Opinion: Why don’t we throw out the spending plans and start again?

When parties come up with their public spending plans, one gets a sense of deckchairs being rearranged on the Titanic, with a bit more spending on something one year and then a little bit less the next, parties micromanaging (and re-announcing!) their spending plans, making compromises and trying to spread the ‘jam’ ever more thinly.

Of course no one is really fooled. We all know that the number of district nurses has almost halved in a decade, that libraries have closed all over the country, that adult education services have been cut to the bone and that those on benefits such as Jobseekers Allowance are having to jump through ever more hoops to get their money. There have been serious cuts in social care services for the most vulnerable too. This may sound harsh, but it is the reality of living in Britain today.

Of course, we know some of the cuts were necessary to reduce the deficit, but we cannot keep living in the past. So what if we instead asked ”How much public spending do we need to build a civilised and compassionate society that educates and cares for everyone properly?” – not calculated using the past as a reference point, but looking at what we should be spending now and in the future.  We then decide not whether to, but how to, come up with the money.

We, firstly, need to make a much stronger case for people with reasonably comfortable lifestyles, paying more towards the ‘common good’. I don’t think it would be as self-defeating as politicians might think. Look at Comic Relief and the London Marathon: people will give generously when genuinely moved to compassion. In fact, a study carried out in 2013 by researchers at the University of Wisconsin-Madison found that compassion, like physical and academic skills, is not something that is fixed, but which can be enhanced by training and practice.

The question then becomes how much more public spending do we need to build the kind of fair and caring society we all, hopefully, want? I am no economist, but judging by the spending cuts we have experienced to date, we probably need an extra £50-100 billion in public spending annually to be able to restore our threadbare council, health, social care and adult education services, plus things like legal aid.

While it would require many different fiscal measures to raise such large sums, I believe a primary mechanism should be through taxing non-essential spending.  When walking through central London, I am amazed by the number of people dining out and shopping in high-end clothes and hi-tech stores and by just how many luxury flats are being built. If there is so much money around for this kind of consumption there must also be more money out there for the public good.

Just a couple of examples: the UK’s total ‘eating out’ sector, including coffee shops, is rising towards £90 billion. What about adding an additional 5% to the VAT charged in restaurants? That would raise £4.5 billion. Is anyone seriously going to do without their morning cappuccino for the sake of a few pence?  The UK’s tech market is also worth around £90 billion so a 5% increase in VAT on consumer spending would again raise nearly £5 billion. I cannot imagine anyone deciding not to buy a smart phone, tablet – or even £3,000 TV! – for the sake of a few extra quid. There are many other tax-raising options, including, of course, higher rates of income tax on higher earners.  If politicians explained that the extra tax revenue would specifically be spent on improving the health service, for example, I think many people would accept that.

None of the political parties have really made the case for us digging deeper in our pockets to help build a better, fairer and more caring social and civic society. That’s the message I think many people actually want to hear in this General Election – and it might be more of a vote winner than politicians imagine.

* Until recently, Judy Abel was Head of Health Policy at Policy Connect.

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83 Comments

  • Just when it seemed the article couldn’t get any sillier, in comes hypothecated taxes.

    Is anyone seriously going to do without their morning cappuccino for the sake of a few pence? […] I cannot imagine anyone deciding not to buy a smart phone, tablet – or even £3,000 TV! – for the sake of a few extra quid

    Of course it doesn’t make a difference to an individual purchase. But an extra 10p on a £2.50 cup of coffee is, assuming one in the morning on weekdays, £26 a year. That’s £26 a year you don’t have to spend on other things, and that’s just on coffee, it doesn’t count actual meals out, takeaways (A £10 takeaway will go up 40p: have one of those a week and you’re losing another £20 on top of the extra cost of your coffee), or even just grabbing toasted sandwiches. A 5% rise in VAT on non-zero-rated food could quite easily cost an individual over a hundred pounds a year, perhaps near two hundred.

    When you put it like that it sounds a bit different to ‘for the sake of a few pence’, doesn’t it?

  • Three points:

    First – there is still waste to squeeze out of government spending.

    Secondly – we should not conflate a caring society with government doing everything for people.

    Thirdly – having more differential VAT rates will be great boon for tax advisers. Just to take one of the examples cited. If the supply of smart phones were to charged at 25% I would expect suppliers to quickly unbundle the sale of the hardware and the sale of the software required to drive it.

  • Eddie Sammon 12th Mar '15 - 5:19pm

    Hi Judy, this is a good bit of analysis, but I’m not quite as optimistic. If we ramp up benefits we will likely get a lot more immigration and the whole thing doesn’t look sustainable. The two realistic options for me seem to be:

    1. Cut benefits, keep a liberal immigration policy.
    2. Maintain benefits, toughen EU immigration.

    I prefer the second option, but many seem to think we can be pro welfare and pro immigration and I just don’t think it adds up and I don’t think the public will accept it either.

    It might not be very inspiring for some, but I like serious politics and think it is the only option we have. Things will slowly get better.

  • Ryan McAlister 12th Mar '15 - 5:37pm

    This is a car crash idea. Not only does it arbitrarily pick random things to be taxed higher (why not umbrellas, laminate flooring or lampshades?) but it chooses the single most regressive tax we have on the statute book as the vehicle through which to do it.

    It then compounds the error even more by hypothecating the expected revenue.

    No thanks.

  • This is a car crash idea

    Oh, new test for a car crash idea: can you imagine Natalie Bennet trying to put it forward?

    In this case the answer is, ‘Three vehicle pile-up, both lanes closed, contraflow in operation.’

