Only Poor People Pay Taxes

In the week that more Government cuts hit the poorest in society, as George Osborne argues with his critics and Iain Duncan Smith says that he can live on £53 a week, I thought I would share this letter to The Guardian from Michael Meacher MP, which is still extremely powerful and pertinent:

The annual Sunday Times Rich List yields four very important conclusions for the governance of Britain (Report, Weekend, 28 April). It shows that the richest 1,000 persons, just 0.003% of the adult population, increased their wealth over the last three years by £155bn. That is enough for themselves alone to pay off the entire current UK budget deficit and still leave them with £30bn to spare.

Second, this mega-rich elite, containing many of the bankers and hedge fund and private equity operators who caused the financial crash in the first place, have not been made subject to any tax payback whatever commensurate to their gains. Some 77% of the budget deficit is being recouped by public expenditure cuts and benefit cuts, and only 23% is being repaid by tax increases. More than half of the tax increases is accounted for by the VAT rise which hits the poorest hardest. None of the tax increases is specifically aimed at the super-rich.

Third, despite the biggest slump for nearly a century, these 1,000 richest are now sitting on wealth greater even than at the height of the boom just before the crash. Their wealth now amounts to £414bn, equivalent to more than a third of Britain’s entire GDP. They include 77 billionaires and 23 others, each possessing more than £750m.

The increase in wealth of this richest 1,000 has been £315bn over the last 15 years. If they were charged capital gains tax on this at the current 28% rate, it would yield £88bn, enough to pay off 70% of the entire deficit. It seems however that Osborne takes the notorious view of the New York heiress, Leonora Helmsley: “Only the little people pay taxes.”

Related to that last point, here’s a graph that illustrates the extent of tax dodging and tax avoidance in the UK.

https://twitter.com/callum_shannon/status/312337191034572801

Update

Meanwhile, the Guardian reports on a massive leak of computer data that shows how much anonymous wealth is held in off-shore accounts

 

Bankers Bonuses and the Rule of Law

I am sure I have made this point somewhere before on this blog, but a quick search through my archives doesn’t reveal it, so… 

All this business about bankers and CEO bonuses makes me uneasy. The pattern is now very familiar: it transpires that some despised ‘fat cat’ – a banker or the head of a quango, say – is due to be given a huge bonus on top of their already huge monthy remuneration. Outrage ensues. The aforementioned ‘fat cat’ is chased by the press and slandered by politicians and interest groups. The ‘Fat cat’ eventually issues a statement saying he will give back the money.

Continue reading “Bankers Bonuses and the Rule of Law”

Strategic Ignorance in the US Primaries

The Republican Presidential Primary debates are frightening. From the audiences at these events, we’ve had the booing of a solider because he is gay, the cheering of the idea of someone dying because they didn’t have health insurance, and the enthusiasm for the executions of potentially innocent people. Meanwhile, the candidates seem entirely ignorant of foreign affairs or proper fiscal policy, and instead double down with their demonstrably untrue lies about President Obama.

This is clearly evidence of an extreme intellectual and moral decay – the sort of thing that, if unchecked by good people, could end up at some pretty unpleasant and illiberal end points: war, torture and extreme poverty. Let us hope that Obama prevails in the 2012 election.

In trying to comprehend why the Republican prospective nominees are so ignorant, it is easy to assume that it stems from an underlying stupidity. But this post from Chris Dillow introduces the concept of ‘strategic ignorance’:

Ignorance – normally a weakness – can increase one’s bargaining power. For example:

… The man who doesn’t appreciate the cost of a breakdown of negotiation – say who doesn’t know how much a strike will cost – will adopt a tougher negotiating stance, and so extract more concessions, than the man who doesn’t.

Applied to the presidential primaries, the idea here might be that many of the candidates are being willfully simplistic and ignorant in order to get votes.  In the wider US political system, they’re being ignorant in order to increase their barganing power in Congress.

This tactic is of course deeply cynical, disingenuous, and wrong.  However, I find it a strangely reassuring analysis, because it suggests that the Republican nominees aren’t actually as nutty as they appear.  If (or when) they achieve office, and faced with actual governing decisions, the cynical political player might at least pick the option which diffuses the chance of war or economic depression, when the genuinely ignorant leader might sleepwalk towards catastrophe.

My guess is that the nominess fall into two camps: The genuinely frightening (Congresswoman Michelle Bachmann, Herman Cain and Rick Santorum) and the cynical (Newt Gingrich, Gov. Rick Perry, Gov. John Huntsman, and Mitt Romney). Congressman Ron Paul feels like he should have a category of his own: A zealot, but self-aware in a way Bachmann and the others are not.

