Category Archives: Taxation

Corbyn forces the Tories to take him seriously

After all the slurs about unelectability, the Tories have very quickly changed their tune and acknowledged that they are now facing a very real threat that they’ve not encountered for the last 30 years.   At a meeting of the political cabinet last Tuesday they decided to focus on the idea that they offer a better future through lower taxes, a higher minimum wage, more jobs, and better public services, while a left-wing agenda would deliver insecurity through higher spending, higher taxes and more borrowing.   If that is their plan, they have a real fight on their hands since almost all of their claims are downright wrong.

Taxes have been lowered for the top decile and for multi-national corporations, but the severe cutback in tax credits in this next Tuesday’s Finance bill will increase taxes for the bottom third of the population, even after the increase in the personal allowance is taken into account.   The £9 an hour minimum wage, which will not be reached till 2020, is actually unlikely to exceed by much, if at all, the uprating that the minimum will have reached by then.

As to more jobs, there are still 1.8 million people unemployed and the jobless figures are already starting to rise again.   Moreover, the quality of jobs created over the last 2 years has been poor: 40% self-employed on a pittance wage and most of the rest insecure, low-paid, and on zero hours contracts, and even then 11 out of 12 jobs created have been in London or the South-East.   As to better public services, are they serious?   The NHS is being outsourced and privatised strongly against the wishes of the public, education is being made to fit Tory ideology, and legal aid is being drastically pared back.

A left-wing agenda that produced growth and better-paid and more sustainable jobs could be generated at minimal higher spending while interest rates remain at 0.5% which will be for some long time yet.   But it would produce the opposite of what the Tories claim – higher income and greater security than the Tory option of prolonged austerity.   Again a left-wing agenda would certainly increase taxes on the very rich who are holding the country to ransom by their industrial scale tax avoidance, but it would lower taxes on the poorer half of the population.   As to more borrowing, the Tories have a cheek at throwing that at Labour when they themselves are forcing the 13 million households in poverty in the UK, half of them in work, to borrow more because of the £12bn welfare cuts about to be imposed.

 

 

It isn’t a ‘lower tax, higher wage’ economy as Osborne boasts, it’s actually a higher tax, lower wage economy

One has to give it to Osborne, he’s extremely good at branding whatever he doesn’t like with a clever, pejorative – but false – jingle.   ‘The merry-go-round on welfare’, ‘strivers versus shirkers’, ‘Labour left behind this economic mess’ , and ‘austerity’s painful decisions are the only way to cut the deficit’ immediately spring to mind.   But they’re all wrong, or at least require teasing out to show they’re more propaganda than reality.   But with the unerring aid of a prostrate Tory press and the feeble docility of a pliant Opposition, he manages to command a narrative resonant with the public consciousness which even a cursory scrutiny would show to be a raging falsehood.

Thus in his budget yesterday Osborne, faced with widespread rejection of his £12bn welfare cuts, sought to turn the tables by fitting it positively into his new framework of a ‘higher wage, lower tax, lower welfare’ society to replace the ‘low wage, high tax, high welfare’ economy  which the incessant Tory mantra of hostility over the last 5 years had turned into the enemy within.     But the budget portrayed no such thing.   It actually contained tax increases of some £47bn, roughly twice the size of all the tax cuts in aggregate.
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What Osborne won’t tell you about his budget

This is supposed to be a ‘lower welfare, lower tax’ budget.   The centrepiece is of course the £12bn welfare cuts, even if a third of that is postponed until after the 2017-8 deadline (but very close to the 2020 election).   By far the largest elements in that are the severe cuts in working tax credits and the freeze in most working age benefits until 2018.   What he wont’t tell you is that this will hit 11 million families by 2017-8.   Osborne will also announce a further reduction in the benefit cap to £23,000 and an even lower £20,000 regional cap, tripling the number already affected and hitting particularly ethnic minorities with larger families.   Withdrawing housing benefit from unemployed 18-21 year olds will hit 20,000 people, but what he won’t tell you is that housing benefit paid to private landlords has reached £9.3bn a year, amounting to 38% of the total.
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Child poverty could be Tories’ Achilles heel