  • jedibeeftrix 12th Mar '15 - 6:22pm

    The aim should be to maximise tax efficiency, not grow our bountiful crop of accountants.

    No tax hypothecation.
    Fewer graduated rates of taxes.
    Fewer arbitrary categories of goods and services to tax.

    Adam smith had something to say on architecting tax systems properly.

  • Philip Thomas 12th Mar '15 - 6:31pm

    Vat is regressive in nature. I favour raising income tax…

  • @Ryan McAlister
    This is a car crash idea.

    I think you’re being more than a bit mean there. The idea of a luxury goods tax is perfectly legitimate – we already have examples, (air passenger duty, fuel duty, alcohol/tobacco etc). If we wanted to get serious about getting more cash out of the richest in society I think it should be very much on the table. When you say VAT is regressive, in this case its not as you can completely avoid the additional tax by not buying the products in question.

    The issue will be whether the electorate would wear it. I remember UKIP flirting with one last year and it not going down well at all. I guess people don’t want the government spoiling their fun. Remember the pasty tax?

    re: enforcement, yes there could be some issues but I think this is more about how the law would be crafted. Don’t want another Jaffa Cake situation.

  • If you put up taxes and expect everyone to dig deeper in their pockets then they have less to spend. It is a catch twenty two. We have to face the fact that defence spending for one will probably have to significantly increase whilst the NHS will inevitably continue to gobble up more and more enormous sums of money, coping with an ever increasing aged population and demands for everything to be met. As for increasing taxation on this item and that, then if they cost more to buy or build there will be less made and that will impact on unemployment etc etc.
    Actually dare I say it, life you know in this country aint that bad, compared to my early years and youth its a picnic. I grew up in a very poor area of London and know what people put up with. It is better now. Things can always be better whatever the situation, but lets keep a sense of proportion.

  • I think commenter’s here, are being a tad cruel with your suggestion Judy.
    But the truth is, even we… [ usually faultless 🙂 ] Ukippers, fell afoul of this idea, a few months ago, when some bright spark at Ukip HQ, suggested we increase VAT for designer handbags and suchlike. I think the Daily Mail called it a ‘WAG Tax’. Nigel ( rightly in my opinion ), stamped it unceremoniously into the ground, never to be seen again.
    That said, (!)……….let’s not throw out the VAT baby, with the bathwater ?
    Why not have a differential VAT for companies that are headquartered here in the UK, (20%) and for those headquartered elsewhere for tax avoidant purposes (25%) ?
    Example :
    UK based coffee houses legally obliged to sell their coffee + 20% VAT
    Caymen Island based coffee houses legally obliged to sell their coffee + 30% VAT
    It gives the coffee drinker the option of a cheaper morning brew,.. plus the knowledge that they are supporting a UK company, as they pay at the till.?
    Onshore booksellers…? versus Offshore booksellers ??
    Onshore tech companies…? versus Offshore tech companies ??
    Whatever colour rosette you desire to wear, surely,… we can all agree, that we have to find ways to twist the arm of those tax avoiding Corporate bas***ds,… one way or another?
    Just a thought ?

  • Matthew Huntbach 12th Mar '15 - 6:53pm

    Richard

    Not only does it arbitrarily pick random things to be taxed higher

    How does this differ in terms of “car crash” from arbitrarily picking random things it is supposed can be “squeezed out of government spending”?

  • I don’t mind people disagreeing with my strategy for raising taxes – that’s fine – but higher taxation is definitely needed. I’m all in favour of higher taxes for the wealthy, but economists say that this will not raise anywhere near the sums of money needed to maintain proper social services . If anyone has any other ideas, it would be good t hear them! What I don’t think is acceptable is that while some people can spend £100,000 on a car, others are not getting the mental health or social services they need.. And we already have high taxation on house sales in the form of Stamp Duty so paying tax on high-end expenditure is not that revolutionary.

  • Matthew Huntbach 12th Mar '15 - 7:01pm

    Gareth Wilson

    Remember the pasty tax?

    Yes, a perfectly sensible clarification a clause that was meant to protect small bakeries from being subject to extra tax because their bread might be freshly baked that was being flagrantly misused by big companies as a tax avoidance scheme on hot take-away food. However, they managed to get it called “pasty tax” and that was it. At the same time, spreading support for elderly people so that all benefitted through higher state pensions rather than only those who earned enough to be able to benefit from a tax allowance was dubbed “granny tax”.

    Well, if people will invent a funny name that can be used to suggest any tax is a bad thing, they have to face the consequences of money therefore not being raised for what they would regard as good things. LIke student tuition fees having to be brought in because people won’t agree to the taxes needed to subsidise universities.

  • David Allen 12th Mar '15 - 7:10pm

    Matthew,

    McCarthy’s book The Prostitute State explains where “pasty tax” and “granny tax” came from. They were Murdoch’s words, and he used them to show the Tories that he could bring down governments, if he so chose, by sheer force of mendacious propaganda. At the time, the Coalition was pushing Leveson very hard. Murdoch did not like that. Everything is now sweetness and light, of course, because Leveson has been binned.

  • Philip Thomas 12th Mar '15 - 7:21pm

    Cutting spending on pensions instead of continuing to increase it above the rate of inflation would be a good start.

  • Peter Davies 12th Mar '15 - 7:33pm

    There are actually quite a few more regressive taxes than VAT. It would be difficult to think one up that was more regressive than cuts in social services.

    That said, ‘eating out’ is one of the more effective ways of getting rich people to pay money to poor people without complaining.

