IT HAS been six years since the financial crisis began, and the government’s books are still in a mess. As the chancellor prepares his latest Spending Review, public sector borrowing will yet again exceed £100bn this year. And most of that isn’t even cyclical – it is structural. In other words, its annual accounts will still be in the red even when the economy returns to a normal state.
The Government has recently set aside £500 million to build a rail link between Heathrow and The West and is likely to agree a similar figure for a line running south from Heathrow. But Windsor Link Railway, a private company, is competing to build the route and for a fraction of the cost. It is proposing the first wholly privately funded new rail line in over 100 years. According to its website, Windsor Link Railway’s proposals could save taxpayers over £1 billion.
This two phased project aims first to link Slough to Staines via Windsor and then to connect Heathrow to the Great Western Main Line and The South, significantly improving access to Heathrow and giving local people a much better service. It has support from local MPs including Michael Gove and Zac Goldsmith, Transport minister Theresa Villiers confirmed that it complies with the government’s specifications too.
What’s more, 95 per cent of local residents were in support of the scheme according to recent polling and over 100 local businesses have signed a letter declaring the project better than competing schemes.
The cost per metre of track is far higher in the UK than elsewhere in Europe, a problem exacerbated by shocking inefficiency of Network Rail and the complexities in building new rail imposed by the Department for Transport. So it will be interesting to watch this develop. If new private rail could see significantly improved services for passengers and better value for money for taxpayers then the option must be seriously considered.
Commenting on the Lough Erne Declaration, Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:
“This summit was a distraction which was never going to address the root cause of British public disquiet over tax avoidance: our hideously complex tax code.
“The way to ensure that all companies and individuals pay their fair share of tax here in the UK is for the politicians at Westminster who created our tax system to simplify it by scrapping the loopholes they introduced and ensuring that tax rates are competitive. Only then will people again trust that everyone is paying what is due.
“Transparency is important, on the part of both tax authorities and multinational companies. But it is also vital that there is tax competition between different nations, because that pushes down overall tax rates for families and businesses alike.”
Writing for the Yorkshire Post, Rory Meakin argues that the fundamental cause of all our tax woes is that our tax code is too complicated.
GOOGLE, Apple and Starbucks are just three of the multi-national companies under fire from the House of Commons Public Accounts Committee and its equivalent in the US Senate for their tax arrangements, one of the defining issues of the G8 summit now underway in Northern Ireland.
Recently, the National Audit Office unearthed public sector bodies dodging National Insurance for employees in Britain. Tax is big news in a way that it never used to be. Barely a day seems to go by without some tax-related news hitting the headlines.
Reacting to Ed Miliband’s speech on welfare, Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:
“Ed Miliband is right to acknowledge the burden of our enormous welfare budget but his proposals won’t do anything to tackle it. The best way to bring down the welfare bill is to focus on the cost of individual benefits, not introduce an overall spending cap. It’s also crucial that work pays, which means cutting taxes and leaving more money in the pockets of the people who earned it. Continuing to trap people in a complex welfare system just isn’t acceptable, so politicians must get serious about simplifying benefits, cutting taxes and removing regulations.”
Several policy ideas were floated in the speech in an attempt to address some of the challenges in the welfare budget. There are better ways to deal with these problems.
The main cause of Britain’s ever-increasing housing benefit bill is a lack of housing supply due to planning restrictions, not poorly negotiated deals by local authorities. Freeing up private investment in housing will bring down housing costs for everyone, including the Housing Benefit bill. Trying to cut Housing Benefit by increasing direct spending on housing won’t help taxpayers.
Grants for living wage:
Offering taxpayers’ money to companies in return for paying a living wage would do little more than link two bad polices into one. Incentives for companies to switch from low-paid jobs to capital investment could lead to fewer jobs, not more.
Tax Credits and low pay:
Heavy business taxes and onerous regulations mean companies have to pay lower wages. The Government should stop making it so expensive to hire low-paid workers by cutting business taxes like employer’s National Insurance and let workers keep more of the money they earn.
The contributory principle:
Benefits and taxes are already too complicated. Reform should focus on expecting people to work for their benefits and preparing job-seekers for the job market while simplifying the system.
Some of this yesterday’s papers were difficult to read. “Hungry Britain” screamed the Independent in its front page splash. Page two of the Guardian declared that “Welfare cuts have caused hunger and destitution”. Both articles are drawn from a new report Walking the Breadline by Church Action on Poverty and Oxfam. It examines the rise in foodbanks and food poverty in the UK and attributes much of this to changes in the welfare system The number of families turning to foodbanks is shocking and should act as wake up call to everyone,but is the rise in the use of food banks really a simple result of “the cuts”?
