Tuesday 21 August 2007

Will taxes ever be cut in the UK?


As we edge close to the next recession (or Depression, depending on how much the financiers screw everything up), alarm bells are ringing in my head about the future that taxpayers face.

Public debt is at an admitted 36.4% of Government spending (let's not include all the PFI and State pensions we have not paid for, as Gordon wants us too).

The Public sector employs 5.8 million people, a near record, only beaten at the height of the last recession in 1992.

Our Chancellor thinks that money not in the government's hand is an utter waste.

Our Shadow Chancellor, George Osborne, thinks along these lines "
I want to simplify taxation and move towards a lower, flatter tax system. In a mature economy like the UK, moving directly to a "pure" flat tax would not in practice be viable. That said, many of the features of flatter taxes, such as simplicity and stability, can and should be actively pursued." Not exactly shouting from the roof tops is it?

In a recession, a government following Broon and Badgerss beloved Keynesian economics, needs to spend its way out of trouble. Unfortunately, we don't have much wiggle room on the borrowing side, maybe 5% or 6%. That is only about £25-30 billion. Given government waste on expenditure too, that effect of that money will be considerably reduced.

So instead, tax rises might have to be considered to keep the Northern & Scottish Statist economies going. Yet we already employ 5.8 million public sector workers, all with fantastic pension (liabilities). So can we really increase this number and remain economically productive? It would seem unlikely. How many more Head's of Adult Services do we really need?

As for the Chancellor, not paying tax must be theft according to his new paradigmatic viewpoint. He won't stand in the way of his masters' redistributive wishes (i.e. from producers of cash to consumers of cash).

Finally, the Conservatives as quoted above, whilst making some noises about reform, really are not interested at all. They are far more concerned about getting the votes of public sector workers and the 7.95 million non-working people. This is politically a prudent strategy, as without the 14.85 million state and non-working people potentially voting for them they have very little chance of being elected.

For a taxpayer though it makes grim reading. I can't see any way in which taxes will come down in any meaningful way, despite their huge increases over the last few years.

Ouch, that hurts.


24 comments:

Mark Wadsworth said...

There's one set of figures that says 5.8 million public sector employees (whose accumulated pensions have an NPV of about £1,000 billion).

There's another set that uses the more reliable International Labour Organisation definition of 'public sector' that says there are 7.1 million in the public sector, or 8.3 million working in "public admin, education and health", up from 6.5 million in mid-1997.

Wolfie said...

To be fair to the conservatives, a decade of profligate public spending and commitments has painted them into a corner so to speak. With the public accounts in such disarray they have little room to manoeuvre - and neither has the UK as a whole.

To put it bluntly, we are deeply exposed to financial risk and there is no magic bullet that can alleviate this problem.

Vindico said...

I totally agree. It does look bleak. The only way taxes are going to be cut in any meaningful way is if the keynesian principle is used in reverse - i.e. cut taxes in a downturn to stimulate the economy rather than spend. Then we might see some sizable tax cuts.
Also personally i would ratehr the Tories actually took on the main taxes rather than fiddle with IHT. Merging NICs and Income TAX would be a a start.

CityUnslicker said...

Mark - thanks for the link, not that it has really made me feel much better about our prospects!

CityUnslicker said...

Wolfie - Yup, our pasy spending by Brown has painted us into a very tight corner.

Anonymous said...

Be sure to make some Personal Pension contributions before the Autumn Statement - who knows how much longer the tax benefits will last?

CityUnslicker said...

Vindico - It seems the tories are following the Blair agenda, changing marginal taxes and playing around the edges. The tax system is in desperate need of reform.

I await with fear the proposals on green taxes!

Mark Wadsworth said...

CU, the link was not supposed to make you feel better ...

CityUnslicker said...

Dearime - Well said, Brown hates the idea of anyone being able to retire in comfort. He wants everyone in penury to vote for him and his miserable increases on the state pensions. Bastard.

CityUnslicker said...

I know Mark, 5 days without sleep is getting to me now though. Accursed paternity leave, it was better when we only had to do a week of this...

Steven_L said...