  • David Allen 12th Mar '15 - 7:41pm

    Judy Abel,

    Of course higher taxation is needed. When the rich holiday in the Seychelles while the poor starve, action is needed. Unfortunately, inequality feeds upon itself, because the “squeezed middle” struggle to make ends meet, and so they (mistakenly) ally with the rich in demanding low taxes, against their own best interests.

    You have been accused of the “hypothecated tax” error. That is unfair. Granted, the idea that one can strictly “hypothecate” tax, for example by saying that all the proceeds of the cappuchino tax go on hospitals, is a nonsense. But you didn’t say that. You merely said that extra revenue would, in a broad sense, help us increase spending e.g. on social services. That is a perfectly logical position to take. A certain political party, in the days when it had centre-left principles, said it would raise “a penny in the pound” for education. I don’t think Paddy Ashdown got called out for the sin of “hypothecation”!

    I don’t think I would start with your “tech” tax. People would bleat that you were a Luddite, that you were endangering UK competitiveness, that people would try to dodge the tax (as if they ever didn’t do that!), and that you would be hitting poor old grannies whose only pleasure in life was their modest little telly. All self-serving nonsense from rich people who want to stay rich, of course. But sadly, it gets heard.

    The restaurant (and takeaway) tax seems to me more hopeful. So do higher taxes on gambling, alcohol, and flying. All of these could be presented as morally good. A neat balance would also be to neutralise opposition by handing some of the money back, for example by a linked (small) reduction in the general rate of VAT. It could then be argued that if you are scared of higher taxes, all you have to do is cut down on the things that you really ought to be cutting down anyway, and that if you do that, you will actually have more money in your pocket, not less. Because we have to persuade people to vote for the policy.

    Not, I’m afraid, that the Cleggies are the least interested in this kind of politics: if you want it, I think you’ll have to vote for someone else!

  • Philip Thomas

    “Cutting spending on pensions instead of continuing to increase it above the rate of inflation would be a good start”

    I think the LibDems are currently getting about 7% in the polls and you want to turn every pensioner and those approaching pension age against the party.

  • Philip Thomas 12th Mar '15 - 7:45pm

    @malc
    I thought we were talking about ways to balance the budget, not election gimmicks. If you’re only argument against stopping the inevitable road to the scenario in 50 years time where the mandatory increase in the pensions budget is larger than combined expenditure on all other items is “it wouldn’t be popular with pensioners”, that is your look out.

  • @David Allen
    Thanks for the detailed comments on the VAT idea. I do concede that there are some problems with it, but still think it could have some applications as you also suggest (for example on gambling). The Lib Dem mantra is a stronger economy (which would certainly help tax revenues!) and a fairer society, so Lib Dems should be interested in these ideas (your last para). Not looking to vote elsewhere – yet!

    @John Dunn.
    Absolutely agree we need to tackle the corporates – and everyone else – who avoids tax. This would raise billions.

    @ Caracatus
    Some interesting thoughts – like the idea of building more council houses to save on the housing benefit bill – as long as no subsequent Government sells them off later.

    All the above comments show that if we started with a zero base budget (as Caracatus suggests) we could come up with a better tax and spending strategy that would plug more of the gaps in social provision. It has got to be possible.

  • Gwynfor Tyley 12th Mar '15 - 9:59pm

    I think the first part of Judy’s post is excellent – too much time is spent running in the wrong direction – time to lift up one’s eyes and work out which direction to run in.

    I have to concur that your suggestions invited the inevitable ‘criticise the detail’, the ‘what sort of tech’, ‘that’s too complicated’ etc. The next step after having identified how much we want to spend is to determine how much we should raise through each of the general classes of taxation – employment, expenditure, corporates, sin etc given the economic and social consequences, elasticity and size of the prize. Then within each class, determine how we (and if we) make it progressive. Run that through the mixer, see what comes out and then iterate until the compromise comes out.

    All this said, any increases in tax are going to upset someone. Being able to paint the bigger picture is key to supporting those increases so that people understand that this isn’t just a punishment for those who happen to like iphones.

  • Gwynfor Tyley 12th Mar '15 - 10:04pm

    An area where we can bring together tax reform and our pro EU credentials is that eliminating tax evasion/avoidance by individuals and corporates has to be an EU wide effort – there are some countries that benefit from these activities but the larger countries only suffer.

    In addition to which, if we want to increase the tax take from the wealthy, again it needs to be done on a co-ordinated basis or it will go the same way as Hollande’s reforms in France with the ultra rich flitting over the border to a lower tax country.

    Let us campaign for EU wide tax reform. (Just because it isn’t sexy, doesn’t mean it’s not the right thing to do).

  • Thanks Gwynfor. I think your analysis is right and we have to look at how much money we can raise through different forms of taxation and see what we end up with, raising VAT being just one of many potential options. The main point I was trying to make though, which you picked up on, is that we have to make a better case for higher taxes on the grounds of social justice. We can no longer fudge the issue.

  • “I don’t mind people disagreeing with my strategy for raising taxes – that’s fine – but higher taxation is definitely needed.”

    No No No!!!
    Why?
    Because you haven’t made the case for your spending plans!
    The article’s heading clearly states: “Why don’t we throw out the spending plans and start again?”
    Until you come up with a new set of spending plans there is no case for raising taxes!

    We know there is a lot fat in central government’s existing spending, to name two obvious examples: firstly the £2 billion per annum it is desiring to spend on a vanity project – firstly to fund it’s construction and subsequently to subsidise it’s operation? Secondly the subsidy on new house building that can be as much as £77,000 per house. Also perhaps we need to address an elephant in the room over the spiralling NHS costs, namely should we set a maximum spend per person?

    So yes there is a need to radically rethink government spending. How to raise the required tax revenue is a different question.

