The General Election Thread

[lou]

Not sure I want to enter into the fray with all you blokes, or gentlemen if you prefer, but nobody seems to have mentioned that the national debt is a moveable feast - or perhaps famine at the moment.

From 1750 to 1870, Britain won wars, assembled an astonishing navy, built an empire and launched the Industrial Revolution to become the envy of Europe, yet the national debt was consistently above 80% of GDP. Nobody cared. High national debt was a precondition for winning two world wars in the 20th century. Periods when the over-riding preoccupation has been lowering the national debt have coincided with industrial, economic and strategic decline. So it will again. (Will Hutton)

Just thought Dave Brigg needed a little support.

 

[biffvernon]

Well I think I did suggest a while ago that national debt wasn't a problem in itself - so long as there is economic growth. Growth allows the money supply to expand and debt becomes a non-problem.

The problem now is that economic growth is pretty much at an end, at least so long as the economy is dependant on oil production. From 1750 to 1870, and indeed right up to 2005, we were able to increase our energy consumption, exploiting first coal and then oil and natural gas. Now that we are at about peak oil we have to adjust to an energy decent. That is utterly catastrophic for an economy that has not made the adjustment.

But the main political parties are not admitting this.

 

[DaveBrigg]

To take the points raised:

you shouldn't believe everything economists say

No, but when talking about economics, I trust some economists a little more than politicians. Which economies have grown while at the same time suffering savage cuts in government spending? It wasn't the solution adopted after WWII, when Britain had a massive national debt, and the country prospered. The last two times cuts have hit this country after recession we have taken years to recover. I once read the definition of stupidity as repeating the same experiment twice and expecting to get different results.

The brains behind Cameron is Osborne

Was the £150 a year marriage tax break his idea? I've never heard of anything so stupid.

• a) if the country is 'bankrupt' why is anyone getting a tax cut?
  b) It will give money to many people (such as me) who will barely notice it but be paid for by cutting Sure Start centres which support new mothers, and the Educational Maintenance Allowance which enables children from poorer homes to have an equal opportunity at further education.
  c) It discriminates against people like our former neighbour, who has two children to support but was divorced last year after her husband attacked her with a knife, and a significant minority of children in our school who have lost a parent.
  d) The average wedding now costs £11 000. For an extra £150 a year, that's a 73 year payback time. Financially couples would be better off staying single and buying an air souce heat pump instead.

Financially, there can be no argument at all that says the best way to help the national debt is to give married people an extra £3 a week. Symbolically, Osborne is saying that marriage is important. By the same measure though, the social issues which don't matter include education, having children, and giving them a good start in life. If you suffer from domestic violence there will be a £150 a year penalty to escape, and if your partner dies, tough. That's Caring Conservatism for you.


Boris Johnson has toned down his stupid comments since becoming mayor, but the most recent example of his judgement and sympathies can be seen in his condemnation of the tax on bankers' bonuses and the 50p tax rate, and a prediction that 9 000 bankers would move to Switzerland. A clearly jealous left wing rag, The Times, reports "the mass relocation of the very rich to gentler tax regimes of Geneva and Zurich does not appear to have materialised... However the tax on bonuses has raised £2 billion" If Johnson is 'highly intelligent' that must make Alistair Darling a veritable financial genius.

 

[DaveBrigg]

In addition:

Cameron's achievement will be have been a spectacular one and a massive vindication of his leadership.

or an indication of how one person, who does not appear to be able to vote himself, has bought the votes in marginal seats.

Those 3m or so higher rate taxpayers are paying a far higher proportion of their income than most of the UK population, hence their contribution of over 50% of all income tax revenue. Why is this not the politics of envy?

If it is envy, then it is something that all parties suffer from. Not even the Tories are suggesting a single rate, and Cameron has admitted that the 50p rate is necessary at the moment.
The 'pop-stars' argument does not work, because people like Mick Hucknall and Paul McCartney have no problems paying tax. If people move residence for reasons other than tax-dodging I'm sure there would be fewer complaints. Ashcroft pays no tax on his wealth in the UK, but pays no business tax in Belize either, where he benefits from running a bank and where 30% of the children are starving. If Belize really is his home, why is he interfering in the elections of a country he has rejected? Lewis Hamilton may call Monaco his home, but still chooses to race for a team based in.. er.. Woking.

A truly fair system would be a flat tax system where everyone pays at the same rate? Such a system might even tempt back the tax exiles and increase the overall tax revenues, as has happened in many countries where it has been implemented.

