will withdraw their Euros from the country concerned, to bank them more securely in a strong Euro country or outside the zone altogether. No-one wants to wait for a devaluation of their savings and deposits.  It will remain impossible  to borrow money for the state if a devaluation is feared, or in the case of a country not yet into the IMF it could be the tipping point which makes the rate too penal for them to carry on borrowing in the market.  It will also start to disrupt normal commerce and contracts. Contracting parties from outside the country will want protection clauses against devaluation.

 

For all these reasons it is important to move swiftly, and to move stealthily. If the discussions are confined to Heads of Government, and the papers released to them at the week-end meeting the chances of embarrassing leaks within trading hours are reduced. The Heads of Government could take this business at one of their regular meetings, so no-one needs speculate on why they are meeting. If the crisis is more immediate and they have to summon a meeting rapidly to deal with Euro problems, the meeting can be described as a meeting like all those before it to resolve the crisis of the Euro without suggesting that it is the meeting to break the Euro area down to a more manageable size.

 

The meeting of the Heads of government needs to consider the following papers:

 

1.      The general case for allowing or requiring the exit of a country from the Euro. This informs the discussion in principle, leading preferably to the conclusion that the exit of one or more country is needed for their sakes and for the stability of the wider zone.

2.      The legal and administrative steps that need to be taken to allow the exit and the establishment of new currencies. The aim should be to switch all relevant deposits and electronic money before the markets open the following Monday, and to phase in new notes and coin as rapidly as practical.

3.      The press statement, summarising the case for the action taken. This should also state clearly the resolutions carried at the Heads of Government meeting, and the necessary legal cover to allow the exit countries to move to the status of having derogations from belonging to the Euro under the Treaties.

 

 

           I am pleased that my critics now accept that current public spending is rising 2010, 2011 and 2012 in real terms as well as in cash.

           They now say it will fall in real terms in 2013-15. That is certainly what the government forecast says. The latest Red Book figures are for  a fall of 1.1% in 2013 , of 2.1% in 2014 and 2.8% in 2015.

          The same Red Book says that current public spending will rise every year in cash terms over that period. They quote March rather than December year ends. The figures are for a 1.3% increase 2013-14, a 1.9% increase 2014-15 and 1.6% increase 2015-16.

          In other words, the offfical forecast assumesa  big surge in public sector inflation in the second half the Parliament. Roughly it assumes that 2013 will bring inflation of 2.4%, 2014 inflation of 4% and 2015 4.4%. These figures amalgamate a March and December year end as there is no quarterly split provided by the government,but will not be far out.

            If instead public sector  inflation could be held around 1.6% per annum during that three year period there would be no need for any overall real cuts. Wouldn’t that be a sensible aim for policy makers and public sector managers? Why allow such rapid inflation when spending is so tight?

 

               Yesterday I argued that there is no wish on the continent to plan an orderly break up or slimming of Euro membership. Only a fast moving and unpleasant crisis, like that which hit the ERM, could force change in Euro membership. I also argued that there is currently no sign that the weaker members blame the Euro for their troubles or wish to leave.

                I have before mentioned that to me the best way to handle any urgent need for a country to exit the Euro would be to move that country by unanimous vote from full membership of the Euro to candidate membership of the Euro under the provisions of the existing Treaty. These two categories already exist, and there is nothing in the Treaty to prevent a full member becoming a candidate member, though the Treaty was clearly written with a wish that the movement would all be the other way. Movement from candidate member to full member is determined by adherence to the qualifying criteria. As a country like Greece clearly does not meet the criteria by a very wide margin there could be a case for switching her the other way.

                  This would clearly need the consent of all. This is only likely to be forthcoming in a  crisis of sufficient force to make member states believe that it is no longer tenable to keep a given country within the scheme. This could change the views of full members intending to stay as full members.

                  Why would the exit country or countries accept? The only way I could see that they could be persuaded to vote for their own loss of full membership is if they needed to receive financial grants or loans from the other members to pay their bills. A change of membership category could then be made a condition of the loan or grant, leading to their consent.

 

 

 

 

   The Independent today tells its readers that the public sector austerity is big and long lasting, without precedent in the UK. They do, however, acknowledge that my claim is true  that for the first two years of the Coalition overall current public spending has been rising in real terms. That is progress.

 

They suggest I am being unfair in my presentation. They point out that capital spending has been cut. I have never denied that. They should remember however, that it was cut by the outgoing Labour government.  They should call them the Darling cuts, not the Osborne cuts as they do. The incoming Coalition government  abated the capital cuts a little as they thought them too severe. Total public spending carries on rising in cash terms despite them.