  • ” The UK’s tech market is also worth around £90 billion so a 5% increase in VAT on consumer spending would again raise nearly £5 billion”

    Do you understand what constitutes a tech company these days?
    Due to the changes that IT has wrought, many companies, and that includes retailers, banks, can more accurately be described as IT (ie tech) companies with a non-tech arm… It is because of this greyness that the UK tech sector can be described as being worth £81bn (reminder, we use pounds sterling in the UK not Euro’s).

    Also the government wants to do more online, which means that some forms of tech are becoming essential…

  • Aside: Also I note the reference used in the article to the UK Tech sector is dated 2011; nuff said.

  • On reflection the premise of this article raises a rather large question mark over the Coalition.

    Looking back to 2010 and the circumstances in which the coalition was formed, the obvious question is why wasn’t there a full scale review of government commitments and expenditure. Yes, implementation of cuts identified may have been delayed, but the government had both the electorate and circumstances on their side to do a full-scale review of Whitehall and expenditure, leaving no stone unturned, given that initial indications were that a 25~30% reduction in expenditure was going to be needed.

    Hence whilst the coalition has delivered stable government over these last five years, it hasn’t delivered in this critical area.

  • Philip Thomas

    “I thought we were talking about ways to balance the budget, not election gimmicks. If you’re only argument against stopping the inevitable road to the scenario in 50 years time where the mandatory increase in the pensions budget is larger than combined expenditure on all other items is “it wouldn’t be popular with pensioners”, that is your look out.”

    It’s not an election gimmick it’s just being practical. Anyone can come up with ways to balance the budget, but getting the people to vote for you is the hard bit. Hitting old age pensioners whilst increasing overseas aid and paying welfare to many people who have contributed little – if anything – to this country, isn’t going to attract many votes is it. If LibDem policy was to cut old age pensions you would be down to half a dozen MP’s again, but this time with the nationalists, UKIP and the Greens you may never recover.

  • There is a way, of course, to get round all of this: to have a larger, more productive economy, without raising the rate of taxation. We would need to grow our economy by around 8% extra to generate another £50bn of revenue. Given UK productivity is miserably low (17% below the G7 average), even recovering half that underperformance would allow us to do that.

    Why not concentrate on raising productivity and investment first before looking around for people to tax punitively and political wasps nests to poke with the stick of taxation?

  • There is a way, of course, to get round all of this: to have a larger, more productive economy, without raising the rate of taxation. We would need to grow our economy by around 8% extra to generate another £50bn of revenue. Given UK productivity is miserably low (17% below the G7 average), even recovering half that underperformance would allow us to do that.
    ity is miserably low (17% below the G7 average), even recovering half that underperformance would allow us to do that.

    Why not concentrate on raising productivity and investment first before looking around for people to tax punitively and political wasps nests to poke with the stick of taxation?
    Why not concentrate on raising productivity and

  • Sorry about the weird double posting

    @ Malc
    Give it a break, why don’t you?

  • @ Roland

    It is hard to write a thesis for sorting out the economy in 500 words! The reason I wanted to tax spending rather than earnings is because the market for non-essential goods has been growing against a background of austerity. I agree that in the past there may have been waste in the NHS and central and local government but that was the past. Council planning and housing departments have been cut back – drastically in some cases.

    This article is simply about what kind of society we want to live in and whether we want to pay for adequate services for the most vulnerable in society.

  • RC 13th Mar ’15 – 7:51am
    Sorry about the weird double posting

    RC — You should perhaps be more concerned aout your weird single posting which just said —
    [email protected] Malc. Give it a break, why don’t you?”

    This does not make any sense at all. What are you trying to say to Malc and why? Any chance of a reasoned or even a reasonable comment from you saying what it is that Malc has done to upset you!
    Or was your last comment sponsored by Nestlé the manufacturer of KitKat who had an advertising slogan which was something about having a break?

  • Philip Thomas 13th Mar '15 - 8:26am

    @malc I agree the foreign aid commitment could be reduced and all welfare commitments need to be kept in check: but welfare commitments to non-pensioners have been cut heavily already and more importantly cutting them won’t do any good if pensions continue to rise- pensions already being more than half the welfare budget and far more than the foreign aid commitment.

  • Judy Abel
    “…It is hard to write a thesis for sorting out the economy in 500 words!”
    Or as they used to say in the Civil Service – “If you want something shorter – you will have to give me longer.”

    You have done well describing Coalition Britain in less than 70 words —
    “…We all know that the number of district nurses has almost halved in a decade, that libraries have closed all over the country, that adult education services have been cut to the bone and that those on benefits such as Jobseekers Allowance are having to jump through ever more hoops to get their money. There have been serious cuts in social care services for the most vulnerable too. ”

    The reality of living in Britain today. It is just such a shame that we have not had Liberal Democrats in Government to prevent these appalling cuts from happening. Oh no, that’s wrong isn’t it? We have had … …

    I am sure that bloke Clegg said he was a Liberal Democrat, I am sure he has been in Government, they keep putting him on the radio and saying he has been Deputy Prime Minister for five years.
    Didn’t he reform the House of Lords or something? He didn’t? Oh! He just cut Libraries, Adult Education, the number of District Nurses, as well as making serious cuts in care for the most venerable.
    He did well on increasing the number of Food Banks though!

    Oh and he has done something wonderful on paternity leave — so that middle class couples in their 40s can do marvellous things with their children instead of rushing off to be Deputy Prime Minister or whatever it is they do.

  • Caracatus 12th Mar ’15 – 7:15pm
    “..,I suggest we build some council houses for low cost rent and save ourselves £30 billion a year. Only another £20 billion to find now.”

