Nigel Lawson, for example, can claim to be one of the most redistributive chancellors in history — but for reasons Mr Brown would hate. When he cut the top rate of income tax in his famous 1988 budget, for example — a budget vociferously opposed by Mr Brown — the richest 1 per cent paid 14 per cent of all income tax collected. It has since soared to 23 per cent. The richest now shoulder a far greater share of the burden because Lord Lawson lowered their tax rates. This is a paradox that Labour and the Liberal Democrats, with their zero-sum economics, are incapable of understanding.
Friday, November 14, 2008
How to Cut Spending - And Then Taxes
Fraser Nelson, in this week's Spectator, has a splendid article explaining how to cut spending - and then taxes. I'll leave you to savour the full text HERE, but think about this short excerpt...
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27 comments:
If the Tories want to fight the next election on a platform of prioritising tax cuts for the richest 1% then good luck to them.
"This is a paradox that Labour and the Liberal Democrats, with their zero-sum economics, are incapable of understanding."
Eh? I understand it perfectly well. And besides, who is proposing to raise the top rate of 40%, apart from a couple of marginal figures in the Labour party?
Perhaps some of the anonymous trolls might want also to consider this: if it is right to borrow, spend and expand the public sector during an economic downturn, what would it then have been right to do during the longest economic upturn in history?
Iain, weren't you arguing against tax cuts the other day?
This could have come straight from the pages of the Adam Smith Institute... - on second thoughts, it probably did.
Iain..anon 2.16 has a good point . No suicide notes please and no alchemical codswallop about less money becoming more
"This is not so — as lower taxes incentivise work and, ergo, generate more revenue. Mr Osborne intends to use a dynamic model in his planned Office for Budget Responsibility"
Rubbish rubbish rubbish. That used to be the case before ordinary people were highly geared and had no choice but now we all have mortages and we have to keep working for increasingly small margins.
This is why Labour have been able to torture the ordinary family without them giving up.
The Conservative Party have got it right . We are bankrupt and we need deep cuts to the Public Sector to finace tax neutral budgets .If the Conservatives go chasing off into La la land then we are lost.
On your gobbet I should imagine the answer is that the richest1% now have far more as a proportion of the wealth. Certianly without that information it is utterly meaningless
Looks like George is being moved closer to the door Iain
http://www.telegraph.co.uk/news/newstopics/politics/conservative/3458928/George-Osborne-pushed-into-stepping-back-from-political-role.html
The main problem with this article is that the ideology of reducing the size (and spending) of the Government is required before tax cuts is exactly the opposite of what is required at this time. We actually do not want to balance the books, and the Tories don't get it at all.
The problem we have is a lack of confidence and therefore spending, plus personal debt weighing large. Consequently nobody is spending any money. Government then must step into the breach and increase the amount of money available for both small business and those on the lower end of the economic scale (both of these are more likely to spend any extra money), thus stimulating the economy again.
The Tory way is to repeat the 'sound money' theory of monetarism, which is guaranteed to make the recession deeper and longer than a psedo-Keynesian approach. This is of course the divide between the two Parties, and also why the Tories are losing support.
Following an item from JCB where it was reported that orders had fallen by 80% in the last year, Nobel economist Paul Krugman was on the Today programme today. I suggest you and all other Tories take heed of what he has to say: http://news.bbc.co.uk/today/hi/today/newsid_7728000/7728875.stm
Politically though it'll be great to see you all continue not to 'get it'. We'll be ahead of you in public support in no time, even in the depths of a recession, if you don't. Not that I expect cocky Conservatives to believe that either though. You haven't a clue what's going to hit you!
Piffle! As the clasically trained Boris might suggest. Caveat emptor and all that. I'm not buying.
This is a paradox which sadly Fraser and Iain with fails at Economics 101 are incapable of understanding.
Not a paradox at all. The richest 1% are now a hell of a lot richer than they were before. They may be avoiding less taxation also. Though I doubt it.
But quite simply they are much much richer now relative to the lowest five deciles say than they were when Lawson was calling the shots.
Indeed this is the difficulty with the relative poverty measure chase.
This absolutely does not show anything like dear Fraser would like it to show. In fact it shows either that his grasp of real economik is poor or that he's prepared to ignore the fiscal facts.
In 1975 it was the case that because of enormous differences in revenue and wealth only around 1% of the population were supposed to pay taxes. Some evaded.
Here we're moving towards a scenario where the richest 1% are several ball parks away from the average earner.
