The UK is divided into three parts


       There is an email in circulation that sums up in scatalogical language the current tensions of UK politics. In polite summary, it says the people who work hard and earn the money are against having to pay more taxes. The people who rely on the state think these people are all rich and should pay more to sustain higher public spending. The government then wades in on the side of the public sector, and decides the self reliant and hard working should pay more. Those who pay the bills are attacked for being “rich”.

        This is a crude characterisation in every sense. It does however strike a chord with a large number of people who do not think of themselves as rich but who do think they are already paying too much in tax and resent the idea that they should have to pay more.

              Some of these tensions bubbled over in the words exchanged on the back of the riots. The law abiding taxpayers by and large were appalled that they would have to pay more taxes to repair the damage and make good. They wanted strong justice and tough punishments.  Some in the public sector wanted to claim it showed we needed to spend more on social problems. I even saw a rioter or two “explain” his conduct by saying that the state took too much of his income away so he intended to grab something back by looting. People on this site have argued that because some in the public sector have taken too much by way of pay and perks, it set a bad example to others who then broke the law to take goods they did not themselves own. This is the false doctrine of two wrongs somehow make social justice.

        The politics of austerity are never easy. Even when the Uk has been growing quite rapidly, there have  been agruments over how to spend “the proceeds of growth”. It is easier for politicians to contain the tensions, as they can offer something more to most groups as they carve up the national pie. When an economy has lost 6% of output, and still is borrowing more than 10% of the total each year to keep itself going, much more difficult decisions have to be made about who is to take the hit of getting the deficit down.

            The model in many people’s minds that the rich can be made to pay to solve the whole problem  is both appealing and false. The size and scale of the debt, and the continuing large gap between state revenue and state costs, are far too big for the top one or two percent to solve the problem, even if they could be persuaded to stay here to pay the higher rates some have in mind.  The debt and deficit is the the burden of all of us, whether we voted for it or no. It falls to the lot of many taxpayers to pay more tax to tackle it, just as it falls to most of the public sector to have to rein in costs and cut out less desirable spending to make its contribution. Modern politics is the argument about the balance between those two parts of the solution.  Somehow there needs to be a growth strategy to offer hope and ease the pain, at the same time.

              The problem with the politics of envy, peddling the idea that taxing the rich can solve the problem, is its easy popularity. Very few people think of themselves as rich. Most people know others in their immediate circle who are better off than them. All see stories of people who are fabulously wealthy in the papers, as their lives  form the modern definition of news. The problem with the resulting policies that some wish to follow is many people would discover that the rich are not just the footballer in the paper or the millionaire down the street, but it includes them as well. Then they usually become less enthusiastic about the idea of taxing the rich. The few who say they do think they themselves should pay more tax have an easy answer. I am sure the Treasury would receive any donations that are on offer, and if they won’t there are many charities doing good work who will.


  1. lifelogic
    August 24, 2011

    At the moment most of the rich are in the state sector. They are paid more, have hugely better pensions, stable jobs (with generous pay off on offer too), work fewer hours and have more sick days. If they also have a tracker mortgage which has fallen they are doing very well indeed. A high proportion of them do nothing of any real use anyway – beyond inconveniencing the productive or producing propaganda.

    In general the real problem is that most people, after tax (and certainly those with children) are hardly any better of than they would be on benefits. Even families with incomes as high as £60,000 are hardly any better off, after tax, than many on benefits. This after you take into account tax, NI and the costs of actually getting to and from work and tax credits, benefits for rent, council tax and the rest of the benefits.

    Many would be better off with benefits and a little more time.

    The tax system also discriminates hugely against people in high property price areas. So if rent/mortgage for a basic small property for your family is say £20,000 PW then you need to be well into paying 40% tax rates just to have sufficient to get to work and for your family to live eat.

    So you can have three families with similar disposable income and standard of living in similar size houses with one, in a high rent area, paying perhaps £17,000 in tax and NI PA, the other on low income paying perhaps just £2,000 and the third just on benefits just paid out of these taxes.

    With little or no variation in real standards of living between all three. If anything the benefit claimant is best off as he has more time available to him to do DIY, barter, or buy more efficiently.

    Clearly it is perhaps best to go abroad at the moment to work and escape the UK taxes and debts or just stay at home on benefits.

    1. lifelogic
      August 24, 2011

      The UK “banking” system in all its glory.

      A company I know of has a debt of about £750,000 to a major UK lender (not RBS this time), secured on 7 properties of total value £1.9M. They have been paying this off, always on time for about 13 years.

      Can we borrow another £200K to finish of another development?
      No we are not lending in this area at the moment.

      Can we re-mortgage elsewhere and pay you back?
      Yes but we will charge you for early repayment and you will loose the current margin and have to pay a new large fee on the whole of the debt and new valuations.

      Can we take a second charge on the properties (if any second charge lenders can actually be found at the moment). Perhaps but we cannot say unless you pay us a big fee to consider the matter (after which we may say no and pocket the fee) or just impose very expensive conditions. On what basis will you consider this matter – we cannot say.

      Can we sell one of the properties – yes but we will want to up the margin on the whole loan and charge you new large fees. But we already paid a large fee when we took on the long term loan. Tough

      Can the government not do something to get some real competition in lending in the UK and prevent this kind behaviour. The effect in this case is the other development is put on hold and jobs and growth is lost.

      1. rodney dawkins
        August 24, 2011

        Sounds awful, but surely one of the main reasons the banks are terrific difficulty is because of the unbridled rise in the buy-to-let sector and a massive over-valuation of domestic property. This is now a social crisis. Hundreds of thousands of young families cannot get a mortgage. Democracy says we cannot address this problem, because there is a danger people will fall into negative equity, or lose their homes. What about the rest of us who are paying, not capitalists, but borrowists with our hard-won earnings? We don’t count, not enough votes. But it is a travesty. Owning and speculating on property is not a virtuous economic activity, and I am not surprised the banks are acting in the way you describe.

        1. Gary
          August 24, 2011

          The banks are in terrific difficulty because their business model is dead in these circumstances. We have debt saturation and borrow short to lend long stops working. We have a crisis of bank insolvency, not one of illiquidity. That is why QE1,2 etc won’t work. The proper action with a bankrupt company is to wind it up. They refuse to do this. So, more taxpayer money gets thrown down the black hole.

        2. lifelogic
          August 24, 2011

          It is not due to any perceived risk or lack or profit in the lending. It is due to them having to meet restrictive banking regulations so they do not want to lend it this general area at all as they used to freely and generally with very little loss.

          The government needs to get the money to good banks who could lend and get some real competition not help pointless zombie banks to pay big bonuses while not lending at all.

          1. waramess
            August 25, 2011

            To ignore the fundamentals that exist between savers and borrowers and to allow the banks to conjure up credit from nowhere is to leave oneself at the mercy of the banks should they decide not to do so

      2. REPay
        August 25, 2011

        The banks – to prop up their balance sheets, a worthy cause, are in my view plundering viable businesses and massively harming the recovery. Anecdotally one hear’s all the time of loans withdrawn, bogus charges invented and ventures unsupported. And we now await the avalanche of “after the horse has bolted” “fighting the last war” and transactional taxes that will cripple the sector even more. This is the vicious circle while not one single UK, US or EU financial regulatory official has been fired, even though the nature of some of the instruments that caused the downfall was widely criticized from the outset.

    2. Javelin
      August 24, 2011

      “At the moment most of the rich are in the state sector.” Totally agreed. With the emphasis that the baby boomers are all sitting on houses that have trebled in price and whose cost is now impoverishing the young.

      1. Chris
        August 24, 2011

        One of the nasty baby-boomers (i.e me) with an “expensive” property is actually currently letting it at somewhat BELOW average market rental, in order to have it occupied and used. I have no mortgage on it any more, but I can’t keep on paying the council tax. Maybe not the wisest approach in terms of “business” but at least I can offer someone a home.
        Why should I try selling it in a “dead” market? And I’m not a greedy BTL’er either….I’ve had the place over twenty years.

        1. carol42
          August 24, 2011

          I am in the same position, when my husband died I moved to be near my only son in Dec 2008. At that time my house was sold but not yet complete. Of course then everything fell apart and after six months I let the house for two years. For me it was a disaster and it cost me nearly £4,000 to put it back into saleable condition again. I have tried again this year to sell at a reduced price but nothing is moving. I am now having to pay full council tax on an empty property, thanks to a change by the last government, it used to be 50%. Like you I have owned the house for 14 years and it broke my heart the state it was left in. I would like it to be used as a family home but I am afraid to risk it again and it doesn’t look like selling anytime soon. As a widowed pensioner, albeit with a decent private pension from my late husband, it is not easy to keep it going. Any ideas?

    3. Tim
      August 24, 2011

      There are two sides to this equation. Taxes and spending.
      Taxes are definately too high after 14.5 years of socialism (Present coalition included!)
      Here are a few suggestions:
      In the 90’s the Canadian Government found themselves in a similar public service costs dilema. They therefore took a root and branch reform on what the state “must” provide, “should” provide and “could” provide. They had the political ability and determination to resolve the problem. I’m not sure we have that caliber of politician in our current Ministerial Coalition. They removed all coulds, went through all shoulds and privatised a number of services and ONLY kept the “musts” for state provision.
      Here are the other obvious public services and costs we could remove or end.
      1. The Equalities Commission and a bucket load of other useless quangos!
      2. In/Out referendum and save £13.5 billion in our net costs and £9 billion admin fees annually. Regain our fishing industry and lower our food costs. Stop our open borders to employ Brisitish people for British jobs, particularly our young people. Our trade deficit with the EU was £40 billion last year so they can’t do a lot about our withdrawal.
      3. Stop the foreign aid budget (£11.5 billion) and allow the public to choose what charities they wish to give to themselves. Do not tax and borrow to give away.
      4. Stop ALL immigration and save at least a billion a year on housing, health and other public services.
      5. Charge foreign people for their health care. No checks are currently carried out and it is effectively an “international” health service.
      6. Stop providing free education to foreign nationals. 25% of all pupils in state schools are from abroad.
      7. Stop all wars and evacuate Afghanistan. Do not allow our politicians vanity to get involved in matters that are not their business.
      So that would save £40-50 billions for a start and we could have our own aircraft for our carriers, not the specious nonsense portrayed by Mr Cameron as a joint operation with the French to “save” money. Nonsense, this is purely softening up for an EU fighting force which we don’t want or trust.

      1. LJHills
        August 24, 2011

        Reduce pay of all officials in the state/council/quango employ, who earn more than the prime minister, by 10%.
        Freeze pay of all officials in the state/council/quango employ so that there is no automatic annual pay or scale rise for those earning more than the average wage.
        Stop replacing staff lost to quangoes/council/state unless they are providing a real sevice not a PC one.
        Sack all climate change advisers, equality coordinators, press officers, seal trainers in quangoes/council/state.
        Stop paying for translation services : if someone needs one, let them find and pay for the service.

        1. APL
          August 24, 2011

          LJHILLS: “Reduce pay of all officials in the state/council/quango employ.. ”

          Abolish bonuses or performance related pay too. If an individual doesn’t want to work for the basic salary he/she contracted for, then they ought to look for another job!

          But everything else LJHILLS says gets a big YES from me.

      2. alan jutson
        August 24, 2011


        Sounds like a manifesto for a good start to get to grips with some of our problems.

        The fact that Canada have done it already, you would think may help politicians to outline the success of such actions to the public, and give them some confidence to take the same action.

        The real problem is most of our politcians give the impression that we do not really have a problem.
        They seem blind to the fact that we are virtually bankrupt. that growth is stalling, that immigrant labour fills most new jobs, that spending is still increasing, that the working taxpayer is getting fed up getting less and less for working, whilst those on all sorts of benefits get annual increases on their tax free income.