    Good idea.

    Scrap Trident and that more than covers your missing £20 Billion.

    Sell the Duchy of Cornwall to the highest bidder for some tens of Billions and we could have a few more Libraries and District Nurses etc.

    Sell the Palace of Westminster to the museum and tourism industry and shift Parliament to one of those out of town mega-supermarket buildings that Tesco is leaving empty all over the country.

    Cutting public expenditure can be fun — just so long as you have your political priorities in place. Which is why the Liberal Democrats under Clegg have been no fun at all.

  • Malcolm Todd 13th Mar '15 - 9:22am

    “Scrap Trident and that more than covers your missing £20 Billion.”

    I’m all for scrapping Trident, John, but where do you get the idea that it would save £20 billion a year? Even the “Rethink Trident” campaign puts the annual cost at only £3bn.

  • Paul in Wokingham 13th Mar '15 - 9:26am

    @Malcolm Todd – “,,, puts the annual cost at only £3bn.”.

    A few billion here and a few billion there and pretty soon you’re talking about serious money.

  • I’d love someone to give a single instance where a UK ‘independent’ nuclear weapon will be used….

  • Malcolm Todd 13th Mar '15 - 9:53am

    Paul in Wokingham
    “A few billion here and a few billion there and pretty soon you’re talking about serious money.”
    😀

    Well, quite. I’m sure you know that when I said “only” £3bn I was contrasting it with JT’s claimed £20bn. In other words, it’s not a magic button solution to the deficit problem.

  • I’d love someone to give a single instance where a UK ‘independent’ nuclear weapon will be used

    It already has been used. It was used from the fifties through to the eighties,.

    A weapon doesn’t have to be fired to be used: sometimes the very use of it is in the threat.

    Or do you think that someone who goes into a shop, points a revolver at the cashier, tells them to empty the till, and leaves with all the money in a bag, didn’t use a gun to do the robbery, even though they never had to fire a shot?

  • David Allen 13th Mar '15 - 9:56am

    Roland,

    “No No No!!!
    Why?
    Because you haven’t made the case for your spending plans!”

    Roland, stop shouting and browbeating your readers with exclamation marks. You haven’t made the case for your lack of spending plans.

  • Dav 13th Mar ’15 – 9:54am ’d love someone to give a single instance where a UK ‘independent’ nuclear weapon will be used
    It already has been used. It was used from the fifties through to the eighties,.A weapon doesn’t have to be fired to be used: sometimes the very use of it is in the threat. Or do you think that someone who goes into a shop, points a revolver at the cashier, tells them to empty the till, and leaves with all the money in a bag, didn’t use a gun to do the robbery, even though they never had to fire a shot?

    No! That was the treat of the US stockpile of nukes…The ‘deterrent’ value of the UK was zero. I asked a simple question and got the usual waffle..

  • for treat read ‘threat’

  • Thanks for comments David Allen. Just about to catch the train to Liverpool for Spring Conference so thanks very much for all the contributions.

  • expats
    Is it fair to ask the americans to pay for everything?

  • That was the t[h]reat of the US stockpile of nukes

    There was (and still is) no guarantee that the US would, if anything happened to Britain, honour its NATO treaty obligations to retaliate on our behalf. I mean, they can’t even spell ‘honour’.

    If any threat is to protect Britain, it has to be the threat of a British retaliation, not a US one that may never come.

  • malc 13th Mar ’15 – 10:14am expats.. Is it fair to ask the americans to pay for everything?

    No! But our part should be where we can ‘make a valid contribution’.. We have some of the best trained military personnel in the world…Yet now our US allies are recognising that our ground forces are becoming too few to act as independent units and, in future actions, may have to act ‘inside’ ‘US forces rather than ‘alongside’…

    Dav 13th Mar ’15 – 10:17am There was (and still is) no guarantee that the US would, if anything happened to Britain, honour its NATO treaty obligations to retaliate on our behalf. I mean, they can’t even spell ‘honour’. If any threat is to protect Britain, it has to be the threat of a British retaliation, not a US one that may never come.

    Again, give an example?

  • Again, give an example?

    Well, Britain wasn’t attacked by the Soviet Union, was it?

    If it hadn’t been for the British (and, to be fair, French) nuclear deterrents, what would there have been to stop the USSR from firing nuclear missiles at Western Europe, secure in the knowledge that there was almost no chance of the US making itself a target by retaliating on behalf of allies who, now, are nothing more than smoking cinders?

  • Dav 13th Mar ’15 – 10:39am Well, Britain wasn’t attacked by the Soviet Union, was it? If it hadn’t been for the British (and, to be fair, French) nuclear deterrents, what would there have been to stop the USSR from firing nuclear missiles at Western Europe, secure in the knowledge that there was almost no chance of the US making itself a target by retaliating on behalf of allies who, now, are nothing more than smoking cinders?

    And while, as part of the ‘smoking cinders’, were umpteen US bases, manned by thousands of US troops (and their families) and a significant part of their nuclear arsenal????????? If that is your only example then we certainly don’t need Trident…

  • And while, as part of the ‘smoking cinders’, were umpteen US bases, manned by thousands of US troops (and their families) and a significant part of their nuclear arsenal?????????

    Who were all already dead. Why invite attack on the US mainland by responding?

    If that is your only example then we certainly don’t need Trident

    Of course now there are far fewer Us troops on British soil, so even less reason for the US to retaliate on our behalf. So by your own logic we need Trident (or something with comparable capabilities) even more now.

  • (Besides which, how as a nation could we have any self-respect if we were relying on America to fight our battles for us?)

