Monday 14 March 2016

UK Budget mess caused by Brownian motion

One thing that is really bothering me is that somehow the Government is finding more and more ways to spend money, whilst at the same time putting in place some huge cuts in certain areas (local Government for example).

Traditionally, tax rises on income tax and VAT were the way forward. For PR reasons, these have been dropped by Brown/Osborne and now they try it on with a variety of smaller taxes that they hope people miss; like Insurance premium tax or stamp duty.

Yet the national spend rises inexorably north, with the tax base stable or at least growing far more slowly than hoped.

Every budget becomes the same issue, where can they try and make the cuts that piss off the fewest special interest bodies, make a few giveaways to the Grey voters who vote Conservative and raise stealth taxes.

This, in reality, is in no way different from New Labour.

But we do have a problem, because the deficit is now stuck at far too high a rate for us to manage and with little clear idea as to how to get it down. Plus, because of the need for excessive taxation to tackle welfare and the NHS, there can be no real reform of pernicious taxation such as business rates. Instead we have the ludicrous Apprenticeship Levy to add to business burdens.

A brave Chancellor would harmonise capital gains taxes with income taxes and bring in larger sums as avoidance became less incentivised. A brave chancellor would put up income tax and reduce the complexity of the Brownian fiddling with the tax code.

Of course, we have no such thing, what a fix the Government has made for itself and yet come Wednesday it will all be; China slowdown, Brexit, Canine consumption of written commissions etc.


dearieme said...

"This, in reality, is in no way different from New Labour." That's because Cameron isn't much different from Blair. OK, he's not a demented narcissist, and he's rather more intelligent, but still he's essentially Blair.

And he does it because that's what the electorate wants.

John in Cheshire said...

A brave Chancellor would actually reduce spending; cut foreign aid, reduce the amount we pay to the EU (unilaterally by telling the EU thugs that we aren't going to borrow just to line their corrupt pockets), de-fund entire departments (because that seems the only way to get rid of them once they've been put in place), quangos and other extraneous drains on our money such as propping up fake charities.

A brave Chancellor would reduce taxation, and honour their commitments regarding Inheritance Tax,

A brave Chancellor would allow interest rates to find their own level.

But none of these things will happen and it will be more of the same; so the problem is never solved.

Diogenes said...

I think you'll find that expenditure is linked to the commitments that Parliament enter into via "the will of the people".

Half the number of MP's and there will be less time for them to vote on yet another grand plan. Spending is proportional to the number and layers of politicians from the Parish Council all the way up to Brussels.

Tackle that and you sort the deficit.

SumoKing said...

A brave chancellor would explain to pensioners that they did not save for their retirement, they damn sure didn't plan on not paying tv licences and getting free bus passes. They didn't plan on living past 70 and they were more than happy to erode what savings they did make by inflation and windfall house price gains, which again, they don't want to liquidate to pay for care that their entitled kids won't do.

So yeah, I agree, welfare and nhs are the big burdens and the people being asked to pay for it have been roundly shafted by their greedy entitled parents need to live in permanent comfort.

But how do you get granny to actually pay her way now? solve that and you solve the lot.

andrew said...

For me it is more that the tax-raising is not closely linked to the spending.

If the parish council decides to spend £20m on a new rollerskate rink for disabled transgender refugee kittens AND gets the votes from those who will be footing the bill, so be it.

The thing is that right now if a council scores highly enough in the disadvantaged buzzword bingo, they get lots of central govt money.

This sort of thing started shortly after ww2 - national planning (the NHS!) and hit its peak around when thatcher got rid of the GLC.
We now have the fag-end with Gove and academy schools. Nothing wrong with academy schools in themselves, but putting control of all those schools in the hands of the dept of education in London is plain silly.

It is the use of the symbols of openness and decentralisation whilst at the same time using the actuality of soviet-era levels of central govt planning and control. I am not attacking any one party in particular. They are both guilty.

One thing that has been shown to be true repeatedly is that central planning and control may work in wartime or in the short term,
but in the long term does not.

I do not see that all those billions central govt ploughed into Blackpool / Gt Yarmouth / the north east / wales / scotland etc over the last 30 years or so have really helped that much. You may say things would have been a lot worse.

I would say that making the local authorities contort their spending plans to fit whatever way central govt thinks they ought to be allocating resource that year:- having someone in local govt prepare the bids, in central govt score and review those bids, then later on have someone in local govt report on progress to ventral govt and someone in central govt monitor compliance is both guaranteed to provide an outcome that is not appropriate to that locality and inherently inefficient due to all the over-management.

Those who remember Hatton's Liverpool can point to some examples where localism did not work out so well. My response would be some bad things did happen, but central govt should have given those who voted him in enough time and space to understand he was not running Liverpool in the interests of the city and given them the chance to vote him out - or not.
Just like we do at a national level.

I know Osbourne is handing back some tax-raising powers to local authorities for base political reasons, but it is probably one of the better things he will have done as a chancellor.

Money will still be transferred from the rich SE to the poorer NE etc but money spent to achieve local ends should be raised as locally as possible and always controlled locally.

If n. somerset want to spend 10bn to create a bristol boating lake (and tidal power) from money raised locally, I probably would vote for that.

Anonymous said...

I am not for tax rises per se. but I really hate the stealth taxes and they are a big drain on entrepreneurship and business in general.

encouraging tax avoidance is a bad thing for the government to do; all have done it this century and I find it incongrous how people living in the same street get such hugely different results from the system.

In terms of spending less, the Govt really has made some huge cuts, like legal aid, that have hit hard. But overall they cut infra spend and local govt. Departmental budgets and little else.

The elephant of NHS and Welfare should be targeted to close the deficit in a few years; but by ignoring them the roof won't get fixed and we are already past the top of the boom post 2008.

Anonymous said...

SumoKing - I posted a comment here a couple of days ago about how NI contributions should be WAY more then self funding as pensions go. Instead state pensions have become reclassified as benefits.

The national debt and the deficit prove the "migrants are essential to our economic recovery" thing is a load of shit.

I don't blame the Boomers for being imprudent. I do, however, blame them for squandering the stable and secure country they were gifted by those who fought for it in WW2.

Anonymous said...

"Every budget becomes the same issue, where can they try and make the cuts that piss off the fewest special interest bodies, make a few giveaways to the Grey voters who vote Conservative and raise stealth taxes."

As I see it, it's going to be shit or bust, thus the rools will change what George does is neither here nor fucking there.

So, he (Osborne) really does want defeat natural science, to grow a pair and can I suggest and ever so impolitely:

How about................. a few cuts?

Say, with immediate effect..
cut all tax breaks to the big Charities,
bin the quangos,
Get the BBC off of the public teat pay per view or and advertizing,
end foreign aid,
halt all EU payments,
reorganize some, all government departments,
privatize the NHS,
get out of the EU,
Break up the banks/let them go bust,
stop filling the boots of corporate Empire not least PwC, EY et al, the 'legal' Magic circle, Crapita, G4S et bloody cetera
and er close the bloody borders to the endless stream of South Asian gimmegrants which means get out of the ECJ-ECHR - see above and ref EU.
no public sector boss to be paid more than £140k p/a and if they can't hack that let them and immediately Foxtrot Oscar - could most of central government, councils, quangos be run any worse, than at the minute? Redraw civil service contracts.
Deport foreign prisoners at £40 k per year that's £400 mil' p/a just there.

Think on.

Plenty of cuts, lots of easy fat juicy low hanging fruit there - mate.

James Higham said...

Ever higher taxes. Y-e-e-s-s-s.

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