 

They then point out that from next financial year there will be real cuts in current spending. Again, I have never denied that the government believes that. Cash spending goes up, but the government thinks costs will also rise more.  The largest real cut is scheduled to take place in 2014-15, election year. Time will tell if these plans are fully implemented. I am glad to have the Independent’s confirmation that so far there have been very few cuts outside the capital spending area, that the cuts are mainly all to come, and so far deficit reduction has relied on higher taxes.

 

It also remains the fact that as cash spending will continue to rise there will only be real cuts if we experience too much  public sector inflation. There are choices to be made on that by managers and  employees over pay and by suppliers and buyers over prices.

 

          I read the five shortlisted entries for the Wolfson prize yesterday. The essay competition asked authors to assess how to manage the process if member states left the Euro. The five published yesterday showed ingenuity and offered a range of utopian solutions. One suggested creating two new currencies, called  the  New Euro-White, and the New Euro-Yolk. Another offered a new ECU-2 basket currency. A third proposes an Exit task force with a Task Force Charter driven by Germany. It is difficult to take much of this seriously. The media has decided to trivialise the whole topic by concentrating on a picture of a pizza drawn by a 10 year old.  The other two are less fanciful, but do not tackle the big issue of how exit can be arranged at speed and legally when the current Treaty does not have a mechanism for exit, and  when no country is seeking exit.

             Over the next few days as the run of news permits I will set out what I think might happen in the real world of EU politics and fast moving markets. Anyone forecasting the future of the Euro needs to begin with a firm understanding of the nature and importance of the project to EU member governments. The critics of the Euro mainly  lie outside the Euro member states. The governments of the 17 members all regard this as a central political project. They see the economic problems within their economies as being a price worth paying for the progress to political and economic union that the single currency represents. Many,  indeed,  believe the official line, that the problems of state debt and unemployment have solutions within the Euro framework. They do not blame the currency for state spending levels or joblessness on the periphery of the zone.  They believe they  need to work away at Euro discipline for it to come right.

          The Greek, Portuguese and Irish governments are firmly wedded to the Euro. They are not seeking a way out. Whilst there are now some senior establishment figures in Germany and the Netherlands who might like to see Greece leave, their governments still want to keep Greece in if possible and all agree that the Euro must continue.

            The Treaty does not allow the other member states to force a country out, nor does it allow an individual member state a right to exit. Those essayists who have thought of this issue state that it would require Treaty change to allow or force the exit of one or more members. How likely is this?

             It is my view that the Euro members will all wish to keep their currency going for as long as there is any chance of doing so. I detect no wish to plan an orderly exit for the most stressed countries today whilst the markets are temnporarily calmed by the large injection of ECB money. I do not expect to wake up soon to negotiations over the creation of one or two new currencies with the complex Treaty changes that would require, nor for an emergency exit which they did not put in place in calmer times. No-one is clamouring for new currencies based on unscrambling an egg, with easter titles.  Whilst an emergency exit is always a good idea in case a building catches fire, trying to knock one through when the fire has started might just fan the flames more quickly.  The countries that fear they might be forced out would not sign up to any such clause willingly.  They need all 27 EU members to vote Yes, and for positive referenda results in some member states.

             So what would trigger the exit of say Greece or some other country?  I could only see it happening if an unwelcome crisis forces it.  I could see three possible scenarios that might force  their withdrawal. I hasten to add I do not wish any of these scenarios on a Euro member state , and do not think it inevitable that one occurs. It depends how flexible and creative the authorities are to inspire some growth in the economy, and how generous the neighbours are when it comes to loans and transfer payments to weaker members. The scenarios include:

1. Another intense phase of crisis in the markets, threatening banks, underlining the continuing need for special funding beyond the currently agreed  packages, with or without the spread of uncertainty to the Euro itself and with damage to  the credit standing of all Euro instruments  and the value of the currency. If the stronger countries have to pay a much larger sum to keep Greece going, this could cause doubts about the sustainability of the scheme and the credit worthiness of other countries and banks. If calculations of the scale of transfers needed to the weaker members starts to erode confidence in the stronger members that too could force a rethink.

2. A massive move to hostility to the Euro by the  electors in a weaker state, who up to this point have broadly suported the currency and in the case of Greece allowed a pro Euro technocrat government to take over. If the electors refused to vote for parties wishing to keep the Euro that could force a change of approach by a future  government.

3. An intensification of strike and protest action on the streets on a sustained basis so that government reaches the conclusion that it can no longer govern and protect the Euro scheme  policies.