All governments, of whatever shade, have discovered that taxes are needed to pay for the running of the country, and they are most effective if based to some extent on the ability to pay. Stamp duty, no VAT on essential items, council tax, taxes on bankers' bonuses. Sometimes the link is fairly crude, but it's there. Income tax is the same. If you want a flat rate, you will need to put many more people into poverty, and then have to support them through the benefit system, or massively cut spending. Thatcher tried the flat rate Poll Tax, and provoked the biggest outbreak of civil disobedience since the suffragettes.
I tried to look for the 'many' countries where the flat rate has worked successfully. They comprise Iceland, Iraq and Russia and its neighbours. Not even George 'the oik' Osborne has chosen any of these as role models.

If the jobs are not there, they're not there. Government can fund all sorts of schemes (sleight of hand?) to create jobs and reduce unemployment but unless they are 'real' wealth-creating jobs they are being funded from taxes, with no net gain to the country.

The jobs are there. People are doing them as I type. Presumably your list of jobs which do not create 'wealth' and therefore produce no net gain to the country includes the army, police officers, teachers, school cleaners, doctors, nurses and surgeons (unless they work privately), prison officers, bin men, paramedics, judges, firefighters, midwives, health inspectors and even conservation officers. I would suggest that rather than being a sleight of hand, if they were all sacked they would be missed. This is not about which party will create bogus jobs, it's which party will retain as many of those that I have listed as possible.
Although the government pays these people, a quarter of their wages comes straight back in tax. Further money is then saved not paying the JSA, council tax relief, housing benefit, free school meals etc. The 'real' wealth creating jobs only work if someone pays for the end product. Put unemplyment back up to 3.5 million and that's an awful lot fewer consumers. Good for the environment, but recent history in 1982 and 1992, as well as Ireland at the moment, shows that increased unemployment leads to increased unemplyment, and it's a hard cycle to break.

That's a good point Lou. The US national debt / GDP was above 90% at the end of WWII. There then followed unprecedented economic growth and it had fallen to 30% before Reagan pushed it up again. in the UK in 1950 national debt was 250% of GDP http://econ.economicshelp.org/2010/03/national-debt-facts.html

 

[Pford75]

The problem now is that economic growth is pretty much at an end,

Perhaps in the UK, but are you really suggesting that globally economic growth is at an end??? I am responsible for 'Emerging Markets' in my job and it's fairly obvious to even the most biased observers that there is plenty of economic growth in Brazil, India, China, Mexico, Morocco etc. etc.

Our problem is that this government has pursued policies which led us into recession first and out of recession last.

 

[biffvernon]

The problem now is that economic growth is pretty much at an end,

Perhaps in the UK, but are you really suggesting that globally economic growth is at an end??? I am responsible for 'Emerging Markets' in my job and it's fairly obvious to even the most biased observers that there is plenty of economic growth in Brazil, India, China, Mexico, Morocco etc. etc.

Our problem is that this government has pursued policies which led us into recession first and out of recession last.

Yes.

Of course in the emerging markets there is plenty of economic growth. China is importing more coal from Australia, Brazil is developing it's own oil. Now that we are at about Peak Oil the picture today has to be one of peak economic activity.

If you go for an uphill walk and reach the top it would be silly to assume, based on recent experience, that the path continues upwards. Since this hill is shrouded in mist you cannot be absolutely sure you are quite at the top yet but neither can you be certain whether the path leads to a gentle decline or a cliff edge. Beware.

The average wedding now costs £11 000. For an extra £150 a year, that's a 73 year payback time. Financially couples would be better off staying single and buying an air souce heat pump instead.

Best comment of the day

 

[LadyArowana]

If people move residence for reasons other than tax-dodging I'm sure there would be fewer complaints.

A lot of people do. However the tax regime may well be a factor in their decision on whether to return or not. Taking a global view there are places that offer a lifestyle that is equally ( if not more ) attractive.

 

[Nigel Watts]

Oh Dear. So many points and perspectives to correct and I have an important meeting to go to this morning.

From 1750 to 1870, Britain won wars, assembled an astonishing navy, built an empire and launched the Industrial Revolution to become the envy of Europe, yet the national debt was consistently above 80% of GDP. Nobody cared. High national debt was a precondition for winning two world wars in the 20th century. Periods when the over-riding preoccupation has been lowering the national debt have coincided with industrial, economic and strategic decline. So it will again. (Will Hutton)

Will Hutton would say that.