  • Malcolm Todd 13th Mar ’15 – 9:22am
    “Scrap Trident and that more than covers your missing £20 Billion.”

    “I’m all for scrapping Trident, John,”
    Excellent let’s do it!

    BTW — my last comment was not audited and approved by The institute for Fiscal Studies. You are quite right to point out that I was talking about more tha annual saving. You have helped clarify things.

    I also do not know precisely how many £ Billions we would get for The Duchy of Cornwall because KPMG present the finances in a way which would make the Swiss branch of HSBC look like a model of good practice in transparent finance. This is probably appropriate because if he becomes King he will also become King of 16 other places most of which are not really proper countries but very dubious Tax Havens set up during his mother’s reign to ensure that she and her friends don’t have to pay tax like the rest of us.

    I reckon we would get a Library or two and some additional District Nurses from flogging off the Duchy, don’t you?
    That would be a good deal and would be more useful to society than Charles and Camilla.

  • Dav 13th Mar ’15 – 11:05am
    “(Besides which, how as a nation could we have any self-respect if we were relying on America to fight our battles for us?)”

    How as a nation could we have any self-respect if thousands of our people go to the food bank to feed their children?

  • Malcolm Todd 13th Mar '15 - 11:12am

    John Tilley
    “I’m all for scrapping Trident, John,”
    Excellent let’s do it!

    Ah, if only it were up to us …

  • Dav 13th Mar ’15 – 11:05am (Besides which, how as a nation could we have any self-respect if we were relying on America to fight our battles for us?)

    My 10.27am response to Malc… £Billions on a vanity project, which serves only to give our leaders an illusion of being one of the ‘Big Boys’, is not one of my priorities…

  • Malcolm Todd 13th Mar '15 - 11:30am

    Dav
    And while, as part of the ‘smoking cinders’, were umpteen US bases, manned by thousands of US troops (and their families) and a significant part of their nuclear arsenal?????????

    “Who were all already dead. Why invite attack on the US mainland by responding?”

    The same argument, of course, would apply to the surviving commanders of British/French nuclear subs in the scenario you describe — why do you think Russia was/would be deterred by one but not the other?

    And fundamentally, the idea that deterrence constitutes use of weapons, whilst accurate enough, shows up the moral bankruptcy of the nuclear regime. Deterrence only works because the possibility of massive nuclear retaliation, even if there is no hope of thereby “winning”, is real. There simply isn’t any way of faking it.
    So if we are to stand by a policy of nuclear deterrence we have to accept the actual possibility of deliberately incinerating millions of civilians, including children, foreign residents, prisoners and political opponents of the regime we are supposedly fighting, not to mention risking catastrophic damage to the biosphere that will make the worst plausible predictions of global warming look like a washed-out bank holiday weekend. Well, I can’t accept that. I’ve actually tried, because I hate being a hopeless idealist who doesn’t understand how the real world works; but I can’t accept it. I’m not even bothered whether it saves any money or not. (Which I guess demonstrates conclusively that this is completely off-topic by now, but – so it goes…)

  • Malcolm Todd 13th Mar '15 - 11:31am

    Oh. Now imagine that comment not all in bold. *sigh*

  • matt (Bristol) 13th Mar '15 - 11:41am

    Malcolm … I like it in bold.

  • Malcolm….
    I’m with matt(Bristol) on this…

    lower case bold….passion
    upper case bold….shouting

  • expats

    Or in my comments —

    lower case bold….passion
    Incomprehensible … Spill-Chucker

  • We have strayed a tad off the topic. I’m glad Judy has reminded us that we need to take an over view on tax and spending before we get to the nitty gritty of how to achieve the results we want. I like the idea of higher VAT on luxury goods and services which the average person is only going to buy once in a blue moon. The problem is that the country hasn’t had many taxation policies aimed at improving the lot of the average person. Instead the wealthy have been the ones given most consideration. I am deeply suspicious of the reason which you give -that the tax take would be minimal. We have all come to believe it as a given, that the rich will avoid tax. Why don’t we look at the tax loopholes while we are thinking about tax and spending and reform that ridiculous situation too?
    Also can we please stop giving benefits to the wealthy. Benefits have to be targeted at those who really need them because we can’t afford universal benefits any longer. That may mean that the methods of tax collection will need reform but as you say we are in a high tech society so it’s difficult to understand why tax administrators are apparently still using quill pens.

  • @Judy

    “This article is simply about what kind of society we want to live in and whether we want to pay for adequate services for the most vulnerable in society.”

    Words you could of used to good effect in the article, because they clearly state your focus and intent. Which with the the background of the “big society”, opens up the door to consideration of the roles of social/civic duty and obligation and state provision. Also I think there are two groups of people you are really concerned about: those who most will regard as being the “most vulnerable” and those who are vulnerable to the vagaries of government policy and who’s work can directly impact the well-being of vulnerable people.

    “It is hard to write a thesis for sorting out the economy in 500 words!”
    Agreed, it does take effort and practise to write concisely – something I also do not find at all easy. The criticism (and certainly mine) is not personal, it is on the article and case it presents.

  • Matthew Huntbach 13th Mar '15 - 1:26pm

    It’s easy. If you want an NHS you have to pay for it. If you want state pensions enough to live on, you have to pay for it. If you want full state subsidy of university tuition, you have to pay for it.

    If when it comes down to paying for it, you say “ooh, er, I don’t like the sound of that”, well fine. Don’t have the taxes, and don’t have what they would have paid for.

    We’ve already seen that happen on one of those things, so what comes next? Up to you, Brits.