              If any of these developments occur, the EU could reach the point it reached with the Exchange Rate Mechanism, when it decides the markets have won and will force policy change. In these conditions the EU will need a simple, quick plan for the early exit of say Greece. There will be no time for agreeing and ratifying Treaty changes. I will tomorrow deal with a legal exit under the Treaty.

 

                Yesterday I argued that 38% seems to be as high a proportion of UK GDP as possible for a democratic government to take in tax. I pointed out that no government in the last 40 years has tried to take more than 38%. I reminded readers that the Treasury itself is now forecasting declines in self assessment income tax and CGT against the backdrop of higher rates. Maybe Labour were right that the practical  limit is lower – they have never tried to raise more than 36% from  UK taxpayers. They have preferred to leave   incoming replacement governments to deal with the big borrowings they used instead of   extra taxes to allow them to spend and spend.

              I agree with those of you who said it would be safer if a government taxed at a lower rate than the current 38%, and agree that a rate around the 31% lower limit of the last 40 years expereince would generate faster growth in the economy than the current tax level. However, getting anywhere near there is difficult, and will itself need growth to help bring the figures into sustainable shape. 

                 Today I wish to draw attention to the difficulties countries like Greece and Spain are having collecting their taxes. Both countries have keen deficit cutting governments. Both governments want to close a lot of the gap by taxing more. Both realise that their economies have lost substantial revenue already, as people put their assets and cash offshore, and as locals trade more and more in cash or by barter to evade and avoid taxes.

                 Spain is trying an amnesty for people who have been evading and avoiding. It is also offering a knock down 10% single levy on any money Spaniards choose to bring onshore or to find under the mattress with no questions asked. They need the estimated E 2.5 billion this will bring in. That shows they think there is an easy E 25 billion to come home. It would also mean they could tax it and the income it generates in the future, as they will then know where it is and who owns it. Maybe tax dodging Spaniards will not regard this as such an attractive offer as their government.

                The Spanish government is encountering resistance to its latest extra property tax. Property taxes anyway are likely to be weak compared to the boom conditions prior to 2008, as Spanish property is in turmoil after the Credit Crunch.

                In Greece travellers tell me the economy functions with a lot of cash transactions. Apparently many Greeks do not see government as a good institution to trust with a share of their earnings, so they would rather shelter as much as they can. The Greek government believes this is true, and is pursuing various anti evasion campaigns to try to get them to pay.  When  a country feels it is above the tax saturation level all sorts of people decide they will no longer play by the rules. Some go in for every tax avoidance trick they can find, others break the law and go in for evasion. 

                 It is no good governments getting on their moral high horse about run of the mill avoidance. After all, they are the main proponents of it. In the UK the government encourages people to avoid tax by buying tax privileged government debt, by saving in Pension funds and ISAs, and in the past paying some of its own employees through companies.

                 Most people go in for a b it of tax avoidance. Now there are high Stamp duties on property, buyers and sellers tend to choose prices just below a Stamp Duty threshold rather than just above. Some people choose their service providers from smaller  craftsmen and women who are below the VAT threshold. Why shouldn’t they.

                 The danger as you approach tax saturation is more people, including those in professional careers and positions of trust, start moving from a bit of legal avoidance to a spot of questionable avoidance/evasion. When the doctor, teacher, lawyer or even the local accountant is happy to pay cash for his building work or even to accept a special cash quote you know your country is moving from the rule of law to the wilder south of Euroland’s non compliant culture. The informal economy may bloom from 5-10% of the total  to 20-25% as some Latin countries believe has happened to them already.  Then governments have a problem. They start offering amnesties, in a desperate bid to get some money back. The question is, will enough citizens play ball? If they think general taxes are too high and likely to go higher, they may prefer to chance their arm and keep the money hidden.

           This site is of course against all illegal actions to evade tax and does not wish to post comments from  people alleging infringements  by themselves or others without proper evidence. Good legal tax saving tips are fine, but are well covered by the  financial pages of papers and the adverts of the savings industry and the government.

 

           Argentina is indulging in a new wave of rhetoric about how the Falkland Islands should be Argentinian. Their latest ploy is to paint a rosy  picture of how the current islanders could live happily ever after under Argentinian government. They condemn the UK as the old colonialists, as if the UK had placed the Falklands under some kind of hated military rule that needed throwing off for freedom.

         This is such a grotesque caricature of the truth, that it is worrying that the US and others think we should sit down with Argentina and talk about it. There is nothing to talk about, other than Argentina’s unreasonable conduct. The Falkland islanders asked the UK to liberate them from Argentinian colonalism when Argentina last invaded the islands and tried to establish government by force.  We did so, and the islanders are grateful. At their request the UK pledges military support to defend  against any future invasion. The only menacing colonial power as far as the islanders are concerned is Argentina, not the UK.