There was a very good programme on Radio 4 a few weeks ago, which unfortunately doesnt seem to be available as a podcast, in which Will Hutton, Nial Fergusson and others were discussing the debt crisis following the Napoleonic wars. Nial painted a very different picture from Will - a much more convincing one, and not surprising given that he is a first rate historian, unlike Will (whom I do not wish to disparage, but history is not is primary concern).

In a nutshell, there was a terrible recession in the UK following the Napoleaonic wars because of the massive deficit and a great deal of civil unreast as a consequence. The need to pay interest on the public debt was highly regressive. Poorer people had to be taxed to repay the already rich who had lent the money. The Duke of Wellington, as Prime Minister, repeatedly had stones thrown his windows at Apsley House and had to install iron shutters. The term "Iron Duke" derived from this, not his resilience as a general. Political and economic reform saw off a revolution, but it was a close run thing.
What got us out of it was the growth driven by the industial revolution and the existence of the empire as a market for exports and source of cheap raw materials.

Nial made two very good and rather depressing obervations about the present (having given the most covincing account of the past). Today, while the public debt is less high in %GDP terms than in Wellington's time, private debt is massively higher, so the total debt burden is as big if not bigger (Gordon incidently never adds in private debt to his inter-country conparisons) . And today in Britain we dont have a new industrial revolution or an empire to save us.

 

[Flyfisher]

I once read the definition of stupidity as repeating the same experiment twice and expecting to get different results.

But it's not the same experiment if the starting conditions are dramatically different - or do you really think we're in the same position as 1946 Britain?

Was the £150 a year marriage tax break his idea? I've never heard of anything so stupid.

I quite agree but, perhaps, for different reasons. I dont like all these complicated little tax "gifts" that try to influence how I live my life. Same with child benefit. We don't need them.

d) The average wedding now costs £11 000.

So what? Surely it's a matter of personal choice how much people spend on a wedding. Personally, I think it's ludicrous to spend thousands on a wedding but it's a matter of choice. But whatever the amount, I fail to see any relevance to the state of the country or the current election.

Those 3m or so higher rate taxpayers are paying a far higher proportion of their income than most of the UK population, hence their contribution of over 50% of all income tax revenue. Why is this not the politics of envy?

If it is envy, then it is something that all parties suffer from. Not even the Tories are suggesting a single rate, and Cameron has admitted that the 50p rate is necessary at the moment.

All parties 'suffering' from it does not make it fair. Unfortunately, a democracy enables a majority of people to vote for something inherently unfair for a small proportion of the population. Of course it's the politics of envy - why else should a small proportion of people be victimised by the majority voting that they pay a higher proportion of tax than most people? No wonder tax avoidance is such big business - I suspect such people feel they have natural justice on their side.

The 'pop-stars' argument does not work, because people like Mick Hucknall and Paul McCartney have no problems paying tax.

That's their choice. Anyone can choose to pay more tax than they legally need to. Even you. :wink:

Ashcroft pays no tax on his wealth in the UK, but pays no business tax in Belize either, where he benefits from running a bank and where 30% of the children are starving. If Belize really is his home, why is he interfering in the elections of a country he has rejected?

The laws of Belize are a matter for their government. Such countries generally have favourable tax regimes specifically to attract such people - who knows why, but it's up to them. As for his political dabbling in the UK, I entirely agree it's despicable, but apparently not illegal. I wonder why such a loophole has not been closed a long time ago?

Lewis Hamilton may call Monaco his home, but still chooses to race for a team based in.. er.. Woking.

But the vast majority of his 'work' is outside the UK. I'm not entirely sure, but it may even be the case that the various GP races pay the drivers directly. I would agree there is a good case for such a person to pay taxes to the countries where their income is actually earned, but I can't see why it would be fair for an income earned around the world to be entirely paid to one country. Still, international tax law keeps a small army of specialists extremely well paid. :roll:

All governments, of whatever shade, have discovered that taxes are needed to pay for the running of the country, and they are most effective if based to some extent on the ability to pay. Stamp duty, no VAT on essential items, council tax, taxes on bankers' bonuses. Sometimes the link is fairly crude, but it's there. Income tax is the same.

Of course taxes are needed - no argument there - but who decides "ability to pay"? If A earns twice as much as B then it seems perfectly fair that B pays twice as much tax. But in our current system B will pay much more than that. Is that because they have more "ability to pay"? Isn't that just another way of saying they don't really need all that money and so should pay a bigger proportion than someone else?