Leave aside the other problems with the report. Look at figures taken from the Trussel Trust and you can see that foodbank use has been rising rapidly since 2005, nearly doubling every year.
The number of foodbanks was rising rapidly even when benefits were increasing significantly faster than wages. The most common reason people use foodbanks is actually delays in benefits being paid. This accounts for nearly 30 per cent of referrals to Trussel Trust’s foodbanks in 2011-12. We have an incredibly complex benefit system which has been made worse by years of tinkering. Yet another reason to simplify the system along the lines of the Universal Credit.
After that, low income is the second biggest reason for referral at nearly 19 per cent. The cost of living has spiralled and low wages simply can’t keep up. But instead of doing something about the taxes and regulations that undermine everyone’s living standards, they want to rob Peter to pay Paul by increasing benefits, at the expense of higher taxes.
If we want to stop people relying on foodbanks, the first step should be to cut taxes on low earners. Even those on minimum wage hand over a considerable amount of their earnings to the taxman before they get to paying bills like their Council Tax. You want a living wage? Then stop taxing the minimum wage . And when you do spend it the taxman takes an increasing chunk of the money in VAT, Fuel Duty and charges on life’s little treats whether it is a drink or a smoke. No wonder people are skint.
But it gets worse, planning laws get in the way of house building so rents are sky high. Government energy policy it makes it more and more expensive to heat a home at winter, while the Common Agriculture Policy forces up food prices.
And who do you think pays taxes like National Insurance and Corporation Tax?
Workers. In lower wages.
In all of these ways, politicians have made choices that have undermined people’s living standards. It means that those people at the margins of the labour market, and trapped there thanks to a dysfunctional tax and benefit system, are much more likely to be pushed into reliance on a foodbank when things go wrong.
The problem is that too many campaigners who want to help are wedded to the idea that the solution to poverty is just more benefits. We have tried that for the last twenty years and where has it got us? An unaffordable benefits bill for taxpayers, people paying their taxes only to be handed the cash back after it has been put through the cogs of bureaucracy and zero action on the root causes of poverty. If you want to read a real manifesto for tackling poverty read the excellent Redefining the Poverty Debate by Kristian Niemietz of the Institute of Economic Affairs.
There is far more to poverty in this country than “benefit cuts”. For too long those wedded to a failed way of tackling poverty have been allowed to set the terms of the debate. We owe it to those struggling just to put food on the table to re-examine how we tackle poverty in the UK rather than pretending throwing someone else’s money at the problem is the answer.
The TaxPayers’ Alliance believes that a healthy and vibrant local press ensures proper scrutiny of local authorities. When councils use taxpayers’ cash to distribute their own publications they create direct and unfair competition for local media, harming genuine accountability. They also cost taxpayers’ money and savings need to be made.
The Department for Communities and Local Goverenment have produced a Publicity Code. It contains many sensible suggestions for how councils should conduct themselves when it comes to publicity. Unfortunately, many are ignoring the code of practice and are wasting taxpayers’ money on rival newspapers, or making political points by plastering posters all over town.
Our response, which can be found here, calls for an end to free-sheets so that local journalists can play their part in keeping local politicians honest. We encourage everyone to respond to the three-question consultation, which you can do by clicking here.
Pub groups have slammed Department for Business, Innovation and Skills plans for a new quango to micro-manage the details of agreements between pub landlords and their commercial tenants. Punch Taverns said:
A founding commitment of the coalition was to reduce regulation, but ministers now seem intent on wrapping Britain’s pubs in red tape.
The problems that the pubs industry faces are not because of a lack of regulation and taxes from ministers and civil servants. The problem is crushing taxes and too much regulation.
It was a great move by the Chancellor to listen to our Mash Beer Tax campaign and scrap the beer duty escalator in the Budget, cutting the tax by 1.5 per cent. But at the same time he also hiked tax on cider, wine and spirits by 5.2 per cent.
And tight planning restrictions which drive up residential rents and house prices, causing the housing crisis are also contributing to the slow but steady disappearance of our pubs. The high residential property prices caused by planning regulations provide a financially attractive alternative for pub buildings, putting economic pressure on owners to convert them into flats.
Pubs don’t need Vince Cable’s battalion of beer bureaucrats to pontificate about what ‘fair prices’ are or dictate the terms of their agreements. They need planning reform so residential property developers are allowed to build homes in commercially viable locations and don’t have to resort to converting pubs. And they need lower taxes not just on beer, but on wine, spirits, cider and business rates, too.
New research by consultants KPMG for tobacco company Philip Morris International has claimed that the UK has the EU’s fastest growing black market, which now accounts for one in six cigarettes sold.