    4. uanime5
      August 24, 2011

      Most of the rich are in the private sector, where you can give yourself a bonus of several million pounds each year. There’s a reason CEO’s from major companies don’t enter the public sector.

      1. APL
        August 25, 2011

        Uanime5: “There’s a reason CEO’s from major companies don’t enter the public sector.”

        There maybe a reason why the CEO’s from major companies don’t enter the public sector, but lack of extremely large bonuses isn’t one of them.

        Particularly if you happen to be a CEO of a local authority, Health authority or some other Quango.

        With a private company, excessive bonuses are an issue for the board and shareholders, no such mechanism exists within the public sector.

        I grant you the board and CEO may not be the best brake on the corruption in the private sector. But there is none at all in the Public sector.

    5. Acorn
      August 24, 2011

      Sorry to interrupt but here is a late sports result.

      In the Libya Crisis Finals match today, the current score is:-

      Sarkozy 5 Cameron 0

      Reports say Sarkozy outplayed Cameron with much greater style, class and flair in the NATO Libya final today. “Cameron lacked the international class required at this level. It was if the whole Cameron team was on holiday on another planet”, said the reporter.

    6. Bazman
      August 24, 2011

      Basically what you are saying is that if you have children say more than three and a low income whether by choice or having it imposed on you, then you are better off on benefits, especially if you live in an expensive area. It’s been like this for decades. The problem is how do you stop this?

    7. REPay
      August 25, 2011

      One solution, which would involve paying more tax overall is the LibDem suggestion that the tax threshold starts at 10,000. This makes work for the low paid a low more attractive. It also means that pensioners have a living income before taxation. I think this would be a price worth paying . The Labour Party likes all to pay tax as they see this as a deriving support for services enjoyed by all. (They are the party of the senior public sector worker whose salaries they have massively ramped up while in power.) I think the Coalition could outflank them on this.
      (PS I thought America was the home on low taxes. Living in Manhattan by the time I have paid federal, NYC and NY state taxes I am getting about the same as the UK. Here you can only save the equivalent of 17.5k pounds tax free into you pension.)

      1. a-tracy
        August 25, 2011

        Pensioners tax allowance is £9’940 pa and £10’090 over 75 this year.

  2. barnacle bill
    August 24, 2011

    Until we actually see politicians of all hues and at all levels in political life joining us poor proles in your government’s austerity drive please don’t talk down to us.
    When I say all politicians I expect to see those at Westminster taking a bigger cut in their own pay packages , as well leaders of local councils not being allowed to award themselves salary increases whilst the rest of us go with-out for another year!
    I thought we would see a cleansing of these Augean stables when we had a change of government.

    1. lifelogic
      August 24, 2011

      Indeed there is far too little activity in actual cutting of the excesses of the state sector (the BBC and similar) much of which could be closed down with no real loss to anyone and often much benefit.

      If Cameron wishes to be taken seriously he should finally make a start some time before the next election. In a similar way if Prince Charles wishes to be taken seriously, on his professed green religion, he needs to do rather more in his personal travel and living arrangements than a few expensive gimmicks.

      Do as I say – not as I do – just will not cut the mustard.

      1. A.Sedgwick
        August 24, 2011

        “If Cameron wishes to be taken seriously”-continuing the metaphor this horse has long since bolted.

  3. norman
    August 24, 2011

    I just wish the government wouldn’t be so sneaky about the tax raises.
    NI, VAT, capital gains, freezing (or reducing in the case of the middle 40% tax band) thresholds, so-called green taxes.

    That every government knows instictively that people don’t like paying tax should be obvious in that they won’t raise income tax (other than for the undeserving rich who we should all hate anyway so double plus good) but then people don’t learn the simple lesson that we are paying through the nose via other taxes for the unsustainable system we have.

    The number of comments I read along the lines of ‘It’s all right for the rich to call for spending cuts but I couldn’t afford to put my children to private school / pay for private health insurance / survive without my child benefit / save for a pension / etc.’ is staggering.

    Don’t people realise that they already are paying, and over the odds at that because it’s done via big government, extortionate amounts for these services, and a whole lot more that is hidden besides? And the answer, sadly, is no.

    Who konws where they think the money comes from but as long as politicians can portray themselves, and the largesse they display with our money, as indispensible they undoubtedly will.

  4. Julian
    August 24, 2011

    When someone says they would be willing to pay more tax, I want to ask what they would do without. If they can afford to pay more tax, it isn’t reasonable to expect them to pay it to the government, but it is reasonable to expect them to donate it to charity. In that case, when they say they are prepared to pay more tax, will they reduce their charitable donations to fund it?

    1. lifelogic
      August 24, 2011

      “When someone says they would be willing to pay more tax”

      They rarely actually mean it they either want other to pay more or just want to appear nice to the youth rather like pop stars (but actually it just look rather stupid). Can they really not think of anything better to do with the money than give it to this government to waste. I can not think of many worse things to do with it.

      It is surely ever one’s moral duty to as much as possible, within the law, to avoid giving to an organisation sure to waste it and use the proceeds rather more sensibly.

  5. D K McGregor
    August 24, 2011

    Whilst agreeing thay more taxation is not the answer , there are issues around the amount “earned ” by senior bankers and government apparatchiks . I believe many would like to see this problem addressed fairly and squarely by the government .

    1. lola
      August 24, 2011

      Government apparatchiks are tax consumers. End of. The primary purpose of Parliament is to scrutinise tax and spend by the executive. As in, can we not do this for less / do we even need to do this.

      The current banking settlement is arguably fraudulent. It is certainly cartelised and specially priviliged by the state. This is cronyism and is why many bankers (but by no means all) are wildly over-paid.

  6. Mick Anderson
    August 24, 2011

    It would be easier to tolerate the tax increases if Government were seen to be working hard to reduce expenditure. There are strikes (Southampton) about some limited job losses, but apart from that, I see very little evidence of genuine cuts. Where private companies have had to reduce labour costs, staff either have to take redundancies or take a pay cut. Being able to arrange a noisy picket line should not insulate you from the real world that those who pay your wages have to live in.

    Many of the changes to Governemt expenditure seem to increase the amount of money that needs to be taken in tax, such as higher University fees (where the student has to borrow the money from the State), large payments to other countries (Pakistan, Eurostan) and large redundancy payouts to the relatively few Public sector paper-shufflers who have been retired.

    The private sector is productive, while the state is parasitic. It is not possible for Government to artificially increase the private sector (any “job creation” they do is by definition in the state sector), but they can improve the ratio by reducing the size of Government. Even when contracts are placed (new trains) they manage to let the money leave the UK. Until Mr Osborne realises this and genuinely acts on it, any talk of economic recovery is all just so much hot air.

  7. Martin Cole
    August 24, 2011

    Many people in the middle, measure their wealth in the value of their property. To maintain these articial prices the two most recent governments have reduced interest rates to such an extent that it amounts to an enormous tax upon those not owning property.

    A phased reduction of property values may be achieved through inflation and currency depreciation, but while underway the general public is expected to live in a contrived fantasy land disconnected from reality. It cannot work during a period of deflation which seems a present danger. The problem is the same across the English speaking world, witness the debt foregiveness proposals floated in Ireland over the weekend. On my blog I have floated a more equitable sharing of lost equity values between lenders and borrowers which has been ignored.

    The fallacy of false wealth lying in over-priced and often cramped accomodation is IMO the first matter needing correction if the other interesting issues raised in this morning’s posting are ever to be corrected.

    1. Javelin
      August 24, 2011

      Agreed – until house prices fall the UK cannot return to being a stable and steadily growing economy – wealth is held by the old and the young are forced to pay for it. We now have a generation of young who cannot afford housing (eg. university debt) and this will slowly deflate the economy for at least a decade.

      It is far better to have a rapid fall in house prices – then to see the general economy grow than to have slowly deflating house prices and have a general economy deflating.

      If house prices fell by 25% next week and the economy then grew steadily it would be better than house prices falling by 25% over 10 years and we had a gloomy decade of low growth.

      Keeping house prices high is basically politicans putting votes ahead of economics – in the same way that borrowing too much and our spending childrens taxes is. Politicans are to blame here.

      1. Gary
        August 24, 2011

        House prices are also kept high by the poor supply of (new, affordable) housing and high demand due to an increasing population. Add to that high state funding of rents for the unemployed which helps private sector landlords and the buy to let market.

        Maybe we need more building of houses by the state (which is spending on assets and infrastructure). Maybe we need move unemployed people on housing benefits in over populated areas to cheaper less popluated areas. Maybe we need to cut population growth (e.g. policies to cut net migration or lower birth rates or increae death rates). Maybe we can already see policies that may achieve the above.

        1. uanime5
          August 24, 2011

          Given that many people on housing benefit have jobs moving them to cheaper areas will just increase the amount they need to claim in benefits. It was also reduce the number of low paid workers in the more expensive parts of London.

      2. Robert
        August 24, 2011

        Don’t worry house prices will adjust downwards possibly by as much as 40% as eventually as interest rates will be forced to rise by the international markets as they realise that we won’t make our deficit reduction targets – we are too dependent on growth – we need to cut expenditure in the public sector, 40% could be achievable if only there was the political will to grab the ‘bull by the horns’. Nobody in the public sector should be paid more than the PM for a start – I don’t think there would a rush for the door as most would not get a private sector job!

        1. A.Sedgwick
          August 24, 2011

          In cash terms property and land is more likely to go up by 40% given QE, devaluation and the decline in the trust in paper money – look at gold prices.

      3. StevenL
        August 24, 2011

        MP’s all seem to own 2or 3 houses, they have a vested interest in propping the prices up. Plus payment of mortage interest expenses is almost like putting them on commission to make house prices go up.

  8. JimF
    August 24, 2011

    It isn’t as simple as that.
    Speculative gains have been made out of home ownership in the past, free of any taxation. These are now being paid for both by the younger generation, who are unable to afford to buy, and by savers, who continue to prop up mortgagees.
    Banks continue to skim off margin and charges from mortagagees and savers alike without adding as much as they should be to our economic picture, as they still favour residential property lending to small business lending.
    In place of “rich” one could argue that anybody who has made speculative gains or been employed in non-productive pursuits count as “the idle rich” as that cash or those resources weren’t put to productive use.

    1. Javelin
      August 24, 2011

      I agree some kind of tax needs to be levied on the baby boomer generation so they pay for the benefits of zero-risk non-productive wealth that penalises the young.

      1. alan jutson
        August 24, 2011


        Your policy of taxing the primary residence would make anyone who was thinking of selling up to downsize in later years, to perhaps think again.

        The whole point of moving down, is to release capital to spend in your later years, usually to suppliment a pension (poor performance over many years) to reduce maintaince/heating costs and possibly, but not always, to reduce council tax expenditure. Otherwise there is no point in trading down.

        The government already takes stamp duty on house sales, takes VAT on home improvements, takes VAT from solicitors and estate agents and takes 40% in Inheritance tax when you eventually give up.

        Discourage sales of larger family size houses and the chain slows as more and more people stay put. In addition, those who were going to free up capital to help them live responsibly by looking after their own affairs, would not bother, and instead could claim government support should they wish (as they would be entitled) due to low income and savings, whilst still living in a large house.

        You are correct that house prices have risen to levels never expected, but this has been due to demand exceeding supply.
        We are an overcrowded Island where property numbers have been limited by Planning laws (sometimes good, sometimes bad) where finace has been made easy with staggering loan to value percentages, and again by the finance industry who have lent many, many, times annual income multiples.
        Virtual uncontrolled immigration from both Europe and elsewhere have added to the supply demand.

        Yes fully agree the younger generation have a problem getting onto the property ladder, but it was ever thus, it has never been easy.