If my calcs are correct, someone earning £20k will pay £2705 income tax or 14% of their income whereas someone earning £80k will pay £23225 income tax or 29% of their income. Is that fair?

And while we're talking about "ability to pay" can someone please explain how council tax falls into this category? I'm sorry, but it's just another example of envy.

If you want a flat rate, you will need to put many more people into poverty, and then have to support them through the benefit system, or massively cut spending.

Not so. Decide on a minimum income that people need to live on (as we currently do) and don't tax anyone below it. The current system already taxes people below this minimum and then has a fantastically complex system of tax credits to give it back to low-income families, plus whatever benefits are then required to bring them back up to the minimum. It's madness!

Thatcher tried the flat rate Poll Tax, and provoked the biggest outbreak of civil disobedience since the suffragettes.

Of course it did, because loads of people were going to have to pay their fair share instead of a small percentage of people paying a disproportionate amount. How is it fair that 4 people (or more) living in a small house should pay less than two pensioners living in the family home that they've already bought out of taxed income and their children have left home? Where's the "ability to pay" principle? The LibDems had the right idea with their proposed local income tax. That, at least, would restore the link with ability to pay, except they then went and ruined it with their proposal of a property tax on houses over £1m (or whatever it was), thus destroying any link with "ability to pay".

[A good discussion though! ]

 

[skier-hughes]

But the vast majority of his 'work' is outside the UK. I'm not entirely sure, but it may even be the case that the various GP races pay the drivers directly. I would agree there is a good case for such a person to pay taxes to the countries where their income is actually earned, but I can't see why it would be fair for an income earned around the world to be entirely paid to one country. Still, international tax law keeps a small army of specialists extremely well paid. :roll:

And not just international tax law, without the complicated UK tax law we wouldn't have been able to keep several small companies going throughout this recession by paying them to come and do some work on our house :wink:

 

[Flyfisher]

And another thing . . . .

The jobs are there. People are doing them as I type. Presumably your list of jobs which do not create 'wealth' and therefore produce no net gain to the country includes the army, police officers, teachers, school cleaners, doctors, nurses and surgeons (unless they work privately), prison officers, bin men, paramedics, judges, firefighters, midwives, health inspectors and even conservation officers. I would suggest that rather than being a sleight of hand, if they were all sacked they would be missed. This is not about which party will create bogus jobs, it's which party will retain as many of those that I have listed as possible.

Don't confuse wealth with worth. Of course all those jobs make a massive contribution to the social fabric of the country and I entirely agree they'd all be missed. But they don't create the wealth required to pay them. They are paid from the public purse and where does that come from? - the real wealth creators. And what happens when there is not enough wealth to pay for all these jobs? Isn't that living beyond our means?

Although the government pays these people, a quarter of their wages comes straight back in tax.

Brilliant. So let's double all their salaries and collect even more tax to help pay off the country's debts! :wink:

Further money is then saved not paying the JSA, council tax relief, housing benefit, free school meals etc. The 'real' wealth creating jobs only work if someone pays for the end product. Put unemplyment back up to 3.5 million and that's an awful lot fewer consumers. Good for the environment, but recent history in 1982 and 1992, as well as Ireland at the moment, shows that increased unemployment leads to increased unemplyment, and it's a hard cycle to break.

True, unemployment is a huge cost for the country, but it can't be eliminated by creating govt-funded jobs - if it could then there wouldn't be any unemployed people would there? We can always use more of the jobs you mentioned above, but we just can't afford them. Can we?

But it's not just unemployment that results in fewer consumers. I'd bet that an awful lot of working people have been repaying their debts recently rather than continuing to buy stuff, i.e. living within (or closer to) their means. We've been living a lie for so long that we've become used to it. Readjusting will be painful.

 

[yamin]

I'd bet that an awful lot of working people have been repaying their debts recently rather than continuing to buy stuff, i.e. living within (or closer to) their means

I hope thats true, its high time. Seems to me that there is a whole culture of not waiting for what you want, even for a short time, more get it on credit and pay later - its as if people don't count credit/credit card as a debt. Frightening. From my admittedly small observations, I'm not convinced that this is getting any better. I think those working and with a havit of spending on credit are still doing so, and most of the fall comes from those who are totally up the creek wtihout a paddle.

 

[Flyfisher]

Seems to me that there is a whole culture of not waiting for what you want, even for a short time, more get it on credit and pay later - its as if people don't count credit/credit card as a debt. Frightening.

