However silly no-tax-increases is, there’s no excuse for not cutting tax reliefs to pay off deficit

Enforcing £12bn welfare cuts ( and a lot more beyond that if the deficit is really to be eliminated) is not only draconian and callous as a means of making the poor subsidise the rich so that the latter can walk away free of any liability, nevertheless no-tax-increases in this Parliament doesn’t end the matter.   It doesn’t preclude cutting back sharply on enormous and wasteful tax breaks which could make a huge contribution to paying down the deficit.   To take one example, the IMF, no less, has calculated that fossil fuel companies globally get £3,400bn a year subsidies, at a rate of £10m every minute of every day, more than the total health spend of all the world’s governments.  That is 6.5% of global GDP, and if the UK hands out fossil fuel subsidies proportionately to that, it would be spending £100bn a year subsidising oil, gas and coal.   The current UK budget deficit is £92bn a year.

Take another example.   The buy-to-let market is currently booming, and lat year according to the mortgage lender Kent Reliance British landlords made £112bn from capital gains and rental income.   Over £44bn of this came from rents very largely paid for out of Housing Benefit grace of the government/taxpayer.   This subsidy to private landlords can only increase in the current severe shortage in housing supply.   What gives a bitter piquancy to this is that a third of all houses bought under the Right to Buy have now ended up bought by private landlords and their rents raised steadily towards market levels, sharply diminishing the supply of Council housing at rents that tenants could afford.

Another telling example is the colossal tax break that allows firms to write off payments on their borrowing against taxable earnings.   This again is perverse.   Before the financial crash in 2007-9 governments in Europe, including the UK, were spending 3% of GDP in foregone tax revenues in cheapening the cost of debt, more than on defence or on all its policies to help the poor.   It isn’t even sensible.   It encourages people to borrow more to buy property than they otherwise would, raises house prices, and encourages over-investment in real estate rather than in productive industry or services.  It has reached the point where corporate financial decisions are motivated more by maximising tax relief on debt than on the needs of the underlying business.   Nor would it be difficult to phase out these tax breaks for debt at the present time if it were done alongside the major lowering of the corporate tax rate that has occurred.

5 thoughts on “However silly no-tax-increases is, there’s no excuse for not cutting tax reliefs to pay off deficit

  1. I’m no economist but it did strike me that Osborne can’t really afford to give all the tax breaks they’ve announced during the Queen’s Speech.

    From tomorrow’s Telegraph:
    “Interest bill on UK’s £1.27 trillion debt to hit £1bn a week.
    Larger-than-expected deficit keeps debt interest on track to hit £52bn this year”

    I’m sure I read that Osborne failed his maths exams!
    They’re leading the country to ruin, in more ways than just economically.

    They reckon they have a “mandate” to do what they like, but less than 25% of people eligible to vote, actually voted for them. I expect most would not have done so had they known the truth, but the papers just printed rubbish about Labour’s economic record. Labour should have gone on the attack. I’ll never understand why they didn’t. Did they want to lose the election!!?

  2. Why fight why do anything you see we all get those nice cossie jobs on the boards raking in money for nowt backhanders quietely given to those who help putting companies up for take your pick yes thats the pot of tax payers monies you now the companies who are there dipping yet back in their home country fraudulent claims by them taking to court for it yet they award them more contracts jobs for the boys perhaps ones got to look inward to see who gets these payments youl be surprised by it many take those backhanders hum didnt they change the law in 2012 on it goes but sadly those who aint rich havent caught on about dodgy dave and his gang not one can say they done a good job look at gove he dumbed down schools greyling help with the great cull then offt out to justice department to take away justice for the peasants then we got the cull master rtu ids yes how can one say about
    This imp notalot but may another quietely sacking personel watching the boarders did this save monies nah it left our boarders open yet on it goes many a toff but to work nah they botch it and sadly ruin the country but dont worry cams invited one of his mates who showed promise so he allowed him to progress into that house of god yes a good wiess was that one a guarding of the flock ouch he sleeps whilst rtu ids culls his flock then george now he played another weiss bringing a failed banksters from canada into the bank of England hum on it goes but realy those working earning monies pay their taxes whilst those companies and peoples who dont pay or hardly nowt show shamefully that they wont pay yes brings to mind norman law but tax it always been the dreaded peasants cross to bare more so today has politicians take away our monies take away our justice and lock you up for shouting out about it yes britain under the tories looking bright for those who aint poor

  3. Well, Mr Meacher,
    will Osborne follow your sound advice and improve the country’s finances?

  4. Elevator, going up!

    In the gleaming corridors of the 51st floor
    The money can be made if you really want some more
    Executive decision, a clinical precision
    Jumping from the windows, filled with indecision

    I get good advice from the advertising world
    Treat me nice, says the party girl
    Coke adds life where there isn’t any
    So freeze, man, freeze

    It’s the pause that refreshes in the corridors of power
    When top men need a top up long before the happy hour………………

    The Clash

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