“[The Republican Party] consists half of people who think like Michele Bachmann and half of people who are afraid of losing a primary to people who think like Michele Bachmann and that leaves very little room to work things out,” – Barney Frank, the witty Speaker of the House we never had.

Via the Daily Dish.

In the UK we have plenty of terrible politicians, but very few who fall into the former group, of frightening zealots.  The negative virtues of cynicism and opportunism, which we deplore, also provoke compromise and middle-of-the-road choices, which we admire.  Ann Widdecombe (now no longer in Parliament) and Nadine Dorries MP might plausibly be added to the former category, but even they seem to be more self-aware than their American counter-parts.  Could this be because our constituencies are less gerrymandered and more diverse, preventing extremism that can exist when you have a whole continent of disparate values bundled together into a single political system?

On Benefit Fraud

Now then.  Dave Osler has an interesting post about benefit fraud over at Liberal Conspiracy.  Apparently, only 1% of benefits paid by the state are wrongly claimed.  That still amounts to a billion pounds, but is obviously less than the billions spent on bank bailouts.

Crucially, it is also much less than the amount of benefits people are legally entitled to, but never actually claim (approximately £10.5 billion, points out woodscolt in the comments).  Double crucially, it is a fraction of the money lost to tax evasion (£30 billion).  Yet in our political discourse, it is benefit cheats who are blamed for the horrible amounts of money the government wastes.  Could this be because diddling benefits is a poor person’s game, while tax evasion is a middle- and upper-class pursuit?

During the election campaign, I recall more than one political debate I had with friends and passers-by, on this problem.  Like immigration, the issue is incredibly muddled.  People often equate benefit-fraud with the separate issue of the state giving people too much in benefits. A story about a woman who steals £60,000 from the state in a benefit fraud is equated with the story of a man who claims housing benefit of £2.1m a year to live in Kensington are seenn as somehow part of the same problem.  However, they are problems of a completely different order – The first is a case of someone breaking the law, who should be (indeed, was) caught and punished.  The second is someone acting perfectly legally and in their own interests, within the system operated by the Royal Borough of Kensington & Chelsea.  We solve the first case by investigating criminality.  We solve the second problem by forcing the borough into building more and better social housing (if indeed you consider humanely housing a group of refugees to be a ‘problem’).  Housing policy, and the level of benefits paid to those not in work, seems to me to be an ideological argument, where Labour and the Tories have very different views.  Meanwhile, everyone agrees that benefit fraud is wrong and must be stopped.  Public discussion on benefit fraud doesn’t always make this clear… and the Left loses the argument as a result.

Fallout

As flights resume following the Eyjafjallajokull erruption, Europe is left counting the economic cost of a genuine, real-life, bona fide Act of God.  I was at the London Book Fair this week, with English PEN, and saw first hand the effect that cancelled travel plans can have on commerce, and indeed, the free flow of ideas.  Below is my Flickr photoset ‘Fallout’, showing the forlorn empty trade stands at the fair.

Health Tourism

Empty Hospital Ward at Hillingdon Hospital, Uxbridge, UK. Photo by Alex @ Faraway
Empty Hospital Ward at Hillingdon Hospital, Uxbridge, UK. Photo by Alex @ Faraway, Creative Commons Licence

Last week, I fell into a long discussion with a group of doctors on the problem of health tourism.  This, they say, is when people visit the UK specifically to take advantage of the NHS for treatment of ailments, major and minor.  In particular, women from Africa who think (or know) that they are HIV-positive will visit the UK in order to give birth.  Their children will therefore receive proper medical care and whatever medicines and retrovirals that the current clinical guidelines recommend.  My interlocutors were of the opinion that this was a major drain on resources, especially in the urban centres where they work.

For the avoidance of doubt, these were not the same medics who held the illiberal opinions of marijuana usage, but I did detect in them a slight note of discontentment.  Not intolerance, yet, but certainly exasperation.

If health tourism is widespread, then such feelings of irritation amongst the medical class are also likely to be common, which is not good.  More to the point, it would mean our health system is being abused, perhaps to the tune of millions of pounds.  Definitely not good.

My hypothesis is that health tourism is actually an extremely localised problem, centred around inner-London.  This is where strong immigrant communities already exist, and where health tourists can stay with British residents while they get their treatment.   If this is the case, then it is clearly a particular challenge for the health service in London, rather than a structural issue for the NHS as a whole.

I have put in a poorly worded Freedom of Information request to the Department of Health to find out what statistics are available.

Why bother, though?  What could we possibly do with this information, when we have it?