It is not tax cuts for the rich or the lack of tax hikes for the rich that will make the economy and society work better it is - as believe it or not the TPA said earlier this week tax breaks for the poorest who spend 99.9% of their net income, and generally locally where they live and in the UK in general.
These people therefore contribute far more multipliable spend into the economy.
The TPA were right. GooCamBoz are ignoring them and making fatuous and poorly costed suggestions about NI breaks for businesses who quite simply won't be interested. At least not in the intended consequences.
Doubling the basic allowance and some adjustment tit for tat for the 40% payers i.e. lowering or not moving up their threshhold would make far more sense.
This is not party political. It's just Economics.
Iain, there is a view amongst politicians and political/business writers in the media that all that is required is either a tweaking of interest rates, taxes or borrowing to cure the problems and get the economy moving. They are misguided.
The UK and the US suffer from the same problem that the wealth generated by their private sector work force is insufficient to provide for the spending of individuals and government. The problem is more acute in the UK where the improvements made under the Conservatives have been largely wiped out by the last elevcen years of Labour.
Whatever friendly noises may have been made by Blair and Brown, the reality is that there has been very little capital investment by the UK private sector in the UK private sector since 1997 and the effects of that lack of investment is now coming through with UK firms becoming less competitive and with few modern businesses being centred in the UK.
A good example is the mobile phone industry. In the late 90's British firms (BT, Vodafone) were expanding all over the world, but after the auction of bandwidth, effectively a stealth tax on 3G that benefitted nobody except the Exchequer, those companies lost their competitive edge, and other countries seeing the effect largely avoided similar auctions.
The solution is not to tinker with taxes, interest rates and government borrowing, but to have a business or industry friendly government.
Newmania - "gobbet" - brilliant. And I find myself agreeing with Newmanis AND the TPA in one minute. How strange.
Newmania is right - deep cuts required. Beginning with all PC initiatives and quangos soaking up money the community needs.
Read the Neslon article. Firstly He is one of the contorted face nutters on the right of Cameron.
And secondly argues that the NHS and Schools budgets be slashed...good luck
What are these Cameron rumours?
Iain
I think the issue The Spectator should consider is the proportion of one's income - why a low-earner should pay proportionally more than "Lord" Ashcroft.
"If the Tories want to fight the next election on a platform of prioritising tax cuts for the richest 1% then good luck to them"
Not sure that was actually what was suggested, but the point is that if you increase taxes for the top 1% they will just find ways to not pay it (legally).
More to the point, when money is tight you either reduce your spending or increase your income - the last thing you should do is increase your spending and decrease your income. Now forgetting all the guff about Laffer Curves and macroeconomics for a minute, the government has a problem - the income it receives is going into decline (less people in work and lower profits for businesses will mean less tax take), but the spending it makes is continuing to rise. It is obvious to anyone, therefore, what the government needs to do - isn't it? (In case you're not sure, the answer is to cut spending).
Anonymous said...
Read the Neslon article. Firstly He is one of the contorted face nutters on the right of Cameron.
And secondly argues that the NHS and Schools budgets be slashed...good luck
November 14, 2008 4:19 PM
So anyone right of the middle is now, offcially, a complete nutter. Give it a break, fascist.
Secondly, schools and NHS - your esteemed leader (he isn't mine, I've never voted for any of them, I'm proud to say) has put the economy in such a parlous state, the IMF and our creditors will insist that we cut funding.
The cash is running out - you better get used to it. Go see Iceland - it's going to happen here.
It's not that the Labour and Libdems are incapable of understanding it. It is that they do not want to acknowledge it as it undermines the remaining shreds of their economic philosophy.
Alex - Excellent article at http://mises.org/story/3183
This explains just why such taxation - 3G licence auction - (in the articles case the capping of roaming charges) will have exactly the effect you state. Mind you the firms did not have to buy the licences!
Taxing and spending capital as Brown has done will take a long time to affect an economy like ours. but eventually as the incentive to invest here is reduced in comparison to somewhere else our competitiveness will be eroded.
Socialism is a vast capital destruction machine. The USSR faield because it spend 70 years spending the accummulated capital of its empire.
The history of the UK since 1945 (and possibly 1914 ish) is one of socialists spending money on things we cannot afford and spending down our capital to do so.
Blue Eyes 2.43. I hardly think so. Feel free to shoot me if I ever do so.
