Thursday, 16 April 2015

Uninspiring so far but there’s three weeks to go!

We’re about half way through the general election campaign.  The manifestos—plush aspirational documents--are published, though few I suspect will read them, party election broadcasts appear each evening, most of the television debates are over and there’s wall-to-wall coverage on the news programmes with every nuance of what is being said debated and re-debated by the pundits.  It’s almost as if the election campaign is panning out in a parallel universe—yes, it’s that uninspiring.  In fact, despite being billed as the most important election ‘for a generation’, I think it’s the most uninspiring campaign that I’ve watched since 1975.  Even the momentously boring 1992 election, notable only for John Major literally taking to a soap box and Neil Kinnock embarrassingly celebrating too early in Sheffield, was more interesting.  Now it could be that I’m being slightly premature and that the public will become really engaged with the campaign as 7 May approaches but, at present, there’s little indication that this will be the case.
There are various reasons for this.  There is a widespread belief—though whether it is true is questionable—that it doesn’t actually matter which party/parties form the government as there’s really little difference between the Conservatives and Labour, it will be politics as usual.  We will still have austerity policies.  People also don’t think that politicians are telling the truth or rather being economical with it particularly over taxation.  They remember being told that the Conservatives had no intention of increasing VAT in 2010 and then, once they were in power they did precisely that.  Their justification was that, as they hadn’t seen the books, they didn’t know how bad things were.  For the Lib-Dems, the albatross of tuition fees has hung around their necks since 2012 and will almost certainly contribute to their standing or rather lack of it in the polls after 7 May.  Apart from UKIP, all the parties have been quiet about immigration and membership of the EU, but these are issues on which the public, particularly in areas where immigration is high, have very strong views. 
Natalie Bennett and Caroline Lucas
Yesterday I received my postal vote containing, not only local and national ballot papers, but a local referendum about increasing the amount of money collected through Council Tax to fund policing.  Though I’m opposed to this—for me it’s the responsibility of those in power to operate, as I do, within their budgets—but at least it’s an honest and transparent approach to taxation.  What this election ought to be about, and it’s the SNP, Plaid Cymru and the Greens that have got it right, is whether as a country we are prepared to pay for things like the NHS and ‘living’ pensions through higher taxation.  You cannot have an effective ‘welfare state’ without being prepared to pay for it.  The problem is that people don’t trust government, of whatever political persuasion, to spend our money effectively.  There’s also the danger, and the police referendum exemplifies this, that if the money runs out you just ask the people for more.  Therein lies the problem and the primary reason why the campaign has yet to take off.

Sunday, 12 April 2015

Why personal progressive taxation has failed

If only to emphasise the triumph of Mammon over Christianity, today the emphasis in the election campaign is on taxation.  The problem with personal taxation is that its progressive nature—those who earn more pay at a higher rate—almost inevitably means that people will try to avoid paying some of their taxes by one means or another.  In addition, there is no agreement what the higher level of taxation should be: 45per cent as it is now, 50 per cent as it would be under Labour or 60 per cent if the Greens win (so chance of that then!).  In practice, no agreement at all about what would be an equitable higher rate of taxation. This means that it’s a political question: how far should we screw the rich?
The current taxation regime with its inevitable loopholes and legal—if not moral--means of tax avoidance is the creation of evolution and general election results.  Personal taxation  is in need of a radical overhaul because , in essence, its progressive character has now failed.  So we have to go back to basics and establish the principles on which a taxation system should be based:
1. It is generally agreed that those who earn more should pay more taxation---the rich should pay more than the poor.
2. It is generally agreed that the tax liability of the poorest in society should be reduced, that is if they pay tax at all, through an increase in personal allowance…one of the major achievements of the Lib-Dems while in coalition. 
That’s it.  Now how do you best achieve this?  This does not require any particularly radical thinking simply that everyone should pay the same taxation on their income with no loopholes, exceptions, being able to claim against taxation or whatever.  So if you earn £20,000 a year you pay 20 per cent of your income after personal allowance; if you earn £200,000 a year you also pay 20 per cent of your income after personal allowance.  If you seek to hide your income, then that’s a criminal offence with a mandatory jail sentence and mandatory fine of ten times your annual salary.  All bonuses from whatever source, whether in cash or shares, are taxed in the same way: so £2,000 shares worth £5.00 each would give a tax liability of £2,000.  My only exception to this system would be for those earning over £200,000 who would pay an additional wealth tax of 2 per cent. 
The result would be a taxation system that is easy to understand, remove the need for people to avoid paying tax particularly if a draconian system of punishment was introduced for those who try and ensure that those who earn more, pay more.