Indeed. I realise my sister-in-law is not a statistically representative sample but, knowing her spending habits, she astonished us a few years ago when she said she only had a few hundred pounds on her credit card. It turned out to be the monthly minimum repayment amount - that was the only 'cost' she recognised. :shock:

 

[Nigel Watts]

From an article in the Spectator a couple of years or so ago:

"Mr Cameron is much taken by the work of William Galston, a political theorist behind the Clinton-era welfare reforms. Galston identified three steps to escaping poverty: finish school, marry before having children and avoid teenage pregnancy. Among those who did all three, only 8 per cent were poor. Of those who did none, 79 per cent were poor. This, for Mr Cameron, was a rare example of his ‘social responsibility’ slogan come alive: here was strong evidence that what counts is people’s own life choices and behaviour, rather than clumsy government intervention which so often compounds the problem.

Mr Brown’s approach to poverty is purely financial, and is seen through a strikingly narrow prism of average income, determined by rigid thresholds set out on spreadsheets. Mr Cameron’s approach will be more ‘holistic’, and is based on restoring the dignity of work....

...And just as Mr Cameron’s school reform policy comes from Sweden, the most socialistic country in the free world, his welfare reform hails from Wisconsin, historically one of the most left-wing states in the Union. This is no accident. It was the American Left which grasped that traditional welfare was actually locking people into poverty, and decided to fight it not by raising incomes through benefits but by cutting welfare rolls."

This gives some clue to the thinking of giving tax breaks to poorer married couples, an idea so deeply unfashionable that it may just work.

 

[Schoolmarm]

Ooops

 

[Flyfisher]

Interesting article Nigel.

Unfortunately, the life-choices theme requires people to take responsibility for their own lives, together with good parenting to instill that sense of responsibility into their children. Of course, 'good parenting' is one of those things that's difficult to define but easy to recognise. My worry is that there may not be enough appetite for such responsibility among many of those finding themselves in poverty, whatever the underlying reasons. I hope I'm wrong but one concern of ever-bigger government is that we're increasingly being told what to do at every turn that people give up responsibility for themselves. OK, an exaggeration perhaps, but I think it's a slippery slope. Or, to put it more bluntly, the feckless won't give a toss and those with the determination and sense of responsibility will pull themselves up in any case. 'Twas ever thus.

So, despite the good intentions, I suspect the marriage tax break idea will not be well accepted. The country is more secular than it was and the stigma of raising a family outside of marriage has pretty much gone these days, so specifically rewarding marriage is more likely to be seen as discriminatory. Plus, let's face it, £150 per year between a married couple is hardly worth bothering with and certainly shouldn't influence any marriage decisions. I can't remember exactly how much the married man's tax allowance used to be but if the intention was to encourage marriage and reduce divorce or 'living in sin' then it didn't seem to work and was worth much more than £150 per year before it was gradually reduced and finally scrapped in 2000.

Close, but no cigar.

 

[Gareth Hughes]

This week's Private Eye contrasts the £150 a year tax break for the married with the £20,000 that the average British wedding apparently costs (really? :shock: yet another good reason not to get married)

 

[Feltwell]

It would be rather nice if, as the sole earner in my house, my wife's tax-free allowance could contribute towards mine. I won't hold my breath though!

The £150 tax break does seem rather a farce - not enough to make a difference to the couples concerned, but enough to make a reasnoble dent in the Government's coffers. Rather like the reduction in VAT we've seen recently - did that 2.5% really change people's behaviour and encourage them to spend? I think not. It saved me a few hundred quid on building works, but I would have done it just the same at 17.5% and overall it wasn't significant.

 

[Gervase]

Rather like the reduction in VAT we've seen recently - did that 2.5% really change people's behaviour and encourage them to spend?

I found that it did. Two customers for whom I'd quoted work came back to me and said 'go ahead' on the basis of the VAT cut. Admittedly, my experience is purely anecdotal, but if it was repeated on a wider scale it will have made a difference. It certainly did for me.

 

[Gareth Hughes]

Rather like the reduction in VAT we've seen recently - did that 2.5% really change people's behaviour and encourage them to spend?

I found that it did. Two customers for whom I'd quoted work came back to me and said 'go ahead' on the basis of the VAT cut. Admittedly, my experience is purely anecdotal, but if it was repeated on a wider scale it will have made a difference. It certainly did for me.

It would, of course, make a huge difference if a government would scrap VAT for repairs - in all sorts of ways. Do any of the manifestos suggest doing this?