Monday, 1 March 2021

David Cameron is right - no new taxes now

Rishi Sunak, so beloved of the media last year as Chancellor giveaway, had a harder time addressing the media ahead of the UK Budget this week. over the weekend. 

He has been harassed by panicky mandarins into raising some taxes to plug the enormous deficit caused by the Covid pandemic inspired economic shutdown. 

However, as David Cameron said last week. We don't know how deep the damage really is until we re-open the economy. It might well bounce back fairly well. 

Of course, there are hundreds of billions blown on furlough and tax collection is well down, there is a huge hole in the Government balance sheet. But the same is true across the world. Raising taxes on business is his favourite idea, along with taxes on entrepreneurship. 

Given the current impact of Brexit, this is the worst idea of a tax rise. Right now, we need to stop businesses relocating to Luxembourg, Dublin and elsewhere in the EU. Having paying businesses leave the Country for the EU is a loss in a zero sum game. 

Instead, the Chancellor should be doing a mini-budget, introducing some austerity to public spending ex-NHS and reducing the furlough scheme from April. Then, when hopefully things are more normal in the Autumn better stock can be taken of what needs to be done to pay for the pandemic over future years. 

All that really matters is that we get Government income and tax rises at the right level to start reducing the debt as a percentage of GDP in 2022 - anything before that is likely to have a net negative impact on an already sclerotic economy. 

Tax rises during lockdown is surely the worst idea yet from the Treasury! If you had too, then maybe a digital tax on online sales as part of the great re-balancing around business rates and the changing economic model - but in theory these should be tax neutral changes in any event. 

20 comments:

Nessimmersion said...

What would the 2 gentlemen below have done?

Ludwig Erhard of W Germany.
Cowperthwaite of Hong Kong.

We can learn from history if we choose to.

E-K said...

Sunak beloved of the media.

I don't know why. Nothing easier than splooging on a credit card to buy the whole pub a drink. The hard bit is yet to come.

DJK said...

I also don't get why Sunak is talked up so much, although as far as I can tell, much of the media adulation originates from Sunak himself. See today's photo-op.

Matt said...

Not sure why the NHS is sacrosanct. But in any case, PHE is close enough and getting rid of it (yes, I know it's supposed to be dead already but it just changed name) would save £4bn a year for a start.

Then there are all the other Quangos...

Anonymous said...

Just taking a double take here. Why would any company want to relocate from Sunny Brexitland.

Asking for a friend.

Charlie said...

Anon, have you ever tried to do business in France? Would you like to relocate your financial services firm to Germany after Wirecard?

Anonymous said...

Anon @ 7:18 here

Quite agree Charlie, and why financial companies need a subsidy or a tax break to keep them in the UK seems a bit odd. If anything, there should be a premium paid for being here - and not just financial companies either.

Anonymous said...

"I also don't get why Sunak is talked up so much, "

It's obvious,it's nothing to do with his experience or expertise, and everything to do with his ethnic and religious background.

That's how it is these days. We can destroy the economy an run up extraordinary debts, cut our energy consumption ( if the economy is dying that's easy ), wipe out huge swaths of what was once British economy (pubs shops restaurants etc ), none of it matters because at least we aren't nasty, CO2 polluting racists.

Nick Drew said...

Charlie, you are of course 100% right abt GE and FR - it's the Dutch that are benefitting. (Dutch law is closer to English law than is usual for a civil code jurisdiction, and they are a lot less corrupt / xenophobic / obstructive in their attitude to trade)

Unknown said...

"It's obvious, it's nothing to do with his experience or expertise, and everything to do with his ethnic and religious background."

However, he does have suitable experience and expertise.

Do you think a Hindu background is a guarantee of promotion in the Conservative party, as a Muslim background (or foreground) is in the Labour party ? I suppose both parties may be under the illusion that promoting people of some specific religion will guarantee votes from those of the same religion.

Bearing in mind that all religions (including Marxism) have many mutually hostile sects, that may not be true.

Don Cox

Anonymous said...

"Do you think a Hindu background is a guarantee of promotion in the Conservative party, as a Muslim background (or foreground) is in the Labour party ?"

Why don't you trot off to Pakistan and see if you can get your self a sinecure in the Pakistani Military top brass, or India and one of the two most prestigious posts in the Indian government.

Don't forget to report back and keep us updated as to how you get on.

Unknown said...

"Why don't you trot off to Pakistan and see if you can get your self a sinecure in the Pakistani Military top brass, or India and one of the two most prestigious posts in the Indian government."

An Englishman or Scotsman could do that from about 1840 to 1940; but you haven't answered my question.

Do you think the Conservative party is practising positive discrimination to the detriment of government ? I'm not convinced that it is, but I may be wrong. My strong impression is that the Labour party _has_ been positively discriminating, and as a result has become racist as well as classist.

I think Sunak would succeed just as much in India as he has here.

Don Cox

Anonymous said...

"An Englishman or Scotsman could do that from about 1840 to 1940; but you haven't answered my question."

And guess what? The Indians didn't want the English nor the Scots in their government. Obviously nasty little racists.

"Do you think a Hindu background is a guarantee of promotion in the Conservative party, as a Muslim background (or foreground) is in the Labour party ? "

Frankly, I couldn't give a toss. The Tory and Labour party are two cheeks of the same deep state arse.

andrew said...

What worries me is that no one seems that bothered about the loss of optionality.

Taleb on optionality:

If you “have optionality,” you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur. (The key is that your assessment doesn’t need to be made beforehand, only after the outcome.)

Basically if you borrow 200bn or so you are on the hook to repay.
Right now that may be at 1.5% - 3bn pa and that is then 3bn pa interest for pretty much forever.
We are betting that the govt today has a better use for 200bn today than our future selves and their descendants can have for an extra 3bn a year. Every year. Forever.
That is what our leaders tell us and the chances of them being right are pretty small.

DJK said...

That Sunak thought it right to suggest that a picture of Ghandi should be on British banknotes suggests to me that he has no feel whatsoever for what British people think. Not least he might have considered the views of British muslims towards Ghandi, or the views of black Britons who might not agree with Ghandi's thoughts on Africans.

lilith said...

Charlie, in my (self employed) early twenties I once sold some of our product in France at a Barcelona trade fair. The buyer refused to pay. I was so naïve that I had no idea people order stuff they have no intention of paying for! Cash up front when dealing with our French cousins.... Getting the stuff back was quite the Odyssey and only partially successful. They don't have that "my word is my bond" thing going on.

E-K said...

Furlough extended to October... here we go.

When all vulnerable people and over 65s have been inoculated why not set us all free ? Are they scared of showing us what Focused Shielding might have looked like ?

Anonymous said...

E-K "Are they scared of showing us what Focused Shielding might have looked like "

Maybe,but I reckon they are more scare of showing us what the economy looks like after a year of shutdown.

Elby the Beserk said...

"Matt said...
Not sure why the NHS is sacrosanct. But in any case, PHE is close enough and getting rid of it (yes, I know it's supposed to be dead already but it just changed name) would save £4bn a year for a start."
=========================================================================

Yes. Last thing I expected to happen here was the Soviet style enforced worship of state institutions.

Not to mention, I was under the impression that I had been paying the NHS for decades to protect me. Not so, it seems. I pay for the privilege of not using it.

All Hail the Glorious NHS!

dearieme said...

"I also don't get why Sunak is talked up so much"

Maybe because quite a few of the Cabinet are a bit dim whereas he's rather bright. Just a guess, I admit.

I must say, though, that the Shadow Cabinet seems to be remarkably dim. Where do they find them?