        The stupid Mansion tax idea is another disaster waiting to happen (if it happens) as it assumes all those who live in a large house, have a large income, which is simply not true, as many families (older generation) in this country are property rich, but cash poor, thus my point about discouraging downsizing.

        Start taxing the Primary residence and you penalise those who have lived in the same house for very many years, over those who continually trade houses, as the capital appreciation will be larger the longer you stay in one place.

        The way to get housing back on a sustainable cost level is to release more land for building, reduce demand by controlling immigration, get to sensible levels of income multiples on loans, get to sensible levels with loan to values.

        Also remember you do not need to own a house to live in it, most countries seem have a larger renting percentage of people than we do in the UK.

        We seem obsessed in the UK with House purchasing.

        1. lola
          August 24, 2011

          Largely nonsense. Go and look up Land Value Tax.

          1. alan jutson
            August 24, 2011


            Another tax, instead of what ?

            Why, your view seems at least here, to be in the minority.

            Most of us only own one home which is the one we live in, its value does not matter much, as you have to live somewhere. But it is nice if it is worth the same or more than you paid for it.

            But the World is full of different views, thats what makes it interesting.

          2. sm
            August 25, 2011

            A land value tax imho would be better at capturing some of the gain from public infrastructure development – currently privately captured for good or bad. Full market value could be given to those compulsory purchased and those that benefit could share those benefits-eg pay a set % at point of sale.

            IMHO Housing assets are still priced too high but protecting banks means the preferred means is by inflation. (The wrong choice when incomes falling).
            We should remove stamp duty on housing purchases below £1m, the market is falling and market clearing prices would be helpful instead of stagnation.

            Migration figures continue to spiral out of control,
            this helps keep prices high, although i cant believe this would be part of such a short term plan. Maybe its just gross incomptence or maybe they really are powerless and its a charade. Only 1 in 5 had job offers i understand.

            Well high immigration puts such high demands on public services , there is no way taxes are going down. How long do you think before a major public service implodes such as health or housing.

            If you dont have income we will tax capital by means fair or foul. Your £ will become worthless but fractional reserve banking will live on and you will still be in debt.

            I also noted we struck a deal with Switzerland to outsource collection of UK taxes without knowledge of the individuals. How do you audit that one? Secrecy issues and potential onflicts of interest issues? After the expenses scandal cant you learn a lesson.

            Even the US didnt buy into that. Lets just name 16 yr olds in the name of justice.

            You have to wonder why we bother voting? If it changed looked like changing anything it would be made illegal or interferered with in some way. Thats our democracy.

            Oh and several wrongs do not make a right – most commentators were clear on that point.

            The margins banks are making and the subsidies are causing the depression. We need a new banking model which allows the failed model to fail.

            Bring on full reserve banking and return direct control of money supply so it is directly accountable.

        2. uanime5
          August 24, 2011

          Better yet we could stop building houses and build blocks of flats that can house far more people on the same amount of land.

        3. Bazman
          August 24, 2011

          What’s next? If you have paid off your mortgage but are not old or rich. A paid off rent notation (PORN) on your tax code? I bet a few would like that.

        4. StevenL
          August 24, 2011

          It’s not a ladder anymore (unless for instance you are a builder who knows wht they are doing), it’s a snake!

      2. Tedgo
        August 24, 2011

        As an old baby boomer on a fixed, not very generous pension, I see no reason I should have to pay a special tax to compensate the young.

        I haven’t pushed up house prices, that has been done by Estate Agents and greedy people selling land to developers at ridiculously high prices along with lenders giving 120% loans. Our planning laws have not helped either.

        I agree that house prices need to fall be 50%, but people will then want Government to subsidise their negative equity.

        As I have said before, had indexed CGT been applied in the past house prices would still be affordable. We should apply the tax in the future.

        1. Stuart Fairney
          August 24, 2011

          “I agree that house prices need to fall be 50%”

          How fortunate we are that you ‘know’ what prices should be. Perhaps you should join some kind of price politburo, we know what a success that was for the Soviet Union.

          “I haven’t pushed up house prices, that has been done by Estate Agents”

          No that has been done by the interaction between free buyers and free sellers in the aggregate of their transactions. Agents don’t make the market they reflect it.

          “greedy people selling land to developers at ridiculously high prices”

          Should they sell it for less than market value then? Do you? What makes the prices of development land high? Scarcity!

          “We should apply the tax in the future”

          Yes, because if there is one thing this country is lacking seriously, its taxation. We are SO under taxed. More money for the government should fix everything.

          Not the best post I have read on this site I fear.

          1. Tedgo
            August 24, 2011

            Touched a nerve. I bought my house with mortgage rates between 11% and 15.5%. Fortunately the house was only 3 times my salary. Since then average wages have gone up by about 8 times and the value of my house about 18 times.

            No one really benefits from this unless you change properties every few years. I cannot afford to move, nor can anyone sell if they need to.

            House prices need to fall by 50% to get back to sensible value/earning ratio of about 3.

            My niece and nephew are going through college at the moment. Their chances of finding a reasonable job and getting on the housing ladder looks grim. The best thing they can do is emigrate when they finish college.

            My partners 3 children have returned to Australia, their prospects, houses and lifestyle are so much better.

            I would be happy to see my house value fall be 50%, as long as everyone else’s did. Its going to happen whether you like it or not.

            Houses are for living in.

          2. Tedgo
            August 24, 2011


            Sorry you don’t understand indexed CGT, if house prices rose at the retail price index then no CGT tax would be paid. The tax would only be paid if house prices moved ahead of inflation.

            Alternatively the index could be on average earnings.

          3. lifelogic
            August 28, 2011

            Good reply saved me the effort and expressed rather better.

      3. Susan
        August 24, 2011


        I would like you to explain that post in detail if you would. What exactly is your definition of baby boomer, because to my knowledge no precise definition has been put forward yet. You surely do not subscribe to this ridiculous idea that baby boomers deliberately set out to impoverish the young.

        Tax them on what for goodness sake. It is hardly their fault that they bought housing when it was available and much cheaper. The escalation in house prices is mainly due to most people in Britain aspiring to be home owners instead of renting, Britains overpopulation which puts affordable housing in short supply. People investing in housing rather than pensions due to the distruction of the UKs once wonderful private pension schemes and the breakup of families which then requires more housing stock. Would you expect a baby boomer, whoever they are supposed to be, to sell their family home merely because it has increased in price. If the inheritance tax in Britain was not so punitive, children of those who have done well and have held onto assets such as the family home would in fact do well out of those parents who leave them such a legacy.

        The problems of today for the young have been caused by a Government who spent too much in the public sector, too much private debt, lack of regulation in the banking system, a poor education system, high levels of immigration which makes employment difficult for the young, too much reliance on the state by the young and the older generations and the young not prepared to save for a deposit in the ‘I want it now culture’.

        In other words put the blame where it belongs, not a group of people who to my knowledge do not exist except in some invented theory.

        1. sjb
          August 24, 2011

          David Willetts MP, on page xv of his book The Pinch: How the baby boomers took their children’s future – and why they should give it back, states baby boomers are “roughly those born between 1945 and 1965.”

          On page 225, he claims a link between high house prices and immigration.

          1. Susan
            August 24, 2011


            I have read what Mr. Willets has to say on this subject. Although he gives dates his definition of a baby boomer is extremely vague. I would suggest to Mr Willets that people born in the era mentioned did not inherit from their parents as they were coming out of a World War and had nothing themselves. What they did inherit was a strong work ethic and “save” culture. There was no easy credit and if they wanted something they waited and saved until it could be purchased. They did not go out binging every weekend and feel resentment if someone had somethng better.

            While there are young people who do work hard and strive to better themselves, I strongly suspect that there are a great deal not in work, bemoaning of what they do not have and begrudging those that do. They do not have a God given right for their parents “hand outs”. I believe these people classed as baby boomers, worked hard and were prudent all their working lives and should enjoy the fruits of their labour.

            I certainly do not begrudge them anything and hope one day to be in a similar position through my endeavours.

    2. Susan
      August 24, 2011


      I do not know what you mean by tax free speculative gains. If you mean people buying a property as their main home in the hope it will go up in price, of course most people hope this is the case. They certainly would not want them to drop in price, especially if the property is still mortgaged. However, if you are referring to people who have more than one property, who intend to sell for profit, they have to pay Capital Gains Tax on these transactions.

      I agree that savers and those who have acted with responsibility are those who are being punished for this debt crisis. However, I would suggest it is the Government that wants the banks to prop up toxic mortgages and business because of all the possible repossessions and defaults that will occur due to people taking loans they could not afford. Inflation is eating away savings due to low interest rates.

      I have seen no evidence to suggest that banks prefer residential property lending to small business. I think cautious lending is going on throughout the banking system as they build up their capital base. Firstly there has to be the demand for small business loans. Secondly the bank has to be presented with a good business model in order for them to lend. Just lending to any business, whether it will fail or not, would only bring back the problems they started with.

      I also do not understand what you mean by non productive pursuits. This was not explained in your post. The only non productive parts of the economy happen in the public sector and Welfare.

      It has always been hard for young people to get on the property ladder. I seem to remember hearing a report recently, that it has at times been harder in the past for first time buyers than it is now. I believe they said particularly around 1974. Maybe someone can verify this.

      1. JimF
        August 24, 2011

        By tax-free speculative gains I am referring to the fact that when a primary residence increases in price by more than financing and maintenance costs of the property, the owner is sitting on a unique tax-free windfall in comparison with his neighbour who rents his house and borrows to invest in a widget-making machine where profits are taxed at a minimum 28%.
        You will certainly argue that this “speculative” gain is meaningless for the owner who continues to need a roof over their head. This isn’t the case, however, because rising property costs don’t affect that person in the same way as his neighbour in the rented property, who is having to pay rent loosely based on ongoing house prices.

        Banks do unquestionably favour residential over commercial loans. I could borrow privately 90% + of valuation at a lower interest rate to buy a residential property than for my commercial property, where my bank would charge me around 3% more to borrow 50-60% of valuation. The charging structure and interest rates for banks lending to small businesses is a different order of magnitude than for personal accounts and residential mortgages, although businesses on balance have stronger account flows.

        1. Susan
          August 25, 2011


          Think of it this way. If a person is sitting on a profit made by buying his home years ago. If that said person then decides to sell his home and purchase one similar, they will have to pay the market price the same as everyone else. Therefore any profit will be wiped out and the usual costs of purchase of a property come into play. The only time that profit becomes real is if someone down sizes, mostly through being elderly or through death of the owner. In both instances the state usually wins. For instance the capital released from the down size by an elderly person helps to keep them from claiming from the state and should they go into care helps pay for that. In the instance of death inheritance tax is charged on a good deal of that money. None of this can be classed as tax free speculative gains.

          With regard to the comparison between renting and buying. It would hardly be fair, if someone puts down a deposit on a home and takes on years of repayments for the reward at the end of it all to be nothing. They have taken on the responsibility of that loan and interest for most of the rest of their life. They also have to spend money over the years to keep that home in a good condition for it to remain an asset. People who rent are free, subject to contract, to move on as they please to cheaper accommodation or more expensive as is necessary. Personally I do not understand why more people do not rent in the UK as they do in Europe and other places. Of course the people who are really sitting pretty, with regard to property, are those who have been in Council Houses for years and who are now on a higher income. Those who are renting may thank their lucky stars in time when interest rates do eventually go up and all those possible repossessions come rolling in.

          Banks to my knowledge see lending only in one way, although during the credit boom of lax regulation this went wrong. What is a good loan and what is a bad one. What is the risk or not. With business loans the risk to the lender is much higher. Credit assessment is a lot more involved etc thus lending rates must reflect this. There is far too much nonsense being peddled about banks at the moment.

          Just because the economy has failed, due to the actions of a poor Government, is no reason for people to believe it can be solved by taking away from those in society who have worked and saved hard for what they have.