These figures follow research published last year by the TaxPayers’ Alliance which revealed that the tax loss from illicit alcohol, tobacco and fuel totalled £28.5 billion.
It’s increasingly clear that the UK’s high lifestyle taxes have become ineffective at both raising revenue and controlling consumption. Governments can only go so far in hiking taxes before people start to ignore them and enter the black market instead.
With the Coalition intent on hitting the arbitrary target of spending 0.7 per cent of our national income on international aid, the Department for International Development is awash with taxpayers’ cash and short of ideas on how to spend it.
In a fiercely critical report, an all-party committee of MPs found evidence of two-thirds of DFID’s budget being channelled through inefficient international organisations, money being moved between accounts to hit targets, and other poor spending decisions. Official documents reveal how in 2011, the department was forced to boost spending by £580 million in a frantic rush to meet increasing spending targets, with £130 million used just to increase the value of payments due on a number of projects.
DFID will see its budget increase to £8.2 billion with a superfluous cash injection of an extra £500m this year. This comes at a time when all other Whitehall departments, barring health, face cuts. The government needs to call time on its policy of pouring taxpayers’ money into international development so they can meet meaningless targets and feel self-righteous.
Friday’s Independent carried details of globe-trotting MPs leaving their constituencies without representation for long periods of time. Mark Hendrick MP spent over 100 days outside the country and at one point spent a month in Beijing learning Mandarin.
Some foreign travel may be justifiable in the interests of informing an MP’s work on a specific policy area or geographical region. But it would seem that some need reminding that they are elected to look after the interests of their constituents both locally and in Parliament – and being on the other side of the world makes that task somewhat harder.
Another case raised by the Independent was Barry Gardiner MP, who spent 73 days out of the country. He is Ed Miliband’s Special Envoy for Climate Change and the Environment and visited Berlin, Cape Town, Cape Town again, Jakarta, Rio de Janeiro (twice), Venice, Warsaw, Washington, New York, Mexico City, Japan and China. It seems strange that there were no other more energy efficient alternatives to all this air travel…
Indeed, politicians and bureaucrats working on climate change seem to be fond of taking lots of flights, despite the emissions. Our research earlier this month showed that the Department of Energy and Climate Change is fond of a flight or two as well, including the occasional trip on business class.
David Miliband MP, who stated after failing to win the Labour leadership that his constituency, “South Shields comes first”, managed to spend 47 days out of the country with a total of 14 foreign trips. There are of course times when foreign trips are necessary, but excessive time overseas impedes the very job our MPs are paid to do.
The issue of adequate representation has been brought to public attention this last fortnight by Nadine Dorries MP, who gallivanted off to Australia for her cringeworthy appearance on a I’m a Celebrity Get Me Out Of Here. All the while, her constituents were left without a parliamentary representative.
Taxpayers have very real and pressing concerns. They pay for MPs to represent them in Parliament. A few necessary trips aside, MPs should be in their constituency or at Parliament as often as possible.
Education Secretary Michael Gove announced yesterday a pioneering drive to cut spending on bureaucracy after a comprehensive, zero-based review identified potential savings of £290 million. As Peter Hoskin points out on ConservativeHome, the Education Secretary is going further than his cabinet colleagues by aiming to cut departmental spending on administration by 50 per cent by 2016, exceeding the coalition’s target of 33 per cent by 2015.
The headline-grabbing statistic that staff numbers will fall by around a quarter to 3,000 is welcome but the review has proposed a more comprehensive package of cost-cutting measures. The department will also be moving out of its pricey Westminster HQ to cheaper digs while excessive overhead spending on finance, HR and IT will be slashed and six unnecessary regional offices closed. The TaxPayers’ Alliance has long been calling for departments to make savings on office space, identifying a staggering £112 million being wasted in recent research. It’s great to see the pressure we’ve been putting on ministers resulting in real gains for taxpayers.
The report found decision making in the department to be “slow and laborious” highlighting duplication of work, uncertainty among employees of their roles and general overstaffing – themes all too common in our bloated public sector.
The TaxPayers’ Alliance has led the way in campaigning for an end to profligate spending by Whitehall departments and for leaner, more efficient bureaucracy that delivers better value for money. However, while this programme shows there is scope for savings in the education department, they are by no means the worst offenders when it comes to waste. We identified £59 million that could be saved by the Department for Environment, Food and Rural Affairs on office space alone compared to just £2 million at Mr Gove’s department. The initiative shown by the Department for Education is commendable but it will only deliver a very small percentage of the potential savings. Taxpayers deserve value for money from all departments and it’s about time Mr Gove’s colleagues followed his lead.