The Tories’ relief that the child poverty figures just published in the official Households Below Average Income (HBAI) statistics didn’t show an increase was palpable.   But that conceals the real story.   The Tories have form on this issue.   Child poverty tripled under Thatcher from 1 in 9 children to 1 in 3, but then fell by 800,000 under Labour after 1997.   Unexpectedly this trend continued initially under Cameron with a fall to 2.3 million in 2010-11 because middle class earnings declined (so that the threshold of 60% of average earnings dipped a bit) while benefits protected the poorest.   However that easing of the child poverty stigma has now come firmly to an end as a result of the housing benefit cap, the bedroom tax and the 1% cap on benefit increases.   Indeed it is now forecast, particularly if the new round of £12bn cuts is launched in the budget, that child poverty will have increased by one-third to 1 in 4 children by 2020.
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Labour must present alternative to Tory orgy in 8 July budget

Some of the details of Osborne’s ‘go for broke’ budget in a fortnight’s time have been deliberately leaked (a sacking offence in 1946 for Dalton in an era with a very different morality).   They are enough to set the tone for likely the most extreme right-wing budget in living memory.    Cameron calls it a ‘low tax, low welfare’ budget which is scarcely veiled version of ‘stuff the mouths of the rich with gold while battering the poor further into the ground’.   Osborne has been itching to reduce the top rate of income tax to 40% and has prompted Lawaon, Thatcher’s chancellor, to give it public support.   It would give 108,000 millionaires an extra £14,000 a year (nearly £270 a week).   Lawson says it would cost nothing, the Treasury says it would cost £900m in a handout to the rich.   Of course Cameron says he wants to help poorer workers – by wage rises to replace benefits; to which the director of NIESR has retorted: “to claim that cuts in tax credits will be picked up by employers who’ll raise wages is pie in the sky”.   No stone is to be left unturned as we learn, almost unbelievably, that Osborne is priming even the Green Investment Bank  for sale as well as  even sending Treasury staff to advise China on PFI for public projects!
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Even the high priests of capitalism are now inveighing against inequality

The IMF is the last place that one would expect to hear the argument being made that inequality has gone far too far.   So the recent detailed research from the citadel of capitalism has to be taken seriously.   What they found was that raising the income share of the poorest fifth of the population increases growth by as much as 0.38% over 5 years, whilst increasing the income share of the richest fifth by 1% actually reduces growth by 0.08%.   On that basis the argument that enriching the rich yet further benefits everyone collapses.   Trickle-down which both Thatcher and Blair devoutly believed in is therefore seen for what it is – merely a rationalisation to justify their hold on power and wealth.
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Scandal of 100,000 UK properties covering 1/2 million acres now owned by companies in tax havens

The Eye has done a remarkable service in exposing the magnitude of offshore ownership of the UK’s historic country houses and of the huge swathes of the British countryside that they control.   Using FOI applications and extensive analysis of other data, it has found that since 1999 titles to no less than 97,500 properties covering 490,000 acres have been acquired by companies vested in tax havens.   With much land already acquired by offshore companies before that date, it is likely that the total area acquired could be a million acres or more.  
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Cleaning up Britain’s corrupt financial system should be another big issue in Leadership contest

Money laundering by a HSBC bank in Mexico is bad enough – though no-one been sent to prison for it yet, don’t hold your breath.   But it’s now happening here in Britain on a huge scale.   The Director General of the UK National Crime Agency (NCA) has said that “many hundreds of billions of pounds of criminal money is almost certainly laundered through UK banks and their subsidiaries each year”.   He even called the scale of the money-laundering “a strategic threat” to the UK’s economy and reputation.   According to the NCA’s latest report on suspicious transactions, no less than 354,186 such reports were filed by banks and other regulated entities last year.   Just over 14,000 of these were consent orders, of which 94 were passed on to the Proceeds of Corruption Unit.   These were then analysed by the international corruption watchdog Transparency International (TI) which found that only 7 such transactions were deemed so suspicious that they were not allowed to go ahead.   TI declared that the current method of seizing corrupt assets was “not fit for purpose”.
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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.
Read more   “However silly no-tax-increases is, there’s no excuse for not cutting tax reliefs to pay off deficit” »