11 Comments

• Dane Clouston 21st Dec '10 - 10:24am

  Policy suggestion? Think political ideology suggestion!

  Think about the tax free luxury expenditure of giving and bequeathing great fortunes of capital. Why does so much of that dodge taxes – legally – when ordinary expenditure by the poorest is about to be taxed at 20 per cent VAT?

  Think about the luxury receipt of great fortunes of cumulative unearned capital from lifetime gifts and inheritance. Why does so much of that dodge taxes – legally – when earned income is taxed at up to 50 per cent and capital gains are taxed at 18 per cent?

  Think about all those who never receive any gifted or inherited capital. In our Capitalist Democracy, if all these fortunes given and received were taxed instead of being legally dodged, there could be not only Universal Suffrage – votes for all – but also Universal Inheritance for all UK-born UK citizens at 25 – capital for all – of at least £10,000 (less than ten per cent of average wealth of every adult and child in the UK).

  What a way to help pay for tuition fees and enable other opportunities for others!

  Liberals and Liberal Democrats, together with progressive Labour, should be in the vanguard of creating a new political ideology of Popular Capitalism for the many in each new generation, thereby putting clear water between themselves and the traditional conservative political ideology of Dynastic Capitalism and the preservation of inherited power, privilege and wealth of the few, “cascading down the generations” – of which, incidentally, the Monarchy is the tax-exempt pinnacle that must be replaced by a Republic with an elected head of state.

  To ease the transition, I suggest that Prince Charles, when his turn comes, should be the first President for five years and then be allowed to stand for election for a second five year term, and that thereafter there should be a two term limit for all subsequent Presidents.

  Roll on the United Republic of Great Britain and Northern Ireland!

• Adam 21st Dec '10 - 10:27am

  As you say, the economic plan is very important. Clearly they need to show that they won’t – as the Tories will claim pre-election – reverse all the ‘good work’ that has been done closing the deficit (regardless of whether or not this is good economics!). A bit of “tax the rich!” might help too! Your structural deficit idea is very good, I’m amazed that’s not already done.

  If Labour want to become more like the LibDems that’s certainly not a bad thing. A good base, I think, would be a commitment to evidence-based policy, whether that be sentencing, foreign aid, education, everything! Their attitude to drugs policy was “We refuse to look at the evidence because our policy is fixed and that tells us the evidence cannot be true”. Decriminalisation with an emphasis on treatment would paint them as the ‘nice guys’, while strict government regulation of cannabis fits their image nicely. But if they don’t want to go that far, or even as far as a few reclassifications, a simple look at the cost-effectiveness of counternarcotics operations would be nice.

  Finally – yet related to evidence-based policy and to not overspending – they need to turn from hawks to doves. Commit to nuclear disarmament, perhaps – to retain broader support – with a plan to first negotiate some multilateral reductions. And try to show that they rather than the Tories are less likely to expand military spending and go invade a few countries. It’s hard trying to work out which of the two are the “nasty party” but it’s well within Labour’s power to clarify which is which.

• Steve Way 21st Dec '10 - 10:42am

  I think the biggest step, and the one the Leadership do not seem willing to take is to engage. Even if Labour are none too serious, the Lib dems are the party that proposes greater plurality.

  I also think that the use of phrases made during an election campaign will not help this. The comment regarding making the Lib Dems extinct was in relation to a single campaign. If this type of coment matters then why be in coalition with a party whose leader, when asked his favorite joke, stated Nick Clegg ?

  As to specific policies, on a previous post I suggested sending the two senior Lib Dems out of government to a joint policy group. This shoudld be aimed at finding the areas of agreement, the areas of similarity and identifying where disagreement exists.

  The next step would be to negotiate around the similarities to see where, in the event of a hung parliament, compromises could be reached.

  This then leaves parties to campaign on the differences. It would also allow voters to see the likely shape and policies of any future coalition between the parties.

  I also feel the same process should be followed with the Tories. This would provide real clarity around outcomes for voters and politicians and be a step forwards for plural politics.

• Ed 21st Dec '10 - 12:38pm

  Lib-Dems are doing a good enough job of making ourselves extinct.

• George Kendall 21st Dec '10 - 1:49pm

  Thanks for the comments.

  @Dane Clouston
  Personally, I don’t think offering £10,000 to each adult at 25 is a priority. For many 25 year olds, if they choose to save, they are perfectly capable of earning their own £10,000. However, that is not true for the children from disadvantaged backgrounds who have come out of school without a decent education.