    Somehow, people seem to have got it into their heads that a coalition of Liberal Democrats and the Conservative Party would result in a government with Liberal Democrat levels of state service and Conservative levels of taxation. Well, that’s what it’s all about innit? The best policies of one of them and the best policies of the other.

    Just perhaps if we had political parties that didn’t patronise the people by pretending that the good things could be had without mentioning the balancing bad things, we could have a more mature national debate on these matters.

  • How as a nation could we have any self-respect if thousands of our people go to the food bank to feed their children

    Surely the fact that we as a nation provide food banks so that thousands of people who couldn’t otherwise feed their children can is something we can be justifiably proud of?

  • Dav 13th Mar ’15 – 2:57pm…Surely the fact that we as a nation provide food banks so that thousands of people who couldn’t otherwise feed their children can is something we can be justifiably proud of?

    Ah, those good old Victorian values! Workhouses, anyone?

  • Workhouses, anyone?

    Nowadays we call them ‘guaranteed job locations’.

  • Tony Rowan-Wicks 13th Mar '15 - 7:09pm

    Considering ‘car crash’ events, which many here seem fixated upon, we had our first in 2010 when a team of Tories wase given the largest number of seats in the HoC. This crash was compounded by bringing into the debacle the ‘thought police’ in the form of the LibDems who believed they could prevent the worst excesses of those emerging from the front of the crash.

    Now the same teams, and some smaller ones with greater chances of winning something, are on the road again. And heading for another car crash of even greater significance if the wrong team comes to the front [again]. The insurers of the coming crash, in the form of Bank or England etc, will approach the resultant damage by referring to where we were at the start of this race.

    I’m with Judy Abel in stating that we have the wrong system for settling the rights of all in the coming crash, and should certainly look for damage limitation, and give more compensation to those with old ‘bangers’ and preferably nothing to those with expensive vehicles. We need the chance to give all drivers some equality on the road – according to their ‘human rights’ to carry on driving after any crash – especially when they didn’t cause it.

  • Philip Thomas 13th Mar '15 - 7:16pm

    Scrapping Trident does not save any money at all while we are members of NATO because we are pledged to spend 2% of our GDP on defence, so (as the old joke in Yes Prime Minister has it) the MOD would spend all the money on conventional forces.

    I happen to think we should stay in NATO. Given that position, I don’t see any point in scrapping Trident: the nuclear deterrent is better value for money than conventional forces.

  • Philip Thomas

    What you say about NATO demonstrates that you misunderstand the facts.
    1… the UK currently contributes more than 2% to NATO and therefore it is possible to make savings by getting rid of Trident without having any impact on the contribution to NATO. As Toby Fenwick has previously pointed out the 2% measure is a useless method of budgeting as it depends on the moving target of GDP. We should decide what we need to do, decide if we can afford it and then budget accordingly. You see, to be suggesting we do it the other way round.
    2…There is nothing in the Treaty that requires member states to pay fortunes on useless nuclear status symbols — which is why the vast majority of NATO countries do not have Trident.
    3…Conventional forces have been put to some practical use over the last 70 years. As well as fighting in no end of foreign wars (most of which Liberals strongly opposed) the conventional forces have been helpful making a contribution to helpingout in various humanitarian crises around the world.
    I do not imagine the residents of Vanuatu would today prefer the opportunity to admire our Nuclear Weaponry rather than have a Royal Navy ship with practical aid and assistance heading in their direction, do you?

  • Philip Thomas 15th Mar '15 - 7:56am

    @John Tilley. It is a fair point that we are currently spending more than 2%- would cancelling Trident bring us below 2%?
    The uselessness of the 2% measure is also a fair point- perhaps the NATO treaty should be renegotiated?
    As for the usefulness of conventional forces, I see no reason why, if we are to be forced to spend 2% of GDP on defence, we cannot have both a nuclear deterrent and sufficient conventional forces to help the people of Vanuatu.

  • At conference welcome policy goals on better care for the elderly – ending 10 minute home visits and much better pay for carers . Also more than £1 billion extra for youth mental health now available. Encouraging.

  • Judy

    As others have pointed out this new higher VAT on luxury good that would be steeling the UKIP WAG tax. You righty note that you are not an economist which is why it is understandable that you have made the mistake of using static figures. If you Tax certain things more people consume less of them. Any money raised can’t be based upon current consumption. For example if you start to charge 25% VAT on electronics (particularly high value) you may see suppliers in Europe selling in to the UK, there was a good deal to be done in the ‘90s with car pricing by ordering on the continent (France 20%, Germany 19%, Luxembourg 17%,).

    I also would point out that you are only allowed two “reduced rates of VAT” under European rules, so we currently have 20%, 5% and 0%.

    To create a 25% rate would you put all the 0% up to 5% or the 5% up to 20%?

    The hospitality industry has poor pay at the moment, do you know of any analysis which considers how your planed tax targeting this sector would impact on employment?

    The idea of fundamentally revisiting everything not just picking at bits and pieces is a good one. A fundamental re-examination of what we do and how we tax. I would suggest the how we tax would have to be a phased in approach (Short term simplification e.g. merge NI & Income tax; long term e.g. LVT).

    Your suggestion for what we spend on also doesn’t address over spending (triple lock pension; pension benefits for Higher Rate, or even normal rate, tax payers).

    Also there has to be more thought of what public spending should be co-spending, the fuss over student fees is an example where the costs being shared are resisted in spite of how other people getting no assistance with training (not economically efficient). We have prescription charging for medical prescriptions for those who can afford it why not a contributory factor on other items. Why not align costs to usage, scrap road tax and insurance premium tax and introduce road charging, etc.