It's depressing isn't it. I've upped my slamming to the maximum now, every photo-bundle counts. I'm already slamming t foreign people that don't really understand me (obviously). Now not even the elderly will be spared having their accounts slammed with photo-bundles. I fear it may not be enough.

Anonymous said...

What is Steven talking about? I just applied for that job by the way... Thanks for the tip.

Steven_L said...

Slamming Mutley, slamming. It's my job and it's looking increasingly likely I'll be stuck in it a while longer, slamming your mobile phone accounts with photo-bundles.

It's ironic you ask what I am talking about, I like to get my customer to that point so theyare just saying 'OK' or 'right' every time I stop talking. When they say 'OK' or 'right' at the wrong time they get slammed with photo-bundles.

Got to keep consumer spending (and my bonus) up now.

Newmania said...

The 8,000,000 public sector vote is ofcourse far more than that . thes era jobs keeping familes afloat and encouraging a culture where the production iof gooids and services is invisible to enitre communities.
When a certain propoprtion of the country becomes employed by the state then deomocracy ceases to mean anyhting much and I fear we are reaching that point

Sackerson said...

Wasn't there a Russian Communist worker's joke that "we pretend to work and they pretend to pay us?"? Jealousy of public sector workers (scorn in boom times) is merely exploited to divide and rule us - please don't fall into the trap.

"Vindico" - spot on re NIC and Income Tax, and it won't happen, precisely because it will show up the true situation - and allow much more tax relief for pension contributions.

However, why shouldn't payslips clearly show employer's NIC as well as employee's, add-in income tax and label the lot "government deductions from your income" - and for good measure, express this as a marginal rate of taxation, e.g. "an extra £100 on your income will result in additional government deductions of £45.80". Then the ordinary wage earner would start to have a clue.

Any employers willing to do this?

CityUnslicker said...

Sackerson - I am not jealous of public sector workers; just aghast at their numbers. I would not want to work the way they do.

That does not mean I cannot be wary of the political effect of having so many people empolyed by the state.

CityUnslicker said...

N - I quite agree, I think democracy is threatened by the massive influence of state power. What we have created is not what it was meant to be. How long before we are like Italy, where whoever is in government makes very little difference?

One answer to this is Scottish Independence. Without the Scots, their would be a much healthier balance of private vs public in the country.

Mark Wadsworth said...

CU, heh heh, how long are you taking off work? That relaxing eight hour spell where you have your peace and quiet? being a total cad I never took more than about three days off.

Newmania said...

Jealousy of public sector workers (scorn in boom times) is merely exploited to divide and rule us - please don't fall into the trap.


This is a meaningless remark we are already divided almost perfectly along poltical and employment lines . The Labour Party rule with an alliance of Public sector wasters , the 5500000 out of work ,pensioners ( let us not forget) immigrants the anti English and the old Union tribal vote ...fat less important than it used to be but still very much there ....also the Guardian readers .

Take the Public sector out and they are nowhere. They always support higher taxes ironically until they are so well paid the increment is marginal. The £190 billion od quangos is an electoral bribe but more than that it is an attempt to create a one party state.

People say these are quiet times . I see it differently . They are quiet in the sense we are floating of a precipice quietly

Ye CU you are a cad! change some napppies

Sackerson said...

Newmania: what I said is not meaningless, since you disagree with it. There's too much stereotyping in these discussions -I spent years in the public sector as a teacher, and can assure you that we weren't all Guardian readers. In fact, teachers are now among the first to see and suffer the results of all that bien-pensant destruction of the family.

But I would agree there has been a coup in public sector management by the card-carrying Left, so it's more than your job's worth to rock the boat. Even in China and Russia, the Party is and always was a small minority - it only takes a well-organised, determined and ruthless 5%.

pommygranate said...

i hate to say it because it sounds as though i am looking forward to it, but the only way the State is going to get trimmed is through a recession.

in the good times, you can have as many Diversity Officers as you want, but not when times are hard.

Anonymous said...

Don't you beleive it Pommy.

The 1980s recession saw the beginning of the recruitment of anti-racism officers and the racism awarness courses in local authorities.

It continued apace during the early 90s too.

Public sector do-gooders can always find the money if they want to.

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