Now is the time to share the pain more fairly. At present it is being taken entirely by the private sector with job losses, small businesses being put liquidated by the banks, and defined benefit pension pots being cut by 40%. In contrast public sector employees are protected, rewarded with pay increases, and are now looking forward to lower mortgage and interest payments, cheaper houses, and now tax cuts.
If there is to be room to cut taxes then public spending needs to be cut. I suggest the following:
The rate of pension accruals for public sector workers be cut by 20% so that if they want to retire on their currently expected pension levels they will either have to work to 65 or pay in more from their own income. (That is a much lower penatly than is being paid by most private sector employees.)
Public sector pay should be cut on the scale Minimum wage = 0%, wages between minimum and half median 1%, half median to median 2% (up to £24K), median to double median (£24-48K) = 4% double to triple median (£48-72K) = 6% and 10% for all salaries over £72K. and a surca=harge of 20% on salaries over £120K.
That should provide some headroom to raise the personal allowance and take some more of the poorest people in the country out of tax.
If the unions what to fight it then the alternative is decimation. One in 10 posts summarally abolished, starting with 1 in 3 managers and advisers down to 1 in 100 front line staff.
In appears that Nick Robinson of BBC, the honrary Labour Party member and Brown confidant is doing an interview with Krugman the Novel Prize winner in economics (it raised stink as it was argued that his collaborator did most work and should have been given the prize) who praised Brown and his cronies were trumpetting about it.
If you wonder how come Krugman knows our PM the economics genius,
here it is:
==========================
New Wealth for Old Nations:
Scotland's Economic Prospects
Edited by Diane Coyle, Wendy Alexander, & Brian Ashcroft
In Chapter 2, Paul Krugman sets out the analytical framework with a discussion in the light of recent theories on growth and economic geography of the challenge of raising the trend growth rate in a regional economy such as Scotland.
============================
Wonder whether Krugman is neutral. But Nick Robinson does not want to know about this!
from Rober Winnet at the Torygraph? Your employer seems to have gorn off u Tories bigtime.
How Labour will win the next GE.
1. Alistair Darling announces US-style fiscal stimulus package offering tax cuts to millions in pre-budget report branded "emergency budget". Winter fuel allowance for pensioners increased immediately, range of tax increases immediately halted. All basic-rate taxpayers promised cheque in new year for several hundred pounds and told to spend it to help economy.
2. George Osborne makes a hash of responding to pre-budget report. Fails to quickly abandon Tory policies such as sharing the proceeds of economic growth and matching Labour spending pledges. Conservative Party breaks out into open warfare with MPs calling for Osborne to be replaced.
3. Early December, Bank of England cuts mortgage rates again by one percentage point.
4. First poll shows Labour have narrow lead over Conservatives. Dismissed as erroneous polling.
4. Mid December. Caroline Spelman is censured by Parliamentary authorities over use of Parliamentary expenses. Talk of shadow Cabinet reshuffle dominates Christmas period. Right-wing MPs fail to heed warnings that party is being damaged. Osborne loses general election role in early January as new party chairman takes over but party discontent continues about David Davis and Ken Clarke not being brought back.
5. Early January. Bank of England cuts mortgage rates by 0.25 percentage points. Fuel bills fall sharply. Petrol hits five-year low. New Year sales offer best bargains ever seen.
6. Late January. Millions of mortgage customers receive huge reduction in bills as many home loans are only recalculated once a year. Barack Obama visits Britain to see Brown.
7. Early March. Bank of England cuts mortgage rates again. Credit markets begin to loosen and some below-inflation mortgages are on offer. Labour's "fiscal stimulus" cheques arrive on doormats across country. Every lower and middle-income earner with a mortgage is now at least £500 better off. ELECTION CALLED.
8. Early April. All tax bands frozen. Labour narrowly win general election.
Anon 7.52
Sounds like delirium. Forgotten again your tablets? Phone me, you need something stronger to stop these bouts of delirium
Wrong. The genuinely rich left a long time ago. These are the laggards who are too idle to fly to a tax haven and wonder why their friends keep dying of hospital acquired infections, loyal to the end to the socialist nightmare that has made Britain into the joke it has become.
It's ok to borrow huge sums of money as the goverment will ensure that only the poor and the working class will PAY IT BACK!!!
Who is going to be the first to mention the near £10Bn a year we pay in membership fees to the EU.
Stop that, get our 200mile limit back and watch thousands get employed in fishing, similarly for agriculture, industry etc.
G.
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