          BTW You still did not explain what you mean by non productive pursuits.

          1. sm
            August 25, 2011


            The evidence is the debt bubble in front of us and the problem of a debt driven adjustment.

            Have you read (positive money) banks create debt,you pay interest they make money, the more debt the more interest. This is a macro issue not an individual thing.


  9. Electro-Kevin
    August 24, 2011

    There are massive disincentives to work in Britain today.

    The only reason to work in a certain salary bracket is if one is possessed of a strong ethic and an innate sense of responsibility. Otherwise it would make a lot more sense to play the system.

    It feels like fairly ordinary workers pay 60% tax (VAT, council tax, commuting costs included) to provide others with the stuff that they’re not getting themselves. They can’t afford school meals, university places or pensions but are buying them for others.

    And then at the end of it all the house they’ve grafted for all their lives gets sold to subsidise the sponger sharing the same care home room with them.

    The only advantage of having a good job in Britain is the access to credit it gives.

    Britain – in many parts – combines the worst disincentives of socialism with New York ’70s style capitalism – law-and-order has broken down, the trains don’t run on time and the place is filthy and yet workers pay through the nose for it.

    1. uanime5
      August 24, 2011

      If there were more jobs then more people would work. 2.5 million people are unemployed because there aren’t 2.5 million jobs for them to go into.

      1. Electro-Kevin
        August 25, 2011

        Because it is more economic for them to stay at home on benefits.

        1. sm
          August 25, 2011

          I think we may be close to a liquidity trap, caused by private sector being forced to de-gear.
          How can 2.5 m (much much higher) people not want a job, i just dont believe it. If its uneconomic then we need to ask what is driving the major cost disincentinve for low paid work.

          Housing costs?
          Council Tax?
          Travel to work costs?
          Ever increasing migration seemingly uncontrollable, leading to surplus labour?
          Employers not willing to train- rather import.

          Tax on income is unpleasant but having a regular job is a major benefit.

          Why are we paying for the adjustment in this manner – with the same system in place – and rewards for failure still in place.

          Private sector labour is taking a massive hit.

  10. Steve Cox
    August 24, 2011

    This You Tube clip quickly went viral in the USA. The message is simple and it’s one that Obama should heed, not to mention the likes of Cameron, Osborne, Sarkozy, Berlusconi, Papandreou, et al. Apologies for some more scatological language, but it makes the point very clearly and everyone I’ve sent it to has appreciated it.

    Watch Felonius Monk explain some basic truths to BHO here:

    1. uanime5
      August 24, 2011

      It’s clear from his complaints that he doesn’t understand any of the problems.

      Also China hasn’t been Communist since the 1980’s.

      1. APL
        August 25, 2011

        uanime5: “Also China hasn’t been Communist since the 1980′s.”

        Maybe not, but it is Fascist. The ease with which the Communist government made the transition to Fascism must be a text book illustration of how similar each ideology is!

        From one ideology to the other – supposedly diametrically opposed – and not a single change in government personnel!

        The transition is much easier that Lefties feel comfortable broadcasting. Mustn’t let the cat out of the bag!!

  11. Robert K
    August 24, 2011

    The “rich” already pay a disproportionate amount of tax. Using an online tax calculator shows that someone earning GBP 100,000 a year – one Libdem definition of “rich” and the point at which the tax free allowance disappears – pays more than six times as much tax and national insurance as an average wage earner (I have used GBP 25,000 as the average wage, which is deliberately on the high side). Someone earning GBP 200,000 pays 15 times as much tax as average and loses 43% of their gross pay to tax and NI.
    This excludes employers contributions to NI, which for someone on GBP 100,000 is GBP 13,000 or five times the average.
    I don’t have the figures to hand, but I understand that a small proportion of top taxpayers pay the significant majority of income tax.
    When Blair and Brown argued over increasing the 40% rate to 50%, Blair reportedly said that rather than castigating the rich, the government should say “thank you” to them.
    I’ve included the calculations below, although I’m not sure how well it will present on this site.
    Gross pay Total deductions Contribution as % of average
    10,000 837 15%
    25,000 5,637 100%
    50,000 14,391 255%
    100,000 35,411 628%
    200,000 85,381 1515%

    1. uanime5
      August 24, 2011

      So what. Those who pay more tax still have much more disposable income than people on lower wages.

      Also as the richest 10% have 53% of the wealth they should pay 53% of the taxes. However they pay much less.

    2. sm
      August 25, 2011

      Yes Robert,

      ..but why dont you check out benefit withdrawal rates? where it interfaces with the minimium wage.

      consider all indirect taxes unrelated to income- council tax,petrol,vat,service charges(via s106 agreements), public transport costs,prescription, etc

      Did you mention higher rate tax relief.

      Consider discretionary income please. If you dont have any you dont spend because you cant. Therefore you cant tax its simple.

      There are a lot of low paid and nonworking people who are not the problem.

      Why do we have so many highly paid bureaucrats?
      Why do we have such generous high end senior pensions for those?
      Why is the House of Lords per diems non taxable?
      You could go on and on.

      Why are funding banking blackholes, EU blackholes, an international health service and a opendoors immigration policy with full benefits (or called something else) to all who manage to rockup.

  12. Alistair Morley
    August 24, 2011

    Technical point; yes, I believe the Treasury will receive donations. It goes into the general fund.

    Always wondered why more “caring” socialists don’t take advantage of the mechanism to contribute rather than insisting other people pay more for their projects.

    1. lifelogic
      August 24, 2011

      “Always wondered why more “caring” socialists don’t take advantage of the mechanism to contribute rather than insisting other people pay more for their projects.”

      Because socialist are by there very nature hypocritical it is just inherent in the condition and the politics of envy they espouse. They say one thing do another.

      Examples abound:

      Every one should go to state schools (but not of course their personal children who have special circumstances). Or I will find the right religion to get into the one state school that is just acceptable for my children.

      Everyone should pay more tax (except me or on MP’s expenses) which should have special tax arrangements to reflect my needs such as childcare and travel.

      Every one should use less carbon – but of course I still must go to the green conference in Mauritius with the thousands of other “believers”.

      They push equality legislation on everyone and the no retirement rules but then think perhaps I won’t take him on he is getting a bit old and will only get older or her on she might need maternity leave soon.

      I am sure anyone can come up with many more in no time at all.

    2. outsider
      August 24, 2011

      As I recall, Stanley Baldwin made a large anonymous donation to the Treasury (when he was Financial Secretary) shortly after World War 1 on the ground that his family steel firm had done well out of the war. He announced this in a semi-anonymous letter to The Times and enjoined others to do the same. Almost no-one took up his suggestion but he became Prime Minister two or three years later. A message for Zac Goldsmith and others? Probably not: in today’s climate it would just be treated as a cynical ploy.

  13. alan jutson
    August 24, 2011

    The questions are:

    What should the government provide in basic benefits, pensions and other services.

    What ideally is the maximum amount of tax it should ever take, to pay for the above, which will still encourage work and both personal and commercial success for its citizens and businesses.

    Given that the Government cannot even perform the simple task of purchasing lap top computers at the right price, one is forced to argue that the government should take as little as possible in tax, until it learns to spend any money it has got wisely.

    The clear indication after decades of waste, is that spending someone elses money, leads to poor value for the taxpayer.

    1. alan jutson
      August 24, 2011

      Thus we need a smaller but more efficient government, which allows its citizens to make their own choices, with their own money, but which protects the most vulnerable.

      1. backofanenvelope
        August 24, 2011

        And how do we get this smaller more efficient government? If you expect the politicians and civil servants to organise this then you believe that turkeys will vote for Christmas.

        1. lifelogic
          August 24, 2011

          No the only way with current politicians is for people to leave the country or avoid tax in what ever way they legally can.

          Cameron clearly has shown that he is unlikely to take action until he actually runs out of tax revenue and tax payers to mug.

        2. alan jutson
          August 24, 2011


          Agree with you, not easy when turkeys are unlikely to vote for Christmas, but it is up to us to vote for someone else other than the present set of turkeys at election times, providing others stand, the real problem we have, is that there seem to be too few options who have another opinion to vote for, so protest (peaceful), on line blogging, and reporting and complaining to the turkeys, is all we are left with.

          I am fortunate in that JR is my MP, and an excellent constituantcy MP who is aware of most things on his patch, and if not aware will respond to any comunication made to him rapidly, many are not aware, are slow to respond, and need to be reminded just why they are in the job they hold..

    2. A different Simon
      August 24, 2011

      If people work until they are 65 and live until they are 85 then someone on average earnings need to be making a pensions contribution of around 28% of their earnings during their working life to give a liveable pension .

      Furthermore they need to get the full return on it , not what’s left after the financial services industry have taken their massive cut .

      Trying to save money by reducing the state pension is a false economy :-
      – the money for pensioners to live ends up coming out of benefits system rather than pensions (not the same thing) .
      – penalises saving because the benefits are means tested
      – costs tens of billions to administrate means tested benefits for old age
      – leads to people spending too great a proportion of their earnings during their working life *

      * Prices for housing , fuel and food adjust to however much money people have to spend . Over the long term with less cash int their pocket the prices will correct .

      The state pension should be pegged at the subsistence level so means tested benefits can be scrapped .

      For a single person this probably equates to about £14k/year . The Govt Actuaries Department would be a natural for administrating such a scheme .

      If anyone has a proper alternative I’d like to hear it .

      1. alan jutson
        August 24, 2011

        a different Simon

        I agree with you, I did not suggest cutting state pensions, and as a victim of Equitable Life and the failure of the FSA, am not a huge fan of private pension performances either.

      2. sm
        August 25, 2011

        Same pension scheme for all. Compulsory employers/employees contributions. Low earner have min contributions paid by gov.
        The pot is out of bounds to taxman whilst in the pot.

    3. uanime5
      August 24, 2011

      Regarding tax levels I believe that the Government was able to have a tax rate of over 90% before WW2 without harming innovation so this should be the upper level.

      1. oldtimer
        August 25, 2011

        It was 90% after WW2, and about 99% or thereabouts if it included investment income. This most definitely did not encourage investment or innovation. No doubt it was a significant contributor to the UK`s post WW2 decline.

      2. Graham Cook
        August 25, 2011

        Sir – what a range of foolish socialist comments you make.

  14. Struggling Pensioner
    August 24, 2011


    This doesn’t just apply to the ‘rich’ We have done ‘the right thing’ and put aside for our old age only to find we are being penalised for it and are worse off than if we hadn’t bothered. My husband’s private pension, despite putting aside 10% of his salary most of his working life is only £6,600 and to get the best of a bad deal that is non-index-linked which means it will never go up whilst everything else will, especially food, fuel and energy costs which are soaring. His total pension including state pension comes to £12,000 but we still have to pay over £2,000 a year in council tax and also income tax as Mr. Osborne has only increased the personal tax allowance for over 65’s by £500 compared to the much talked about £1,000 for under 65s, a fiscal drag Gordon Brown would have been proud of and shamefully drawing more pensioners on modest incomes into paying income tax. Compare the income we are left with of £9,500 per year or less than £800 a month to live on with those who have never put by for their old age who receive almost £11,000 in pension credit, rising annually and with no income tax or council tax to pay. They are £1,500 a year better off than us. It would seem the present Government despite the rhetoric are no better than Labour at punishing the thrifty whilst rewarding those who rely on the state. We are wondering why we bothered. It’s not surprising that more and more people in the private sector are not saving for their old age when they know the state will look after them better without it costing them a penny!

    1. Geoff not Hoon
      August 24, 2011

      Struggling Pensioner: Obviously I do not know your full circumstances but could I suggest you speak to your local CAB office. There advice is free, independent and totally confidential. Be prepared to be asked lots of private and confidential questions in there quest to help you. If you havent used them you have nothing to lose and possibly something to gain.