Simply put, quantifiable information on such an issue will immediately put it in perspective.  Is it a major abuse of the system that we could correct, or just another example of patient-led inefficiency that we will never eradicate?  My suspicion is that it will turn out to be the latter, something akin to the problem of hypochondriacs, that we know is a waste but nevertheless do not have the heart or the stomach to actually address (turning away pregnant Africans at the automatic doors never feels good).  Either way, it will at least address the mutterings of the doctors who see the issue on the ward floor, but have no sense of whether it is a problem beyond their particular hospital.

Second, it may allow for a rather deft sleight-of-policy at the Department of Health.  If the NHS is indeed providing millions of pounds worth of care to people it does not have to, over and above the call of duty, then they could with some legitimacy put that expenditure into a different accounting column.  They could, perhaps, claim it back from DfID or the FCO as a form of targeted, useful government aid.

Let us not be so naive as to think that my request doesn’t carry some risk.   While I do not believe that such statistics (whatever they may be) will actually inspire xenophobia, it is certainly possible that someone might try to use the figures to further some anti-foreigner agenda.  I’m not sure I know what to do about that, but I don’t see this possibility as a reason not to ask the question.  Better me than someone else, I reckon.

What do you think?

On the Ward in Bbowa, Uganda. Photo by Paul Evans. Creative Commons Licence
On the Ward in Bbowa, Uganda. Photo by Paul Evans. Creative Commons Licence

Beyond Nations

In last month’s Prospect, David Goldblatt gave a couple of interesting statistics about Golf:

you have a global [golf] industry worth around $350bn. This is roughly the same as the GDP of Belgium, which coincidentally covers about the same land area as the world’s golf courses.

I was reminded of this just now, when I read a couple of statistics in the Shift Happens presentation by Karl Fisch.

  1. Nintendo invests double the US government in R&D (slides 31-32)
  2. If MySpace were a country, it would be the 11th Largest in the World (slide 35)

These are further examples of how companies and communities are now operating on a scale that dwarves the efforts of some nation states.  As I said in my notes on the Clay Shirky’s ‘Hello Everybody’ Demos podcast that accompanies his book, I find it fascinating that the nation state might wither in the face of alternative communal bonds:

However, I wonder whether the most profound shift might come when people transcend ethnicity as well as geography. With people spending so much time, and actually making money in worlds like Second Life, or building large guilds of allegiences in Eve Online or WarCraft, perhaps those bonds could be the basis for some other kind of nation or ‘polity’ with real power and relevance.

To Be Continued, I’m sure.

Update: 24th Sept 09

If all the gaming consoles in the US formed their own city, that city would use as much power as San Diego, the 9th-largest city in the country. (via Kottke)

Think local, act local?

Philip Blond’s interesting cover essay for this month’s Prospect, ‘Rise of the Red Tories’, advocates a new form of Conservatism for David Cameron, centred around the Tories’ new thinking on social issues (I’m going to be as radical a social reformer as Margaret Thatcher was an economic reformer says Cameron). Blond says the consensus that has emerged in British Politics – socially liberal-left, economically liberal-right – has failed on both fronts. The vice-versa, which would be a social conservatism alongside a leftist economy, seems a rather chilling prospect to my mind, but Blond thinks that an alternative could be to push through a full-blooded new localism which works to empower communities:

[Cameron] could start with four task: re-localising our banking system, developing local capital, helping normal people gain new assets and breaking up big business monopolies.

I suppose the emphasis on market forces (albeit at the local level) makes this a nominally right-wing policy, but with an emphasis on local, community ownership and assets, its not immediately clear to me why these ideas couldn’t be labelled left wing instead (indeed, I assume that confusion is why the article is illustrated with a graphic of Thatcher-as-Che). Yes, Conventional Wisdom would have it that a Labour Party under the Authoritarian Gordon Brown would not adopt such policies. But on the other hand, these ideas seem to be precisely the sort of wings that Hazel Blears’ Community Empowerment agenda requires, to get it off the pages of think-tank reports, and into actual communities.

Meanwhile, The Economist reports on ‘For-profit activism’, that is, harnessing the power of social networking to build-up buying power, to bend markets in favour of socially acceptable or environmentally friendly businesses.

Residents of San Francisco have been signing up enthusiastically for a new green-energy campaign called 1BOG. Short for “one block off the grid”, it aims to convince homeowners to switch to solar energy one block at a time, by organising them into buying clubs. Members get a discount on solar panels, and typically try to get their neighbours to sign up too. The city has also seen several recent examples of Carrotmobs—crowds of activists who buy everything in the winning shop in a contest between retailers to be the greenest.

As the article notes, we’ve seen these sorts of enterprises before, from the Body Shop, to Bono’s RED iPods, to Fair Trade Labelling, to the expensive soaps and hemp shirts you find in charity catalogues. Only this time, its local.

