When in trouble, the government wants to put taxes up

The only refrain most Labour people in power seem to know is the demand for higher taxes.
No sooner has the Income Tax hike unravelled, than the Vehicle Excise Duty increase comes under fire.
Learning nothing from this, today we hear from the Local Government Minister that Councils should put up Council Car Park charges, as another way to tax motorists off the road.
Using a cloak of green policy and a further urge to nanny us into walking more, the true aim of this Minister is to tell the municipal raiders seeking more cash that they should get it direct from motorists, rather than demanding it in grant requiring the government to get it from motorists.
Any Council which puts Car Park charges and Council taxes up by more than inflation in current conditions is asking to be unpopular. People have had enough and cannot afford any more.
The Chancellor has had to rule out windfall taxes on utilities, urged by many in the Labour movement, and is thinking what to do about further noisy calls to tax the rich who are still here after the last round of taxes on rich foreigners who come to do business in London.
The economic problem the government faces is not the shortage of tax revenue, but the failure to spend all the tax revenue they do raise to best effect. The problem is not that the public sector spends too little, but that it wastes too much for the productive potential of the economy. So often the spending achieves the opposite of what they intend.
I am sure the government intended the huge sums they spent on Northern Rock to protect jobs in that northern business and to shore up the mortgage market. Instead, thanks to EU Competition rules, it does neither. The workforce will be more than halved, and the mortgage book will suffer a similar fate. Huge sums are being wasted on running down the very asset they bought.
Similarly, the move of Railtrack to the public sector Network Rail led to a huge surge in costs to deliver the same amount of track, running up massive borrowings which the markets regard as public sector borrowing (with a Treasury Guarantee) even if the government doesn’t think of them like that.
We now see the public sector is some disarray. This week there will be tube strikes, thanks to Union unhappiness about the pay regime following the financial problems within one of the government’s most expensive and absurd Public/Private Partnerships. The taxpayer was predictably left picking up the bills when it went wrong.
There will be a long period working through this government’s creative borrowings and expensive projects. I expect them to sign up as many as possible in the next few months, to tie hands of an incoming government. If they do it will represent a further deterioration in the UK’s already very overstretched public finances, and mean more grief sorting it all out in due course.


  1. B Jones
    August 19, 2008

    The best part of the parking plan is the notion flouted by the Minister that by raising parking prices they will help small local shops. Now, I’m sure I’m not the only one who when faced with excessive car parking charges should I head into town would decide to go to the nearest Tesco or out of town shopping centre and shop there with their wonderful free car park.

    Surely the way to get more people using the small shops would be cheap parking around the town centre, and perhaps introducing the American idea of “validating parking” where you pay to park but can get the money back if you shop/work in the area.

  2. John Lindley
    August 19, 2008

    Discouraging town centre parking drives the customers to the nearest supermarket, where the parking is plentiful and free.
    Tough on those who do not have the use of a car through the week.
    The retailer gets even less for his busines rates and shuts down.
    Another attractive feature of the small market town goes to the wall.
    Towns suffer the fate of villages, removing a convenience for country dwellers and a bonding community benefit.

  3. Acorn
    August 19, 2008

    It always amazes me how much the British will put up with, there appears to be no limit to how much they will take up their rectums from any government. What would it take to get them out on the streets and do a Howard Beale: 'I'M AS MAD AS HELL, AND I'M NOT GOING TO TAKE THIS ANYMORE!' … discuss.

    Having sat through a few "Fees and Charges" local government budget scrutiny meetings, you will not be surprised if I tell you that the key job is to spot the political "fizzer". That's the one that can be turned into a local newspaper headline. If you can't find one, it will just get nodded through.

    Some bedtime reading on how the government disguises the public sector pension liabilities, annex 1 is interesting.

    This one from the IFS shows the sources of local government income (table 4.2). Keep in mind that council house rents are on average half of the private sector equivalent rents. It would be a smart move for the Tories to come up with a radical new plan for local government finance; disconnecting it from central government to a very large extent. This is actually the easiest way to hobble central government. Remember; the power is where the money is.

  4. mikestallard
    August 19, 2008

    Here in Wisbech, Cambs,the town centre is being taxed heavily for car parking while they are deliberately building on the ring road. We are to get a Multiplex Cinema and a Superstore, for instance.
    In the Market Place is a pub where drunken youths spill out – and that is at 9.p.m. (A Labour induced phenomenon).
    There a few broken windows appearing now in the town centre on Saturday and Sunday mornings too. And we even got a couple of rape/stabbing kind of crimes at 2 a.m.

    What a contrast it will be when Mr Darling hands over to whomsoever. Instead of the bottle of champagne of Ken Clarke, there will be an impossible mountain of debt and chaos.
    I do not think so.
    I reckon myself that it will be a very long time (if ever) before labour gets back into power after all this misgovernment.