  So rather than give £10,000 of unearned income to every young adult, I’d concentrate resources on measures to help these people. Firstly through support in education, and I think the pupil premium is an excellent policy for this. Secondly through measures to make it easier to turn their life around through work: by non-academic training and measures to reduce the poverty trap.

  There’s a limit to how much we can help children from disadvantaged backgrounds. Home life, and the wider environment of where they live, will make it difficult. But we should do what we can.

  As for measures to raise tax revenue. I’d probably agree with raising capital gains above 28% (it was raised from 18% to 28% at the last budget).

  I think an inheritance tax on large inheritances is fine. But I’d be reluctant to raise inheritance tax dramatically. I don’t have a problem with an ordinary family passing a modest inheritance to their children tax-free. It’s already been taxed when the parents earned it, and it’ll be taxed when the children spend it.

  @Adam

  “A bit of “tax the rich!” might help too!”

  I’m pretty uneasy about that. We already tax the rich a fair bit. There’s a fair bit of evidence that if we tax them more, that’ll result in reduced tax. The IFS produced a warning about this when Labour introduced the 50p tax band. I believe in evidence-based policy, and the IFS reports I’ve read seem pretty good evidence that there’s a ceiling above which taxing the rich is counterproductive.

  “a commitment to evidence-based policy”

  Of course, I’ve yet to hear a politician who didn’t claim to be following it. But, you’re right. Labour too often followed Daily-Mail-based policy, instead.

  “they need to turn from hawks to doves”

  I think this is the big test for Ed Miliband. There’ll be many in Labour who see an opportunity in some of the liberal policies of the coalition, to outflank the coalition on the right. Many in Labour think this would be electorally advantageous.

  I’m not sure. Cameron is trying to detoxify the Tory brand, but I don’t think he’ll succeed, especially in the context of painful cuts. But he might succeed if Labour outflanked him on the right.

  Opinion polls indicate that the electorate like authoritarian populist policies, but I’m not sure, deep down, that the electorate are impressed by politicians who pander to the electorate’s authoritarian impulses.

  @Steve Way
  “If this type of coment (making Lib Dems extinct) matters then why be in coalition with a party whose leader, when asked his favorite joke, stated Nick Clegg?”

  I agree. Pre-election, though he didn’t say so, I think Cameron would have been delighted to make the Lib Dems extinct. Nonetheless, Ed Milband’s pre-leadership statements are a problem, because they feed the tribalism of Labour, which makes cross-party dialogue difficult.

  “on a previous post I suggested sending the two senior Lib Dems out of government to a joint policy group”

  While we are in coalition, I don’t think that is realistic or appropriate. We’ve gone into coalition with the Conservatives. For now, I think we have a responsibility to try to make this work. If we went into private meetings to help Labour produce policies to attack the coalition, I don’t think the country would approve of that. And I think they’d be right.

  And even in opposition, I don’t think it would be wise. By all means have our people contribute papers to left-leaning think tanks. By all means have informal discussions. But attending private meetings to help Labour write their manifesto would raise questions about our independence.

  What might make sense is if, six months before the 2015 election, our people did have a pre-election meeting with Labour just to introduce themselves in a non-confrontational setting, preparatory for the possibility we might have a post-election coalition. But doing so at this stage is, I think, premature.

  “I also feel the same process should be followed with the Tories”

  I think, to the limited extent that we can, we should use the six months before the 2015 election to reestablish equidistance between the two other parties.

• Steve Way 21st Dec '10 - 2:53pm

  @George Kendall
  “While we are in coalition, I don’t think that is realistic or appropriate. We’ve gone into coalition with the Conservatives. For now, I think we have a responsibility to try to make this work. If we went into private meetings to help Labour produce policies to attack the coalition, I don’t think the country would approve of that. And I think they’d be right.”

  Then there is no future for truly plural politics. I don’t propose anything that would be an attack on the coalition, although the current Lib Dem policies are exactly that. What I propose is looking for areas of agreement and possible compromise. It’s how businesses work every day, and achieve the best results because of that. If dialogue is only takin gplace with the Tories and not Labour then the Lib Dems not only restrict their options in he event of another hung parliament, but they also reduce their bargaining position with the Tories.

  I also do not believe the meetings need to be private. A very public statement at the end of any session stating, for example, that both parties believe in a permament 50p tax rate and that both would agree tomove to an entirely elected second chamber within 1 parliament…. (note the two issues are yet to become real objectives for Labour!!!).