    2. Steve Cox
      August 24, 2011

      I sympathise with you deeply, as so many of my elderly friends are in the same boat. They had assumed that having some savings would provide them with a little interest for the luxury items. Well, ‘little interest’ is the operative phrase!

      We appear to be in an era of mixed or garbled messages, and I don’t know if this is deliberate or merely a sign that the head has no idea what the backside is doing. On the one hand, economists are telling us that saving is evil, we must spend, spend, spend, to stimulate the economy and bring back the glory days. Then the government is telling us that we must save, save, save, or our retirement will end up in poverty stricken misery. In the meantime, Mervyn King and his cabal at the Bank are saying inflate, inflate, inflate, under which circumstances only a fool would bother saving, as very few investments will ever keep up with it (and there is, of course, a not very generous limit of £15K on the inflation linked NSI bonds that you can buy). Why is everyone in a position of power or influence saying or doing the exact opposite of each other?

      1. alan jutson
        August 24, 2011


        “Why is everyone in a position of power………………..”

        I agree with you, but guess.

        Because they are all trying to please everyone, but they end up pleasing no one.

        They try to preach prudence, to please the savers.

        They try to preach spend, to please business, to get the economy moving.

        They try to preach we care, by paying out our benefits.

        Why do they preach opposites.
        Because they want votes, no matter where they come from, almost no matter what the cost.

        If they were to preach, we should all try to live within our means, and take action accordingly, then they would upset those who are feckless, or those who cannot look after themselves.
        They are a poor example because they themselves, have not controlled wasteful government spending.

        So what we have is a whole series of mixed messages where if you try to help yourself, you get little or no help, but if you do nothing for yourself, you get some help.

        What a state we have got ourselves in.

    3. A.Sedgwick
      August 24, 2011

      This baby boomers phrase apart from being largely inaccurate is demeaning. Most of today’s pensioners were fighting in WWII or youngsters through the war with evacuation or bombing or born in the war years. We grew up in a very austere post war world, where law and order mattered, social conscience mattered and earning a living mattered. There is inequity and ingratitude suffered by many pensioners now through unfair income and council taxes.

    4. sm
      August 25, 2011

      Dear Pensioner,

      Good points. You may find this helpful.
      Also there may be special tarriffs for lowincome- try Ebico.

  15. Iain Gill
    August 24, 2011

    It’s worse than that because “The law abiding taxpayers” have been criminalized. When they see 20 police out handing out tickets for minor infringement of an arbitrary speed limit set by some anti-car council while knowing that in the local cemetery there are teenagers sitting on the war graves drinking cans of beer with knifes in their pockets who are quite immune from the forces of law and order. When they know the same burglars are out night after night and even when convicted are quickly back on the streets.
    The ordinary decent hard working folk are disenchanted with what passes for a criminal justice system in this country. A judiciary who have never had to spend a night on a sink estate.
    It also worse than that because we can see our national intellectual property being handed over to the India’s of this world who instantly start copying what we have worked hard to generate and under cutting us on the world markets. We have the establishment encouraging this haemorrhaging of our wealth creating power.
    It’s worse than that because for large numbers of decent people there is no chance whatsoever of them getting their kids into a half decent school. While at the same time we can see the state throwing good money after bad at a failed education system.
    It’s worse than that because the social security system has all the incentives setup to do the wrong thing. Why should you lose all your benefit if you try to study fulltime to escape? Why should you move to an area with better chances of work when you will lose the nice family house you need to bring your children up in and be forced into worse accommodation elsewhere?
    Why should the local drug dealers and thugs be queuing up in the same inner city GP surgeries as decent hard working folk in their most vulnerable state when they are desperately ill? I am sure YOU wouldn’t tolerate it for your own family.
    And so on

  16. Mike Stallard
    August 24, 2011

    Rainy day yesterday and I had to go to Peterborough where I grew up.
    I wandered round looking. The huge new Council Offices were as big as a cinema where people could wait. There was even a screen where the various “officers’ ” waiting times were on display. Even those who did not know what they wanted could be told by an “officer”. There were even two “officers” in black uniforms chatting in the front hall with little to do except look pretty.
    Groups of beggars, some with ridiculous haircuts, others laced with tattoos and piercings queued for their just desserts. (sic).
    In the park which I remember as the “wreck” was a man sleeping rough under a plastic sheet among the immaculately groomed (by whom?) flower beds. In the market place (as was) are some new computerised fountains squirting as if by magic on the rain sodden terrazzo. Not a stall in sight.
    I could go on. But you get my drift.
    But in the commercial garage, everyone had a job. Everyone had a smile. Everyone was paid. We were even given a chauffeur service into town. They were proud to work there.

    This is just to show that we desperately need more garages and lots and lots less money wasted by “officers” on silly things that create beggars and people sleeping rough.
    Jealousy, and “entitlement” are the results of this system of wastage.

  17. Woodsy42
    August 24, 2011

    “because some in the public sector have taken too much by way of pay and perks, it set a bad example to others who then broke the law to take goods they did not themselves own. This is the false doctrine of two wrongs ”

    No it isn’t, it’s the common human trait of copying the moral values you are shown by those in authority. Of course that doesn’t make it right, but it helps explain it.

  18. Cliff Buckley
    August 24, 2011

    A great pity of the requirement for austerity has been the polarisation of economically active citizens, public sector and private sector, who are now pitted one against the other. I am one of the parasitic public sector workers. I was a parasitic soldier for 9 years and then a parasitic police officer for 8 years and now yes it gets worse a parasitic civil servant. I earn a good salary £52,000 and if I remain employed for a further 16 years bringing me to 44 years of sucking the blood of my private sector neighbours then I will be in line for a civil service pension of around £26000. I cant say I feel wealthy. My train ticket costs me £4200 per year, I feel heavily taxed, i have lost child benefit, am subject to a 2 yr pay freeze and significant hike in pension contributions. I dont list these issues to complain but to add some needed balance to the discussion. Even some of the parasites are making a contribution.

    1. Tedgo
      August 24, 2011

      Making a contribution depends on what you are doing, if you are doing something of real value to society then that Ok. If on the other hand you are practicing the civil service art of moving a sheet of paper from one side of the desk to the other in a day, while appearing busy, then no.

      My partner works for the MOD, and keeps our joint finances stable. She is energetic and proactive in what she does, much to the disgust of many of her colleagues who are simply there for the money. Her bosses tolerate her because she is not a threat to their promotion prospects and that if they give her a task to do she will get it done.

      I ask her how she and her department contribute to the countries defence and particularly the front lines overseas, she has no answer. She is involved moving the MOD’s computers to a common system (being F’d is the official term), that is the gravy train to the large IT companies who charge £3000 per year to put and keep a bog standard computer on each civil servants desk. Is she making a contribution, probably not.

      1. Tedgo
        August 24, 2011

        On second thoughts, if I don’t wish to wear my supper tonight, probably yes.

    2. norman
      August 24, 2011

      I don’t think anyone is saying we need no public spending i.e. anarchy. The point is that we are living way beyond our means and that something has to give. The two viable options going forward are to tax more or to spend less, dismissing fantasy growth projections.

      I work in the private sector, in engineering doing a proper job that I have a professional qualitication for and had to pay back a sizeable student loan at the end of it and I imagine I now generate a fair bit of cash for HMRC both directly and from profits I help generate, not that that’s really here or there.

      I recently had a pay freeze for two years (2008/09), I receive nothing towards a pension other than what I put in, I spend around £3000 per year on travel to / from work (my choice, like yours, to live a bit away from my place of employment because decent housing nearby is prohibitively expensive), I expect to work until at least 68 if not longer and I won’t retire on anything like a £26,000 per year pension, let alone £26k + state pension.

      I’m sure you feel you are making a contribution, and I daresay you are, it’s a question of balance and a lot of us in the private sector feel the balance has swung too far towards the public.

      1. Cliff Buckley
        August 24, 2011

        You make some very persuasive points as do many others on here. I suspect the answer is however more complex than some contrbutors imply. We should have an honest national debate about what the state should not only stop doing but stop paying to be done. Beyond defence, policing and a minimum safety net should the state provide anything? Health and education could easily be private matters. Ability to pay could be the deciding factor. This may be an extreme scenario but a line needs to be drawn somewhere. Privatise public provision and allow the highly educated public sector workforce compete in the marketplace with their slightly less well qualified private sector contemporaries. I have no problem in principle with that.

    3. A different Simon
      August 24, 2011

      I agree that it is wrong that sections of society are being pitted against each other – an awful lot of people seem to be falling for it so easily .

      This productive/parasitic thing is far too simplistic . It’s hard to think of a more productive job than a teacher , equiping many children with the skills needed to make their way through life .

      This divide and conquer approach is intentional on the part of the elite who run the country and deflects the blame from where it should go .

      If the public sector had to suffer the same pensions provision as everyone else I’m pretty sure there would be such an outcry that it would result in a proper plan for pensions for all .

      A £26k pension at age 60 from an annuity provider costs between £677,000 and £758,000 . (see ) .

      If you wanted to take a tax free lump sum on retirement the the size of the pot would need increasing accordingly .

      If the pensions contribution you and your employer make were invested in private pensions schemes with their much lower returns you would be lucky to build up a lump sum half this size .

      Supposing that is what you had done and in June 2011 you were looking forward to retiring on £13k/year in September 2011 . Thanks to the August stock market crash you could now be looking at retiring on £10,500/year .

      1. A different Simon
        August 24, 2011


        “If the pensions contribution you and your employer make were invested in private pensions schemes with their much lower returns you would be lucky to build up PENSIONS POT half this size .”

      2. Cliff Buckley
        August 24, 2011

        Fair point and one which applies to companies and their employees who rely on government contracts to stay in business. It also raises interesting questions about the point of nationalised banks paying tax.

      3. Cliff Buckley
        August 24, 2011

        It is very difficult to take issue with anything you write. I accept that a pension of £26000 from age 60 is incredibly good in comparison with most people in the private sector or public sector for that matter. Having said that I dont believe for a moment that I will receive it. I think that the government, irrespective of party, will keep coming back for more. Consequently I am saving as much as I am able into a stakeholder pension which as you point out looked a lot healthier in June than it does now. One other point though which illustrates the complexity of this issue. After divorce I have come to accept that I will be in the private rented sector for the rest of my life. I simply do not have the wherewithal to buy even a small flat. If I were to retire at 60 or even 68 on the £10000 to £13000 level I imagine that I would fall squarely in the housing benefit category. These are complex issues.

      4. Andrew Johnson
        August 24, 2011

        “This productive/parasitic thing is far too simplistic . It’s hard to think of a more productive job than a teacher , equiping many children with the skills needed to make their way through life . ”
        The education public service that teachers work in, results in around a million students leaving school each year without the basics in reading writing and arithmetic. The state spends around £86+ Billion each year on education. On what basis are you calculating teacher’s productivity?

        1. A different Simon
          August 25, 2011

          I’m saying that the job itself is productive .

          There are many caveats , not least the teacher being good and the subject being taught being worthwhile .

          New Labour politicised the whole thing which is unforgivable .
          Children should not suffer by being grouped with children who dont’ have English as a first language and can’t even speak it .

          I was sitting next to a student on a train who had some learning material for a social science . This was nothing like a text-book and was little more than thinly disguised propaganda .

          I’m fortunate to travel the World for business and when you get back to the U.K. the complacency is mind numbing . We are failing on almost every front and it’s painfully obvious that education is not taken as seriously here as it is overseas .

          The results which you cite are dismal , I don’t know how much this is by intent – to create a generation of compliant morons which the financial services industry can fleece .

          What grade shall we award it , E-minus ?

          Worry sick for my nephews and nieces .

          None of this supports the CBI’s and big-businesses claim that there is a skills shortage in the UK so we must open the floodgates and bring in (cheap) labour from abroad .