    1. Peter Reddington
      August 22, 2008

      Being a Northerner I would like to agree, labour will not get in for a long, long time. I know a few in the affluent south think us Northerners are a bit thick, workshy, all vote labour, wear flat caps, live in terraced houses and race pigeons. Well I'm afraid it isn't true, we "up north" no longer believe nu lab, in fact I only know one person who wouldn't vote for another party, mind you, compared to him, trigger from "only fools" is bright. My point is, no one up here is fooled anymore, we came to our senses a long time ago, but the problem was who do you vote for if there is no one to vote for, so we didn't vote. That's how labour got into power three times, but no more. My opinion is when labour are voted out in two years they will be out for thirty, mark my words.

  5. Eddie Allen
    August 20, 2008

    Acorn is right to suggest a separation of central and local / regional government spending. Coupled with proposals for regional decision making and local referenda, city mayors and local people serving local need, then I think the picture would be a lot fairer and more reasonable and of course democratic.
    Certainly it would give a shot in the arm for local government and if LG spending was under direct public scrutiny through a 4 or 5 year tick list of high and low considerations then surely spending and the needs of society would be a whole lot more in tune with one another ?

    I think the problem lies in trying to centralize everything and every decision making process because clearly those in central government haven't the first clue how to manage and are too distant from the localities to make decisions which reflect public opinion or their needs to any great extent.

    Now all we need is a General Election and a clear manifesto which lays out the bare facts of Labour's crucifixion of all things reasonable and makes a distinctly different plan that things CAN and WILL get better as opposed to they're "gonna". ( Satire intended ).

  6. tim holden
    August 20, 2008

    A smoking ruin populated by petty spies will be the Labour heritage. The ruin can be rebuilt – but how shall we rid ourselves of the spies? They are expecting their pensions to be paid.

  7. APL
    August 20, 2008

    A primer on how the government (this is an american link, but it applies equally to our government) likes to produce statistics that are meaningless.

    1. Acorn
      August 21, 2008

      APL [4:26 pm]; excellent link, they should make this compulsory viewing in every sixth form as they are going to be the poor sods who will pick up the bill. It should be compulsory for MPs as well. Thanks for finding it, hopefully we will find a UK equivalent one day soon.

  8. Alan Douglas
    August 21, 2008

    John, is there no mechanism whereby the Tories can issue a warning, based on the principle that no government can bind its successor, that any contracts let between now and the next general election will be subject to review with a view to amendment and/or cancellation, should the government change colour at that GE ?

    Surely there must be some way that we can provisionally spike the worst excesses likely to be "invested" in ?

    Alan Douglas

    Reply: There is no mechanism for an Oppositon to block contracts, and once signed contracts have to be honoured or compensation paid for cancellation. However, an Opposition can warn that they do not agree with certain bodies/appointments etc and can warn people not to go to work for them as the possible next government will not need them.

  9. Eddie Allen
    August 21, 2008

    Well if that's the case, next time we're in government could we make a lifetime contract with the people to have a Conservative Government please and I'll be happy to take my compensation if ever that contract is voided by another clown Labour Party ?

  10. Eddie Allen
    August 21, 2008

    Dear Mr Redwood, I’ve just read your diary on the housing market and agree with your remarks re: Caroline Flint. She is totally focused on SPIN and doesn’t possess a thought in her head about the problem, the effects to people or how to alleviate those or to encourage the markets.
    I don’t possess to know everything but I do have 20 years experience in the housing market myself so I think my ten penneth may be worth a little if not a lot when I make a few suggestions.

    1 – Bring back MIRAS
    This will create the essential advantage an ordinary buyer holds over a speculator which would if our markets permitted be buying off plan so as to fulfill the rental requirement for millions of overseas workers and students which are not generally positioned to buy.

    2 – Completely remove Stamp Duty for First Time Buyers and place it on the end on sale. i.e. No loss to revenue and a win for the public and the housing sector per se.

    3 – Stamp Duty on purchase could be debated here and I personally favour the same system as Spain.
    Spain gives a choice to pay the equivalent of stamp duty or purchase tax either up front or at the end ( on sale ), but there tax is more straight-forward at a clean 5%.
    If such a plan was adopted here then this would make a sizeable GAIN in revenue but it would permit a home owner to have a choice in the matter. Secondly, the government could look into the lending situation and permit / or rather ask lenders to accept “builders deposits” as many do not.
    That would have an impact of builders basically coming up with competitive sales packages where they can offer a house with 5% deposit paid by the lender and thus that money could be used to pay or partly offset the cost of stamp duty on purchase.
    So if working such a scheme then First Time buyers could a ) delay payment of duty or b) pay it with an excellent builders deposit and all parties are in a win win situation and revenues would not suffer loss.

    4 – My last suggestion would be to create a Self-Build scheme which permits a self-builder to have certain concessions if they build “GREEN”. Concessions could vary from get lenders together to have such schemes which are promoted through a borrowing scheme similar if not wholly different to Labour’s own which is basically a free licence for a lender not to incur much if any risk as the liquidity scheme is backed by taxpayers. Such a scheme could be adopted on a 15 year repayment at a fixed rate of interest and a complete avoidance of any stamp duty being applied to the property if sold after 15 years.

    Meanwhile, I think Caroline Flint is obviously lacking a great deal of any kind of sense in the housing market and would be better placed on a market stall in her home town.

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