  There could also be a statement on the differences, i.e. the Lib Dems want to phase out tuition fees but Labout want to institue a graduate tax.

  Where these cross over with coalition policies this would take the heat out of opposition allowing better laws to be made with a consultative approach.

  In short we should expect our politicians to be adult… In fact we should demand it.

• Oranjepan 21st Dec '10 - 4:18pm

  @Dane Clouston

  £10k may seem like a lot of money for a lot of people, but it won’t go very far in changing anything given the real levels of wealth in the country.

  Such a windfall would be treated like the populist sop to opinion it is and would most likely be squandered by the vast majority of beneficiaries. You might as well promote a national lottery…

  If you want to be really radical then you could look towards providing a universal capital balance of several million each, of which the interest could be used. However, any sensible economic plan would demand how you could account for this – ie where it would come from and all potential impacts – before instituting it.

  As George says, that is a long way off and therefore cannot be prioritised.

  @Ed
  So long as we’re able to institute a liberal democratic society with a political consensus supported by all other parties, extinction of the LibDem party would be a sign of success.

  However, both Labour and Conservative parties are structurally undemocratic and in many ways fundamentally illiberal in their internal workings.

  First for Ed Miliband should be to disaffiliate all Trade Unions and separate the Cooperative Party and sort out their un-credible and embarrassing funding model.

  It isn’t healthy for their politics to be a slave to a separate master with lower standards of accountability. Former Labour leaders have neglected this pressing concern, but since he secured his position with union backing Ed Miliband is in a unique position to change that.

  It would be an electoral gamble, but he would have made a positive change for which he’d be rewarded as he could take the high ground over big business backing of Conservatives.

  Second, should be to engage in a fuller discussion of constitutional reform – including the House of Lords and ways to further devolve powers to regions (in particular English ones).

  Under Ed Miliband reforms to NHS bureaucracy were opposed on the grounds that they were a false-decentralisation. So we should hold him to that and ask him to follow-through with a decentralisation agenda which we could support.

• Anthony 21st Dec '10 - 4:54pm

  Labour are going to blame the coalition for what’s happening because the coalition are at the wheel, Labour aren’t going to hold their hands up, say they made a mess of it, but please vote for us next time and not try and hold the coalition to account, the same as the coalition aren’t going to stop blaming Labour for the mess, even though the mess is far from all being down to Labour.

  This is an area where politics needs to grow up, but I’d imagine it will be a long time before politicians are prepared to grow up.

• Dane Clouston 21st Dec '10 - 5:29pm

  @George Kendall,

  £10,000 for each UK-born UK citizen at 25 may not be a priority for you. But show me a 25 year old who would not like to receive it.

  It is not a question of EITHER education, pupil premium, non-academic training and measures to reduce the poverty trap OR Universal Inheritance. The latter is an extra, financed by abolishing the major exemptions from Inheritance Tax. It will help both those who choose to save £10,000 (how easy you make it sound!), by making it £20,000, and it will help those who go to university with their tuition fees and will help those who have not a chance in hell of saving £10,000 by the age of 25.

  It is not a question of raising Inheritance Tax, but just of abolishing the exemptions, lowering the rate of tax on all giving and bequeathing to 10 per cent and taxing all receipts of unearned capital at a progressive rate from 10 per cent up to 40 per cent, with the tax on giving dedutible from the tax due on receiving. The point is to tax receiving more than giving, in order to spread wealth as widely as possible in each new generation – a Liberal aim, and, I would have thought, a LibDem aim.

  You yourself may not have a problem with an ordinary family (whatever that is) passing a modest inheritance (however much that is) to their children tax-free. But I do. Why should they not pay some tax on this luxury expenditure. All should pay a minimum of 10 per cent on such inter-generational transfers so that ALL young adults have the benefit of a basic minimum Universal Inheritance of about 10 per cent of average wealth, regardless of the bankruptcy, fortunes or generosity of their parents.

  The fact that what is passed on has already been taxed when the parents earned it is neither here nor there. So has ordinary expenditure which is subject to VAT at 20 per cent already been taxed when the parents earned it. So what?

  Similarly after-tax income earned by children will be taxed at 20 per cent VAT when they spend iti. So what is wrong with unearned receipts by them being taxed as well as earned income when they spend it?

  If the amounts received are modest, then any tax due under the progressive cumulative Lifetime Unearned Capital Tax will already have been paid by donors paying the 10 per cent Capital Donor Tax.