          I don’t think there is any need to get carried away with actually calculating or measuring the productivity , certainly not until the fundamentals are sound .

  19. David
    August 24, 2011

    I think taking money from those who have more than me would help solve the problem. However I don’t mean footballers or bankers.
    I mean those on benefits who get money to live in a house more expensive than I do.
    I used to live in a 3 bed flat in SE12 – according to rightmove it costs £900-1000 pcm to rent a flat there. Why should anyone get more in housing benefits?
    If people want to have more than 2 children that is their choice and they can live 4 to a room for all I care.

    I think that the cuts to housing benefit don’t go nearly far enough.
    To be honest even a limit of £1k pcm could be too much – you could still have people on benefits better than some workers which is wrong.

  20. Peter Richmond
    August 24, 2011

    Increasing taxes is all very well but, as you yourself remarked a week or so ago, Mr Redwood, the mystery is why when faced with financial problems, governments cannot face up to spending less. Why can we not have a holiday from paying to the EU for a few years or cut our overseas aid for a while? Where is the clamour to keep these payments going in times of austerity? I imagine you or your readers are not short of other ideas for cuts in government spending. Why oh why do members of our government not see the need to reduce their own spending?

  21. Javelin
    August 24, 2011

    I would use the term “indulgent” to describe those who receive state benefits. Politicians in the West have been “indulging” voters for decades with their children’s taxes. Utterly immoral.

    1. uanime5
      August 24, 2011

      They “indulge” voters because they cannot magically create jobs and affordable housing.

      1. APL
        August 25, 2011

        uanime5: “They “indulge” voters because they cannot magically create jobs ..”

        There will be more joy in Heaven over one leftie that repents than ninety nine righteous men.

  22. oldtimer
    August 24, 2011

    The perception of a gulf was increased by reports that public sector employees continue to receive automatic pay increases. This contrasts with many private sector employees who have faced pay standstills or even pay cuts and/or layoffs in order to cope with the recession.

    Then there is the emergence of a fourth, super rich, category which, apparently, is not mentioned in your email. Just give it time.. These are the large landowners who, it is reported, are earning colossal sums for planting wind farms on their properties. These are not only fundamentally unjustified and uneconomic. They are paid for out of extra charges on all our electricity bills which have been legislated by Parliament. The longer this goes on, the more the Westminster political class (of all parties) will be seen as the friends of undeserved privilege.

  23. Brigham
    August 24, 2011

    A little known (it appears) fact is that we, the taxpayers, are paying the wages of hundreds of union officials that are embedded in various government ministeries. Why don’t we just sack the lot of them. From what I gather, they appear to be doing “non jobs” while actually working for their various unions. The cost is apparently millions of pounds a year.

    1. alan jutson
      August 24, 2011



      I blogged on this subject on this site earlier this week, one is forced to wonder how all this nonesense started, I thought union dues were for paying union officials and expenses.

      1. backofanenvelope
        August 24, 2011

        Surely sacking them is unnecessary? Just direct them to carry out their day job.

  24. waramess
    August 24, 2011

    More taxes can never be the right answer, particularly when the tax take is as high as it is at present.

    Smaller government is the answer and the only answer.

    The people who are being invited to join the austerity club are, of course the taxpayers and not the Civil Servants who should rightfully be at the sharp end of austerity as the axe falls (or should fall).

    May the taxpayers remember, next time they are told that we are all in this together, austerity is for the government and there is little reason for the man in the street to save this or any other government from their sin of overspending.

    Let them find that in the end that the governments inability to borrow will properly require them to reduce spending, and fast. No doubt this reduction will fall first on vital services as the public sector frantically endevour to exclude themselves from the pain but in the end it will be a worthwhile exercise. Not without its casualties, but worthwhile.

    1. Cliff Buckley
      August 24, 2011

      Are you implying that public sector workers dont actually pay tax or that we simply should not regard them as tax payers?

      1. alan jutson
        August 24, 2011


        I think the answer you seek, is that they pay tax on earnings on jobs, whose wages were fully funded 100% by other taxpayers in the first place.

        EG: The taxayer funds 100% of their wages first and foremost, and then they in turn, return an element of that money in the form of Income Tax and NI, then VAT back to the government coffers

        1. Richard
          August 24, 2011

          This reminds me of an article I read recently that posed the question: what is the point of any Government employees paying tax on their wages.
          It would save a lot of money and time calculating their tax bill and repaying it back to the Government if they were simply paid a nett amount.

        2. A different Simon
          August 24, 2011

          Alan ,

          What you said would seem to apply to almost everyone in the country wouldn’t it , whether public sector or private ?

          Isn’t the major difference that the Govt is the middle man and that people don’t get a choice whether to pay for the public services or not like they would get a choice whether to buy a pound of tomatos in a supermarket ?

          Certainly the cost of public sector workers is hidden at the moment in terms of the true costs of their pensions etc etc and there there should be transparency .

          I would not want to throw the baby out with the bathwater though and give big business the excuse to privatise everything .

          Last I heard the Govt spent 60% more on private companies than it does on public sector remuneration . A lot of what it spends with private companies is so badly procured as to constitute a subsidy .
          We need good public servants to stop this happening .

          Which reminds me , why is the energy cartel being allowed to stiff customers with the recent price rises , in a middle of a recession ?

        3. APL
          August 24, 2011

          Public sector employees paying tax is a matter of perception. And the actual transaction is nothing more than a book keeping entry on a government ledger.

          The only people who pay tax in this country are those in the private sector or those of independent means.

      2. Bob
        August 24, 2011

        Private sector worker
        Earns say 100k and pays half of it in tax he receives a net payment of 50k.

        Public Sector Worker
        Gets the 50k that was taken from the private sector worker and is told that he earned 100k and paid 50k in tax. But in reality he didn’t – did he?

  25. Gary
    August 24, 2011

    “Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property.

    But it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder.

    Now since man is naturally inclined to avoid pain — and since labor is pain in itself — it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.

    When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.

    It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.

    But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws.

    This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds.” – Bastiat

    1. waramess
      August 25, 2011

      …and there was I thinking how perceptive you were

  26. Matt
    August 24, 2011

    Need fairness of taxation and leadership, both are highly subjective.

    In my view the tax system is reasonably fair, but we cannot afford as a nation

    5 million on out of work benefits

    5.6 million Civil servants

    (I don’t have a down on these groups, just point out that we can’t afford the magnitude)

    The two together accounts for a country, of population, the size of Greece.

    All paid for by a hard hit productive sector, starved of bank funding and a mounting debt. This is before interest on the debt, net payments to the EU

    I don’t think that the government is showing enough leadership, tackling the issues.

    (50% tax rate, failure to throw out mansion tax option, failure to negotiate out of EU labour restrictions, maternity pay, and paternity pay)

    They need to get the next budget just right.

    1. uanime5
      August 24, 2011

      What do you plan to do about the 5 million on out of work benefits and the 5.6 million Civil Servants? Will you

      A) Give the 5 million unemployed jobs as civil servants?

      B) make the 5.6 million civil servants unemployed?

      1. APL
        August 24, 2011

        I vote for option B.

        With the small modificatio that we might benefit from a civil service of about 0.6 million.

        1. APL
          August 24, 2011

          In addition.

          Given that many unskilled and quite a few highly skilled jobs in manufacturing are now be performed to a consistently higher standard by computer aided automation. Why is it that paper shuffling – which is largely what the civil service does – has to be performed by expensive paper shufflers?

          Such activity is far better suited to automation, yet the civil service continues to increases in size.

      2. Matt
        August 25, 2011

        Were I that bright, beyond my pay grade, but I do believe that it is too much of a burden on the productive part of society to endure this burden.

        Indeed it is, as the gov has to borrow to fund this gap.

      3. waramess
        August 25, 2011

        uanime5, pretty unimaginative of you. Why not then abolish unemployment forever and have everybody employed by the state, just as they did in comunist Russia??

  27. David John Wilson
    August 24, 2011

    The arguments on this thread clearly point to the need to rebalance our tax system away from the source of income towards where it is spent. More generally the tax taking part of any money cycle should be moved to as late as possible in that cycle.
    Thus reducing income tax should take priority over any reduction in VAT. While as a balance the council tax on more expensive properties should be raised by introducing at least two new higher bands.
    Similarly employers’ national insurance should be reduced in preference to reductions in corporation tax.
    Vehicle excise duty should be reduced in preference to reducing fuel tax.
    The added advantage many such changes in the cycle is that they also reduce the cost of exports, put a higher price onto imports and help reduce unemployment.

    1. alan jutson
      August 24, 2011


      Why should higher value properties pay more council tax?

      Why do you assume owners/renters of higher value properties have a higher income than tjhose who live in smaller properties.

      Do higher value properties use more council sevices than lower value ones ?

      More : Street lights, rubbish collection, street cleaning, library books, Police calls, Fire service calls, Education demand, grass cutting, graffitti cleaning, Social services demand etc, etc.

      The fairest way was the old council tax, everyone pays a little for the services they all use, not just the head of the family whoever that may be.

      1. David John Wilson
        August 24, 2011

        The higher bands of council tax that I was proposing would be taken from the current top band. These houses which would be valued at over half a million pounds are in general occupied by the rich. It is surely more sensible to charge the people who own one or often more of these properties more council tax than 50% income tax which they are very adept at employing accountants to avoid.
        Currently a large proportion of local council services are paid for by money provided by the government out of general taxes. It is much more efficient and desirable for that money to be raised locally.
        You are wrong to suggest that the occupiers of large houses don’t put extra demand on council services. There are many examples of which refuse collections involving an almost a private special visit are typical.

        1. a-tracy
          August 24, 2011

          I met an elderly lady last week in a London theatre and we got chatting, she lived in Soho in a one bedroom tiny flat, she told me that she had worked as a housekeeper at a top London Hotel until she was 82 last year, she had bought this flat for £20,000 (I’m not sure what year) with her husband who had died shortly after they moved in and it is now worth half a million pounds. The government will get its money in inheritance tax before her family get the gain from this property sale as she said she doesn’t want to live anywhere other than central London for the convenience and familiarity. Knowing what pension schemes are paying out to private pension savers I’d guess any hike in her Council tax would cause her problems. So there would have to be a way for her to offset any punishing annual wealth tax until after her death.

        2. alan jutson
          August 24, 2011


          Do not agree with you.

          Yes I am one of your supposed rich people, I live in a house worth more than £500,000 because I designed and built it myself 30 years ago in an area where property is not cheap.

          I am now semi retired after a lifetime of work, my private pension is peanuts, not due to me not making payments into a Pension scheme, but due to the incompetence of the FSA and Equitable Life.

          My wife and I only live in our house, the kids having left some years ago, to their own properties, I am not a drain on society yet, but my council tax is at the moment nearly 50% of the State old age pension.

          Why should I pay more, where do you think I should get the money from, bit too old to sell my body, although not bad for my age !

          Should I sell my home and furniture that fits it, and buy a one bedroom flat. If I did that Javelin would want to tax me on the so called profit of 30years gain.

          The government will get 40% after the IHT allowance, is that not enough !.

          1. Bazman
            August 24, 2011

            This was Thatchers argument. Whacking everyone in a small house so old pensioners, but really the rich, do not have to pay more tax or downsize. She did not believe it and nether do I.

        3. waramess
          August 25, 2011

          Why try to find a system of taxation that will further feed this already bloated government? Why not instead deliver the benefits of any higher tax receipts collected back to the smaller households in the form of reduced rates demands.

          Finding ways of further feeding this enormous beast is simply deferring a future problem

  28. Neil Craig
    August 24, 2011

    “No matter where or what, there are makers, takers, and fakers.”

    – Robert A. Heinlein

    Successful societies have more of the former.