    Some items have to be totally funded via tax (like social services) others don’t but we may want to provide help so we should not assume that if government spends it must pay the whole cost. More building of houses would reduce the rents paid in housing benefit (that would have to be private and social), you could do so by relaxing the green belt restrictions.

    Fundamentally the issue as RC identifies id the productivity of the Economy. Education and housing are both key to this but not the simply demand from some that Government “just pays” it will have to be a mix.

  • Gareth
    “The idea of a luxury goods tax is perfectly legitimate – we already have examples, (air passenger duty, fuel duty, alcohol/tobacco etc).”

    Those ‘sin’ taxes work on the basis that they are generally price inelastic (APD being different but based upon environmental beliefs).

    John Dunn
    You probably don’t care about this point but European rules on VAT don’t allow you to pick the company you have to pick the product.

    JohnTilley

    “Any chance of a reasoned or even a reasonable comment from you saying what it is that Malc has done to upset you!”

    Is that a suggestion that someone should address the argument not the person? I’ll have to remember this for future threads.

    “Sell the Palace of Westminster to the museum and tourism industry and shift Parliament to one of those out of town mega-supermarket buildings that Tesco is leaving empty all over the country.”

    Preferably in Manchester, if not at least in the North.

    Matthew Huntbach

    “Just perhaps if we had political parties that didn’t patronise the people by pretending that the good things could be had without mentioning the balancing bad things, we could have a more mature national debate on these matters.”

    That is a dream. I wonder if it were ever to come true politicians would not be as distrusted as they currently are?

  • @Psi
    Interesting. An economist on Radio 4s Today Programme (6.30amish) suggested that putting VAT on food and compensating the poorest in society (eg by significantly raising tax threshold) would raise billions in tax by the better off paying VAT on food. I may not be an economist but here’s one who had some common ground with my view!

    @Matthew – absolutely agree. We have to pay for a good NHS, good social services and good education if we want it, at least until the economy may deliver more growth and tax revenues.

  • Alex Sabine 17th Mar '15 - 3:49pm

    A whole series of excellent points by Psi. As well as the price-inelastic point re ‘sin’ taxes, the imposition of high excise duties as well as VAT (and excise duties are extremely high in the UK by European and international standards) is usually justified on the basis that we are taxing a ‘negative externality’, ie confronting the consumer with costs they impose on society that are not captured by the market and not reflected in the price. (In fact little attempt is made to show that the level of extra tax applied corresponds to the estimated external costs, but that is another matter.)

    I do not think the mere designation of a particular item as a ‘luxury’ can in any way be justified on such grounds. The departure from a uniform main rate of VAT, and the resulting distortion of consumption decisions, has to rest on a different premise than ‘Pigouvian’ taxes on externalities – or at least it requires an Orwellian redefinition of ‘externality’.

    It also needs to answer the argument made by many economists of different hues that our VAT base in the UK is already too narrow, distorting and hideously complex. It is far from clear that exemptions, zero-rating and a reduced rate are effective ways of achieving the policy goals they are intended to achieve; but it is abundantly clear that they have many negative effects. See the IFS Mirrlees Review for a fuller explanation.

  • Alex Sabine 17th Mar '15 - 4:03pm

    I meant to add that if a ‘sin’ tax applies to goods for which the demand is price-inelastic, then it will succeed in raising revenue but not in reducing the number of sinners or the amount of sin! If the demand is more elastic, there will be a behavioural response but the revenue gains will be smaller. Indeed if the ‘sin’ tax is really effective in its stated intention of discouraging drinking/smoking etc, there will be a net loss of revenue (but presumably a welfare gain to society in the eyes of policy-makers). This is the basic conundrum of ‘sin’ taxes and ‘green’ taxes, and the reason why it is unwise to count on additional revenue from these sources to finance spending programmes or offsetting income tax cuts etc.

    A cynic might suggest that the last thing Treasury ministers want to happen is a strong behavioural response to ‘sin’ taxes and green taxes, any more than their colleagues wish to see their departmental budgets reduced by the resultant depletion of revenue… I’m sure they do genuinely want us all to drink and eat less, stop smoking, and drive and fly less… I just notice that few policy failures bring such lavish compensation and few clouds have such bright silver linings 😉

  • Enlight_Bystand 17th Mar '15 - 4:08pm

    @ Judy – the worry that jkumps out from that summary is those already below the threshold, or close to it – they would see little to no benefit from the tax cuts, but still suffer from the significant rise in prices. There’s also the impact the sudden spike in inflation would have on the likes of the Triple lock…

  • Well if raising VAT on high-end spending is not considered a viable option – although Sabine at one point you also say zero-rating hasn’t achieved its aims either – maybe we should raise income tax and be ruthlessly honest about the reasons why we need to – such as almost 1 million people having to use Foodbanks in the UK last year (the main reasons being because of benefit delays, low incomes and changes to the benefits system).

    It is interesting that Denmark – said to be one of the happiest countries in the world – has an upper tax rate of 55% and Sweden an upper tax rate of 56 %.

  • Judy

    You rightly note that one of (if not the main) cause of people using food banks is cock ups with their benefits. This illustrates that the problem is not total spending but effectiveness if the distribution system, the plan for universal credit is good in concept (simplify the numerous different benefits in to a simpler one) but has many issues with execution. Confusing the total spend question with the complexity of the old system and the chaos of implimenting the new does not help understanding.

    As you noted much further up raising income tax may have no effect on revenue, which according to the treasury estimates over the last few years may well be the case.

    People’s material condition is made up of both the money they receive and the costs the incur, the cost side of people’s lives is often overlooked. More housing, merging NI and income tax would materially improve people’s lives but are not often advocated.

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