However, I would note a fundamental difference. On the national level, the kind of eco-friendly, ethical capitalism has found a niche within the retail economy. It has become successful, and crucially, normalised. On the other hand, the Carrotmobs and 1BOG seem to be one-off gimmicks. Indeed, the latter only works because a large company subsidises it as part of a marketing campaign. Its almost as if those people who are actually spending the money to make this work are participating in a leisure activity, rather than an everyday participation in a market that could sustain the local economy. We won’t be able to herald the coming of a ‘new localism’ until this sort of thing can arise and sustain itself without being shepherded by a well-meaning entrepreneur, or subsidised as part of a pilot scheme. Its not clear from these examples that this is possible.

Notes on the VAT rebate

Westfield Shopping Centre, Shepherd's Bush, London
Westfield Shopping Centre, Shepherd’s Bush, London

In recent weeks, many have been mocking at Alistair Darling’s 2.5% reduction in VAT.  It amounts to a measly two pennies in every pound, so they say, and is hardly likely to stimulate spending in the waythe Chancellor so desires.  Who would cross the road for a 2% off deal?

Having run a small business, I can also say that a 2.5% change in VAT is not small change for everyone.  Business-to-business transactions all require VAT to be charged (regardless of whether it is claimed back every quarter).  A reduction of 2.5% on a five- or six-figure contract equates to hundreds or thousands of pounds, respectively.  That could easily represent difference between solvency and insolvency.

Wandering around the expansive, yet surprisingly pleasant Westfield Shopping Centre yesterday, I marvelled at the legions of people flooding into the designer outlets, and tried to imagine how much money was beiung exchanged.  I began to think that the critique of Darling’s VAT adjustments might be missing some maths.  Or at least, some psychological insights into how people spend money.

It is not that we will notice the cheaper prices, and therefore go out and buy more of the “discounted” items.  We will not.  However, its a fact that if we maintain our current levels of spending, on similar items as we did before the VAT change, then we will be left with a little but of money left over at the end of the month.  If a person on an average wage of £24,000 spends, say, half his or her salary in a given month, all on VATable items, then that amounts to about £16 extra each month.  If that average person is anything like me, they will indeed spend it.  Why?  Because me and the average guy do not budget very well.  The amount we save each month will probably be predetermined by standing order (perhaps even siphoned off into a pension scheme, for all the good that would do in this perilous financial climate).   And as for the rest, well, we just keep spending on a whim until we reach a certain level. This threshold will be different for each person:  It might be the point at which the bank account reaches its over-draft limit, or when the sight of the balance falling into single figures induces panic.  Regardless, this threshold will be met when sixteen extra pounds have been spent (or whatever the figure actually is).     If most people operate like this, then an extra few quid – equivalent to an extra evening a month in the pub, say – ends up in circulation.  That’s a lot of money in the economy.

Humane Being?

The asylum issue has been marred by groups of people who simply have a narrow perspective on the nature of the world. They see the problem in a typically Anglo-centric fashion, never stopping to consider what is happening in countries that are not their own. It is this narrow-mindedness that is damning the human race as a species.

We can talk about the economic implications of the asylum problem all we like. Critics of the government, and indeed those actually making the decisions, consider only the ‘pull’ factors, the reason people come to this country. They suggest we are a soft touch, that we house them, give them benefits, and this is damaging the economy of this green and pleasant land.

No-one ever stops to consider the ‘push’ factors, the reasons people bother to emigrate in suffocating containers or freezing cargo trains. Why on earth would anyone endure thousands of miles of hunger and abuse to live in an alien place where language, customs and culture are hostile? The reasons are obvious, and many. Widespread poverty, soaring violent crime, economic mismanagement on the part of their own government, stellar inflation, institutional corruption, natural disasters, sub-standard water, zero health-care, zero social security, zero secondary education, low life expectancy, poor civil rights for women, sexual assault, AIDS. And these are in ‘stable’ countries without a civil war.

Why do the selfish anti-immigration campaigners not perceive the wider world? We humans must accept our embarrassing truth, that most countries are shit-holes for most people. Until we, fellow homo sapiens of the West who have won the birth lottery, make serious efforts to help the developing world industrialise, economic migrants will try and get into our country by any method they can. And who can blame them? Who can deny them that essential human trait—of desperately trying to make your life bearable. Would you not do the same?

In the meantime, we have to accept that dealing with immigrants will cream a percentage of our taxes off the top of the Treasury pot. And gee shucks, the trains might well be late, again. That is the price we must pay for living as privileged, Platinum-Plus humans.