    1. alan jutson
      August 24, 2011



      Problem is there are a growing number of takers and fakers.

    2. David Price
      August 24, 2011

      It is also clear that the public sector and politicians are not believers in TANSTAAFL

  29. startledcod
    August 24, 2011

    Oh why don’t the rich pay more tax? I think the answer lies in the fact that they are Taxed Enough Already.

    The top 1% of aUK taxpayers pay 27% of all income tax. The top 5% pay 45% and the top 10% pay 54%. The top 25% of tax payers pay 72% of all tax. Yeah, but those are really rich people, they can afford it. Depends on what your definition of rich is, to get into the top 10% you have to earn £44,900 which less than twice the national average.

    What do you have to earn to get into the super-rich 1%, a surprisingly low £149k, that includes a good number of public sector employees, especially when quangos are taken into account. That 1% number around 275,00 taxpayers of whom 13,000 are paying tax on over £1 million and a significant 138,000 are earning between £200k and £500k.

    The average income tax rate for people earning up to £50k is 22.3%, whereas the average income tax rate for people earning more than £1m is 44.5%.

    So by any reasonable measure it is probably fair to say that the rich already pay their share and the not so rich, those on £44,900 and above are also shouldering more than a fair share of the tax burden.

    So when the populists advocate taxing bankers (boo, hiss) and the other big earners more by increasing the rate at which they are taxed should be very careful what they wish for. One thing on which everyone should agree is that the 151,000 taxpayers earning £200k+ are the most mobile and the most able to restructure their lives and their finances to, quite legally, reduce their tax bills most simply by taking themselves elsewhere. They will happily pay their taxes to another country that doesn’t believe in the politics of envy. ‘Good riddance’ might be the cry but it is also good riddance to approximately 15%-20% of your total income tax take. Brilliant.

    As Ronald Reagan so succinctly put it “We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much”.


    I’m adding an excellent parable that first appeared on Dan Hannan’s blog, the numbers vary slightly from those above.

    Suppose that every day, ten men went to the pub, and drank exactly £100 worth of ale among them. If they paid their bill the way we pay our taxes, the breakdown would be roughly as follows:
    The first four men (the poorest) would pay nothing. The fifth would pay £1. The sixth would pay £3. The seventh would pay £7. The eighth would pay £12. The ninth would pay £18. The tenth man (the richest) would pay £59. So, that’s what they decided to do.
    The ten men drank contentedly together in the saloon bar until the landlord, meaning to be helpful, presented them with a dilemma. “Gentlemen,” he said, “you’re my best customers. To show you how much I appreciate your trade, I’d like to give you a discount. From now on, I’ll knock £20 of the total bill for your drinks”. Drinks for the ten men would now cost just £80.
    The group wanted to carry on splitting their bill in the way that we pay our taxes. So, obviously, the first four men, those least well off, would continue to enjoy free beer. What, though, of the other six? How could they divide the £20 discount in such a way that everyone got his fair share of the windfall? They realised that £20 divided by six is £3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink.
    So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, following the principle of the tax system they had been using. This is how the bill now looked.
    The fifth man, like the first four, now paid nothing (100 per cent saving). The sixth now paid £2 instead of £3 (33 per cent saving). The seventh now paid £5 instead of £7 (28 per cent saving). The eighth now paid £9 instead of £12 (25 per cent saving). The ninth now paid £14 instead of £18 (22 per cent saving). The tenth now paid £49 instead of £59 (16 per cent saving). Each of the six was better off than before. And the first four continued to enjoy free booze. But, as they left the pub, the men began to compare their savings.
    “I only got a pound out of the £20 saving,” declared the sixth man. He jabbed an accusing finger at the tenth man,”Why should he get £10?” “Too right,” exclaimed the fifth man. “I only saved a pound too. It’s unfair that he got ten times more benefit than me!” “That’s true!” shouted the seventh man. “Why should he get £10 back, when I got two measly quid? The system is rigged in favour of the toffs!” “Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. It’s always the worst off who get neglected by the politicians!”
    The nine men dragged the tenth into the car park and gave him a thorough kicking.
    The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beer without him. But when the bill came, they found that their money didn’t even cover half of it.

    If we take the

    1. Gary
      August 24, 2011

      Higher earners do pay much more income tax and contribute a large percentage of income tax collected, but the picture is reversed for VAT. However that is mostly because people with more money are more likely to use the income to save, invest, buy houses, and contribute to pensions than buy VAT’ed goods and services.

      So it is difficult to get a clear picture, but the top 25% probably “subsidise” the bottom 75%.

      1. startledcod
        August 25, 2011

        VAT is mainly charged on discretionary expenditure. Food and children’s clothes are zero rated and domestic fuel is reduced rate. It is charged at full rate on luxuries which are disproportionately bought by the better off. How does VAT hit the poorest hardest?

        1. sm
          August 25, 2011

          Vat is charged on repairs? Vat is charged on fuel,communications,only certain food/drink elements are zero rated. Reduced tax is still a tax.(EU again)

    2. uanime5
      August 24, 2011

      Your figures are completely wrong.

      You need a liquid wealth of £41,907 to be in the top 1%, not an annual salary.

      The Top 1% earn at least £688,228 per year and control 21% of total UK wealth.
      The Top 2% earn at least £460,179 per year and control 28% of total UK wealth.
      The Top 10% earn at least £176,221 per year and control 53% of total UK wealth.
      The Top 25% earn at least £76,098 per year and control 72% of total UK wealth.
      The Top 50% earn at least £35,807 per year and control 93% of total UK wealth.

      Those who earn over £200,000 aren’t very mobile. It is exceptionally difficult to get a high paying job in another country, especially on where internal promotions are common.

      1. APL
        August 24, 2011

        uanime5, where do you get these figures from?

      2. startledcod
        August 25, 2011

        As APL asks, where do you get these figures? They are wrong.

        Income tax is paid on income not on wealth. To get into the top 1% you need an income of £149k not £688k.

  30. Epigenes
    August 24, 2011

    Excellent post, Mr Redwood. Guardian journalists with mansions in the UK and Tuscany should donate their wealth to charity or the Exchequer and spare us their bleeding hearts.

    And the same goes for the rest of the champagne socialists.

    1. APL
      August 25, 2011

      ” .. Guardian journalists .. mansons … Tuscany ..”

      We know who you mean! A bit generous to call her a journalist though.

      But agreed, anytime someone wants to pay more tax, that person can simply write a cheque to the Inland revenue [or whatever they are called these days].

      Odd that they rarely do!

  31. Mactheknife
    August 24, 2011

    I have worked all my life and have never claimed a single penny from the state. I now earn what could be described as a good salary, but despite paying for myself to go to university to increase my potential, despite working hard to earn bonuses, funding my eldest through university, funding my youngest through college I’m constantly the target of tax increases or tax benefit removals by various governments.

    I live in what is classified as a socially deprived area, and its true that our town has lost 25,000 jobs in the last 25 years, there are those who choose not to seek any type of employment. These people get everything paid for in terms of their rent, council tax, car (if they claim they are incapacitated) and numerous other ‘nice little earners’.

    Recently I met with an old school friend who is just one of these people and we compared incomes. In short all his family benefits were equal to my take home pay. How can this be right ?

    Here’s a story from a friend of a friend who works in the local beneifits office. A young man comes in and asks if it would be possible to have some benefit payments for a couple of months before he joins the army. No is the response. The next person is the local alcoholic who is give £400 for his ‘condition’. Yes folks, the lunatics have truly taken over the asylum.

    The sad part is that no government is really prepared to take this on.

    1. uanime5
      August 24, 2011

      Benefits have to represent the cost of living. The higher this cost is the more people get in benefits.

      Also the young man should have been entitled to benefits unless he has more than £16,000 in assets.

  32. Paul Danon
    August 24, 2011

    Criminals need to be personally liable for the financial cost of any damage they do for the rest of their lives. Such cost should become like a student-loan with payments collected through their payslip. Not only should interest be charged but, to make the system punitive, the actual cost should be multiplied depending on the extent of accompanying social damage. Citizens should also be able to sue rioters for the stress they cause the public and the damages should be added to the criminals’ social debt. We have to stop criminals from seeing bad behaviour as an innocuous form of self-expression (as the left want them to) and/or something they can just put down to experience. One’s crimes should haunt one until they are fully expiated.

    1. Andrew Johnson
      August 24, 2011

      Good idea- in theory. Check out your potential clients by taking a trip to your nearest magistrate’s or Crown court. There you will discover that most of the “criminals”, don’t work, won’t work and have no intention of ever working. They don’t pay the fines the courts give them, let alone life time compensation payments. Fines are not a deterrent, prison is not a deterrent – why? Prison is just about bearable and whatever happens, the State and their thieving will continue to fund their and usually their family’s chosen lifestyle.

    2. uanime5
      August 24, 2011

      All this will do is remove any incentive of criminals to work. They’ll either claim benefits, work in the black economy, commit crimes, or all three instead.

      The more punitive the system the more it hardens the criminal.

  33. Caterpillar
    August 24, 2011

    “The politics of austerity are never easy.”

    The easy bit (flows):

    The lowest earners are hardest hit and therefore need protection => increase tax free earnings and compensate by dropping middle tax thresholds – a tick to the coalition.
    The highest earners are likely sources of future innovation, effciency gains etc. => reduce higher tax levels – a cross to the coalition

    The hard bit (stocks):

    Misallocations of capital needs to be adjusted => collapse house bubble and encourage savings (which can then be a source of funds for investment) – a cross to the coalition

    1. uanime5
      August 24, 2011

      I fail to see why high earns are likely to be a ‘source of future innovation’. Most entrepreneurs weren’t rich when they started.

      1. Caterpillar
        August 25, 2011

        I will partially concede, on your case (though only because I haven’t checked the specifics; repeat inventors, repeat start-ups, repeat improvers I believe would be confirming evidence, but I agree that I do not know the scale of the refuting evidence). My basic reasoning is that people have generally been paid for performance, and though there is a large random element two strong correlates of performance are General Mental Apptitude and past performance (in a similar role), from this I presume the density of good future performers is higher in the previously rewarded group than in the not yet rewarded group. I don’t think it is a Markov process.

  34. Elliot Kane
    August 24, 2011

    I think the biggest problem is really that every govt coming in assumes all the money is theirs and that there is an infinite supply of it.

    It’s that mentality that has to be stopped before anything else can be done, IMO.

    The entire machinery of govt needs pruning, starting with a ton of useless regulations that do nothing but lose money for businesses.

    And getting out of the EU, of course, which will solve many of our problems at a stroke.

  35. Rick Hamilton
    August 24, 2011

    It’s time public sector gravy train freeloaders showed some leadership and cut their own bloated salaries voluntarily.

    Why should public sector ‘chief executives’ be paid as much as those handling similar budgets in the private sector? In real business, you have to generate the money first before paying your salary and all the other overheads. Public sector managers just spend taxpayers money that comes to them without any effort. As we have seen from years of Gordon Brown, any fool can spend other peoples’ money. Public sector managers should be paid half the private sector equivalent because they only do one half of the job.

    And why should any one of them presume to receive more than the prime minister with all his responsibilities? What is wrong with these selfish and shameless people?

    1. Cliff Buckley
      August 24, 2011

      Why do you attack the recipents of the salaries rather than those offering them? You may be right that a British Ambassador or Permanent Secretary of a department of state such as the foreign office should be paid much more modest salaries than at present. Actually I agree. I dont think the same people would necessarily continue to fill those positions however.

  36. matthu
    August 24, 2011

    What part of the UK do you consign DECC and Chris Huhne to? or do they inhabit another planet altogether? (One without a fast lane.)

    Here is what Roger Helmer MEP has to say

    “If DECC and Huhne don’t understand the consequences of their decisions, then they are in dereliction of their duty. If they do understand, and are pressing ahead anyway — then words fail me. They are apparently setting out deliberately to sabotage our economy and to pauperise our children.