  Are you not in favour of greater equality of opportunity. How do you rate equality of opportunity between someone who inherits a fortune of billions and someone who inherits nothing?

  @”Orangepan”

  £10,000 is one amount of money absolutely, and another relatively, when you are thinking about opportunity, and greater equality of opportunity. The reduction of larger inherited fortunes and the arrival of a basic minimum Universal Inheritance will go quite a way in changing Opportunity for All.

  How do you treat such a well known once-a-lifetime windfall/inheritance “like the populist sop that it is”? What is “squandering” such an amount? – Spending on what people need or want, whether by consumption or investment? There is no comparison, other than a flippant one, between a national lottery – which exists anyway – and a national Universal Inheritance.

  I have no wish to be radical in any different way, thank you. All I would like to see is the introduction of UK Universal Inheritance at the modest amount of £10,000 and then see how the parameters of amount and progressive rates of tax would change under the pressure of democratic debate.

  I have explained where the amount would come from in other posts. It is a policy that would be easy to introduce over a five year period, from £2,000 up to £10,000, so that no one year group would lose out by more than £2,000 vis a vis the next. It would be financed, as above, by a 10 per cent Capital Donor Tax deductible from a progressive cumulative Lifetime Unearned Capital Receipts Tax from 10 up to 40 per cent. It’s impact would be in line with government encouragement for the private sector to spend to help keep the economy going, since the money would go from those with a lower to those with a higher propensity to spend (or “squander”, to use your derogatory word which is not worthy of a liberal in relation to people’s individual choices).

  You and George Kendall say that UK Universal Inheritance is a long way off and therefore cannot be prioritised. People would have said the same thing at some stage about Gladstone’s Estate Tax, Income Tax, State Schools, the Old Age Pension, the National Health Service, the Income Welfare State, and so on. It is time for an Asset Welfare State. You appear to be very comfortable with the Coalition, and I can understand why. But this thread was about what Ed Milliband should write on his blank page, looking to the future rather than to the present.

• daft ha'p'orth 22nd Dec '10 - 1:29pm

  @Dane Clouston

  Disclaimer: I am not an economist and therefore am probably talking through my hat. But… the more liquidity made available, the faster it will be sponged up. Without a government that is far more well-meaning and genuine than the bunch currently occupying Westminster, or any other govt in the last few decades come to that, something like this Universal Inheritance sounds like an invitation to think of some reason to prey on those in their late twenties to the tune of an additional £10k.

  For me, one significant place where Labour went wrong was in encouraging the idea that the young and skint should be encouraged to engage with very large sums of money, be they tuition fees and loans or ridiculously massive mortgages. Throwing more money around sounds to me as though it would just promote more upfront fees: for example, why not mandatory 2k fees on setting up a first mortgage, or raised insurance fees for the late twenties, or raised taxation for the temporarily affluent. Why not, when you know that everyone in that age range has the money for it? Think universities or American healthcare: If you know that everybody in that age range can borrow that much money, you’re not going to put in a lot of effort to keep prices as low as possible at the expense of your other pet projects, shareholders, or bottom line. You’re just going to take as much as you can get.

  Don’t get me wrong, I appreciate the idea in principle, or at least the sentiment behind it. I just think that it would need a lot of work to be useful as anything other than a plum target for any scoundrel, including the government itself, appropriately placed to target the significant and trivially identifiable ‘universal inheritor’ demographic. As it is, it’s such a tempting artificially created market for collusion and price fixing that it’s virtually entrapment 😉

• Dane Clouston 23rd Dec '10 - 2:55pm

  @ “daft ha’p’orth”.

  What a pessimistic view! Every 25 year old would need a bank account in which to receive the Universal Inheritance. End of financial exclusion! Reduced alienation! Less poverty! More chance of starting a small business! A start to a deposit for home purchase! Advice would be available. It only goes to one year group each year.

  I heard once that there were post 2nd world war credits which were treated very much by recipients responsibly as once-a-lifetime payments – as the UK Universal Inheritance £10,000 would be – which is what one would expect.

  Even those who wasted the money from their point of view would know what it felt like to have a bit of capital – a bit of a financial cushion – and would be keener than otherwise to build it up again if they had spent it unwisely.

  Personally I remember being given a capital sum by my grandmother at 25 and it was still there when we bought our first house when I was 33. Why not give all young people the chance of doing that?