            I pay tribute again today to all those UK service personnel who gave up their lives, and to those who risked their lives, to restore freedom and self determination to the Falkland Islands.

 

            Recent events interrupted my series on taxes. 

            Taxes are too high. Taxes have in  recent years  got higher. They need to come down.  There are too many of them. Too many of them stifle enterprise, success and saving. They deter investment, encourage tax avoidance, lower incomes, and  slow private sector recovery.

           Let us introduce a couple of  ideas to help the analysis. The first is that we should accept there is a maximum sustainable taxable capacity in any country, a level of national income that a government can take, before avoidance, disincentive and other factors kick in to make it difficult to collect more. It is the level elected politicians feel is the limit to their ambitions to spend more.  The second concept  is that if a government goes over this level, it can reach Tax Saturation, the level at which revenues start to fall, as the tax levels hurt enterprise and reduce activity and income. This is a kind of Laffer curve applied to the whole economy and to the totality of taxes levied. 

            You can see the UK this year has reached the point of tax saturation on Self Assessment Income Tax, which is forecast to fall by almost 10% despite some modest growth in the economy as a whole.  There has been a sharp reduction in higher incomes in response to the 50% tax rate imposed. That was before news came of its future reduction. The higher CGT rate is forecast by the government to induce a  fall in revenues from that tax next year.

             So what is the maximum sustainable level of total taxation in the UK?  If we compare the percentage of national income taken in taxes since 1970-71  (Red Book June 2010 p 104) we see that the maxmimum tax take  was 38.2% of GDP in 1982-3 and 1984-5, both years when the then Conservative government was trying  hard to get the inherited deficit down against a background of a recovering economy.  The highest under Labour was 36.4% in 2007-8. The lowest was 31.8% under the Conservatives in 1993-4 and 33.1% under Labour in election year 1978-9.

               All this would imply that at the very least democratic pressures seem to prevent a government taxing much  more than 38% of GDP.  It  is especially interesting that socialists who tend to believe in higher public spending on a wider range of items than Conservatives have thought the limit of our taxable capacity is around 36% of GDP during their eighteen years in office since 1970.

                Total current public spending is forecast at 42.5% in 2011-12, with total public spending at 46%. If the aim is to  pay for current spending out of current tax revenue in normal years, only borrowing in cyclical downturns, it implies that we need a lot of growth to get public spending down to the Sustainable tax level without making further cuts.

                There  is another theoretical level which is difficult to estimate, the level of taxation which would maximise growth. It will be below the sustainable level of taxation, but the question is how far below?  Would it be better to get there quickly to speed recovery? What reductions in public spending would be necessary to achieve that without losing fiscal credibiltiy?

1 April 2012

Sometimes you need to get in your retaliation early.  The answer to anyone in government who thinks we need an email tax is No, No, No.

These things begin for the most plausible of reasons. The Business Department is saying emails are now doing huge damage to the public investment in the Royal Mail. As they grapple with the problem with higher stamp charges, the wish is to hit the free private sector rival with a tax to show that emails are not harmless or costless competitors.

I think maybe the idea started in the Climate Change department . Apparently regular use of emails and websites means people are keeping on their computers for many more hours, so much more power is used with all the consequent carbon dioxide effects that produces at the power stations.

Meanwhile the Treasury never needs much encouraging when someone suggests a new and very buoyant source of revenue, especially one where there is a clear record of use which you cannot erase unless you smash your computer hard drive. Even Number 10 is said to be considering it, despite the obvious downside of its unpopularity, because they hope it can be angled in a way which stops so much unhelpful blogging and comment. Wouldn’t people think twice before being rude about the government if there was a tax on it?

I guess Ministers know it would be unpopular. I expect they will deny it if asked prematurely.  They will probably say it is the privileged who are digitally enriched and dominate in the email stakes. The very poor after all may be on the wrong side of the digital divide and will not have to pay a penny of this tax. They will also doubtless have some large figures for the amount of carbon they could save by getting the nation to ration their use of the email and websites.

 

Ministers will wish, of course, to keep quiet the growing pressure for an EU directive regulating email traffic on a cross border basis and endorsing a tax on them, as they appreciate this would get in the way of a fair hearing for this idea amongst Eurosceptic newspapers and voters in the UK.

I am afraid I am supporter of free speech in this case. Free speech should mean just that. I do not want to have to pay a levy every time I send an email or put out a blog entry. I invite my readers to join me in getting in our retaliation  fast. Today’s the day to do it, don’t put it off til tomorrow.  I am very grateful to a Parliamentary colleague for giving me the tip off about this idea.