    So there is a clear message for George Osborne: Unless you want to see your economic plans scuppered by green zealots, you need to start waving the big stick now.”

  37. pipesmoker
    August 24, 2011

    John Profumo got it and spent the rest of his life doing the right thing to atone for his lie to parliament and I respect him for that.

    The problem today is that many of those in high places do not get it and continue to abuse the system for their own ends and in are worse than any of those rioting in the capital?

    Jacqui Smith is in the news again today. Hazel Blears did nothing wrong criminally. Tony Blair and some on your side of the house, I hasten to add not you! If they are the only examples we have to live up to it is no wonder the public is apathetic and grumpy?

  38. Simontm
    August 24, 2011

    I constantly have discussions with a friend of mine who would never vote Tory. When it comes to taxes, he always says it is disgraceful that the government is making cuts and that people need the money.
    I always ask him: “Would you like an extra penny or five on your tax bill to pay for the public sector obligations and welfare?”
    Funnily enough he never does.

  39. matthu
    August 24, 2011

    The letter we all want David Cameron to write:

    Dear Britain,

    If you realised just how totally stuffed we are you wouldn’t waste time getting to the end of this letter. You’d already be outside Number 10 with pitchforks demanding my head on a spike – and you’d be quite right to do so, for I have failed you.

    … [skipping about 50 lines here – read the original]

    … never again take the soft, easy, head-in-the-sand path of voting for which ever political party offers to bribe you the most with money it doesn’t have. You’ll vote for the one which acknowledges the scale of the problem facing us all and which has the courage and the will to deal with it.

    … [ skipping about 100 lines here – read the original ]

    After that it’s up to you: liberty or the soft, enervating tyranny of the Left; growth or stagnation; future or no future; jobs or no jobs for your children and grandchildren. You choose.


  40. Bernard Otway
    August 24, 2011

    Thank you Steve Cox for the link,my wife and I watched it and others of his I have started it going viral again,it has gone to my regular UK people as well as Australia,Canada,New Zealand,South Africa[16 people], Cyprus,Fiji,Swaziland ,Mozambique and Lesotho.
    The majority of commenters have shown that the mood out there is VERY UGLY,and if the likes of DC and others don’t recognize it then IMHO they are STUPID,another nearly 4 years
    to go and translated into votes NOT FOR Con/Libdem/lab this I believe will be a game changing point in time,what would be so wrong in having 600 Truly independant MP’s,
    potential leaders could stand After the GE and Proper Democracy could emerge,with the majority’s wishes being put into action,as these independants would know they were NOT
    subject to Whipping,BUT to their constituents who would Scrutinise their voting records in the house,in the event that they did not stick to their manifesto promises then OUT and another IN. SIMPLE. Parliament should reflect EXACTLY what the people want.
    As for those advocating people leaving the country,I tell one family at least EVERY day
    to go to Aus/NZ/Can,I carry around with me a photocopy picture of the FIRST house I bought in my life [in 1969] as a 24 year old,taken in the last 6 months [2011],which was a new build in Brisbane 3beds 1 ensuite DETATCHED ,their eyes go like saucers,and when I ask them WHEN they expect to own something like it HERE they Laugh.Google Earth
    Brisbane/Everton Park/near South Pine Road and Camelia Street,26 Mirbelia Street, look for yourselves,today something like it here in Surrey would be about £750,000 [and not
    salubrious suburbs either].

  41. lola
    August 24, 2011

    It is easier for politicians to contain the tensions, as they can offer something more to most groups as they carve up the national pie.” Eh? Just why do you think that politicians should ‘divide up the pie’? Why are 650 ish individuals uniquely wise as to how best to gather up all the wealth in the UK and then hand it back out in some form of giant central planning rationing system mired in cronyism and favouritism? It’s bonkers.

    Reply: That may well be true, but the reality is politicians do take half the current pie and spend it on their choices of services and activities in the public sector.

  42. ferdinand
    August 24, 2011

    John, you are indeed correct. However those of us who pay our taxes are not just cross at having to pay more but are just as angry with the politicians who authorised the wild extravagance of the Government. It seems to us that politicins who vote for an increae in spending should suffer more than the rest of us. How to achieve that I have no plan.

  43. Dr Bernard Juby
    August 24, 2011

    After so many years of a Socialist mind-set, with its ultimate devastation, Atlas is starting to shrug again.

  44. cuffleyburgers
    August 24, 2011

    Nobody is arguing that public sector looting justifies the “private sector” looting we saw the other week. But it is a bit rich for you lot to separate the two, and there can be no doubt who does the most damage to social fabric, to the national culture and economy or any thing else, and that is the appalling behaviour and injustices witnessed week in week out be it MPs, council chiefs, quango crats or the EU.

    This disgusting, immoral and frequently criminal (such as illegally firehosing billions of tax payers pounds to greece for example) creates vast frustration in the minds of us serfs who actually have to pay the taxes.

    Second point, it is not the governments role to slice up the national pie you damn’ socialist. It is the government’s job to protect the citizen against other citizens who may wish to commit crimes against him, against foreign governments who may wich to take over this country (such as Brussels, quite why the Tornado GR4s which were so effective over tripoli apparently haven’t been deployed against the berlaymont I do NOT understand) and to ensure there is a mechanism in place to protect the citizen against the state itself.

    Your precious coalition is doing pretty poorly against all three of these measures so its about time you encouraged Mr Cameron to indulge in a spot of digitum extractum, or else it’s going to be piano wire time, and each time this joke is repeated, it is a little bit less of a joke.

  45. backofanenvelope
    August 24, 2011

    The only way out of our current mess is to cut public expenditure and the only way to do that is for the government to STOP doing things. Mr Redwood is a voice of sanity but he is wed to saving money by managerial action. Not only is this beyond the present bunch but the civil service will stop it working.

  46. Iain Gill
    August 24, 2011

    I love this blog

    Shame there isnt a bit more proper democracy and MPs were unconstrained by the limits of the party system

    This country is going belly up and until a few people like me are attracted into the political system its only going to get worse

    Its about time John Redwood was a minister

  47. Javelin
    August 24, 2011

    Interesting point on voting.

    People over estimate their self worth. The more unequal the society the more people over estimate it.

    This is interesting because there is a negative feed back in society. Whilst under Labour people became unequal and less well off they actually felt better off. Interesting research.

    1. uanime5
      August 24, 2011

      So does this mean the rich say they’re vital for the economy because society is so unequal?

  48. Richard Long
    August 24, 2011

    John, You are right about the UK being divided into 3 parts. Part one is the public sector who want to be kept by the two parts in the private sector and feel it is their right to have better salaries (average 7.5% above private sector) and also believe they are entitled to higher pensions again funded by the private sector. Even the public sector “taxes” are funded from the private sector tax bill. The Public Sector also feel that austerity should not impact on them. The sooner the present public service funding system implodes from unsustainability and we all work under the same conditions the better.

  49. APL
    August 24, 2011

    JR: “This is the false doctrine of two wrongs somehow make social justice.”

    And that is a straw man argument.

    In current popular parlance these people* are ‘sending a message to the yoof’. And despite abysmal education the yoof are picking up on that message loud and clear!

    The latest wheeze seems to be to announce that somebody will take a 5% pay cut but give themselves a bonus which more than compensates for the well publicized pay cut.

    *They tend to be the so called CEO of local authorities, health boards, trusts or some other Quango.

  50. Bazman
    August 24, 2011

    If anyone believes the rich should only pay small amounts of tax then shift the tax burden onto indirect taxation forcing those that use services, such as medical care or transport, to pay for them themselves by taxes on everyday items such as food/utilities, and at point of use through charges. Revenue from state helicopters/hospitals for the rich to pay for buses/workhouses for the poor. Rich areas paying less council tax. If you do not want to pay do not use. Like pay per view sport which all sport should be on.

  51. uanime5
    August 24, 2011

    The last paragraph was little more than scaremongering to protect the rich from higher taxation by claiming that taxing the rich more will somehow involve taxing everyone else more. Anyone who earns less than £150,000 need not consider themselves rich.

  52. Andrew Smith
    August 24, 2011

    The three classes in Britain are those in the private sector, those in the public sector and the political class.

    The idea that taxing “the rich” more will generate more income is laughable. “The rich” in any event may not have any taxable income, so really we mean the high earners. It is well established that higher tax rates on them generates less tax revenue than lower rates. Push that thought down the income curve and the difficulty is immediately apparent.

    Growth is the only solution which, to be fair, John repeatedly points out.

    To get more growth you need some or most of those not now earning to earn more or at least something. At present, I have been told today, an unemployed person on job seekers allowance who also gets housing allowance has no incentive to work. If they work more than 16 hours a week (which on minimum wage is not a lot of cash), they lose housing benefit as well as (naturally) the JSA.

    Effective benefit loss rates of over 100% are not likely to tempt anyone back into work! Can someone tell George?

  53. wab
    August 24, 2011

    “Very few people think of themselves as rich.”

    I would say that anyone who is in the top 10% in terms of income or wealth should be regarded as “rich”. Most people who have any public voice (including the people who comment on this blog) are either rich (if they are old enough) or will be rich some day (if they are young enough). It is always amusing that these rich people insist on calling themselves “middle” class. They are not in the middle, they are at the top.

    Needless to say, pretty much everything with regard to tax is arbitrary, in particular what the rates and thresholds should be. Needless to say, nobody wants to pay tax on anything, and everyone believes that others should be the ones paying tax. Needless to say, everybody wants the government to provide the services that they like, and none of the services they do not like. It is up to MPs to square this circle.

    As others have commented, government should also look at the spending side of the equation and start to bias government spending towards activities that are economically productive. There is no indication that the current government has made any real effort in this direction.

  54. David
    August 25, 2011

    Posted August 24, 2011 at 1:06 pm | Permalink

    House prices are also kept high by the poor supply of (new, affordable) housing and high demand due to an increasing population. Add to that high state funding of rents for the unemployed which helps private sector landlords and the buy to let market.

    Maybe we need more building of houses by the state (which is spending on assets and infrastructure). Maybe we need move unemployed people on housing benefits in over populated areas to cheaper less popluated areas. ”
    A good idea. I used to work in Woking many people in my company could not afford to live there – but lots of pro single mums could because WE paid for them to do so.

    1. waramess
      August 25, 2011

      House prices are kept high by low interest rates. Push the BofE discount rate up to six percent and see by how much house prices fall. Nothing at all to do with supply and demand, it’s all a big fix

  55. StrongholdBarricades
    August 25, 2011

    We are bombarded by the sound bite “fairness”.

    What is fair?

    A level playing field is surely not one where those who have the most should also pay the most to the state? But maybe it is about access for all to legal tax avoidance.

  56. BobE
    August 25, 2011

    No public servant or council employee should earn more the £100k. That would save a few million.

  57. Mike Fowle
    August 25, 2011

    Excellent post, and many fascinating and thoughtful responses. One of the major problems the government faces, I believe, is the poor standard of journalism in this country. It is so easy simply to report a story of how “the cuts” will affect a particular group. Lots of sympathy and there is probably a union or a charity to provide a sound bite. The explanation and rationale for the saving is never made. Or indeed the probable amount of waste involved. Just some lip service to difficult economic times. I have just read The Big Short by Michael Lewis about the sub prime mortgage scandal, and although I thought It started in America was just a typical piece of Brownian buck passing, he had a point. It is a scandal and it is wrong that those involved have got away with it. By the way, thanks to Susan for her eloquent defence of us baby boomers.

  58. Bazman
    August 25, 2011

    ‘Very few people think of themselves as rich. ‘
    This is true and very many of the rich think that as they are not as rich as some others are somehow disadvantaged. The politics of envy in reality and not just some childish comment.

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