An interesting piece by Rupert Darwall in today’s Wall Street Journal explains how tax has once again become political centre-stage…
"The first signs of a taxpayer revolt came last October. With Mr. Brown poised to call an election to capitalize on his momentum in the polls, the Conservatives announced they would exempt the first £1 million (U.S. $1.95 million) from inheritance tax. It sent an electric shock through the electorate. Mr. Brown called off the election and his poll numbers tanked.
"The tipping point came in March. Through the winter, Labour had clawed back some of the Conservatives’ poll lead. Then came the annual budget. Steep hikes in annual car taxes – dressed up as measures to help cool the planet – took the levy on some family cars up to £400 a year. Labour’s ratings started to slide. They went into free-fall when people realized that Mr. Brown’s abolition of the 10% starter rate of income tax actually had the effect of raising taxes on the lower paid.
"Something big is happening in British politics: Taxation has re-emerged center stage. And as an issue, taxes favor the Tories. Conservative leader David Cameron was quick to exploit the change in the public mood, giving a speech with the Thatcherite theme of making government live within its means. And the policy lessons come more naturally to the Conservatives. Instead of squeezing the tax base and (as the Laffer curve predicts) collecting less revenue than you’d hoped, do the opposite. As happened under Conservative governments in the 1980s, tax reforms that cut people’s marginal rates and create far more winners than losers are good for the economy – and for winning elections."
…and gives the Tories some apt advice: avoid green taxes:
"Harder for the Conservatives to square with voters is their support for green taxes. The public is beginning to realize that there is no pain-free path to a low-carbon nirvana. Unlike Labour, though, the Conservatives are in the happy position of not having to reverse tax increases they’ve already announced. Raising the car tax cost Bill Clinton his first re-election as Arkansas governor. Having been forced to make concessions on the 10% band, Labour will also have to draw the sting of its higher car tax. While politically necessary, such concessions won’t help the prime minister. Voters can see the only reason the prime minister is responding to their concerns is because he is unpopular. Reward Gordon Brown with another term, and their leverage is gone."
With the latest polls showing that only 2 per cent think they don’t pay enough tax, the political party that sets out a plan to rein in government spending and substantially reduce the overall burden of tax will reap the electoral rewards.
The Telegraph ask an important question, how should the NHS be reorganised?
Government plans for new polyclinics are facing furious protests and, despite spending £1 billion, government initiatives have not offered significant increases in choice that might drive improvements in standards for patients.
The problem is that the Government are trying to force what should be a decentralising agenda, greater choice within the NHS, from the centre. Programmes like the National Programme for IT are a huge imposition on the independence of local health providers who, with so many decisions made by central quangos, have little ability to form their own policies.
Instead, as we set out in the report Wasting Lives: a statistical analysis of NHS performance since 1981 in European context (PDF), the NHS needs to be freed from day to day political control. The NHS needs more decentralisation, competition and an end to political management. Other European countries, with more effective healthcare systems, decentralise provision to competing social health insurers who buy services from independent hospitals. Our report concluded:
"Failing to reform the NHS comprehensively leaves British healthcare without the decentralisation, competition and professional management that it so urgently needs. Confused and unstable policy has managed to combine the worst of both worlds through constant transitions but little lasting reform.
The poor performance of British healthcare is not preordained. It is not a price we pay for ensuring that everyone gets the treatment they need, given that the other European countries this study has examined all look after the unfortunate. Equally, our healthcare system has proved unable to make effective use of large amounts of additional resources so this is not a problem that will go away with more money. Gordon Brown has proved that.
Politicians should stop trying to do the impossible and focus on their proper role of setting high-level policy. Professionals working in the health service can enjoy greater autonomy which will make for more satisfying and possibly even less stressful careers. Patients can live longer and healthier lives. All it requires is that we learn important lessons from how other countries organise the provision of healthcare."
Now the precedent has been set, how much more will it cost taxpayers to maintain the Government’s majority? There are a lot of votes coming up and a lot of unpopular and controversial measures to be discussed. If there are rebels too principled to be bought, as there clearly were in the Labour party last night, then MPs who would otherwise be automatically loyal will undoubtedly realise their support is now worth withholding until they get a good offer. Imagine if John Major’s Government, bedevilled by rebellions and a wobbly majority, had taken this route, simply buying itself the legislation it wanted. The Government might have got through more of its desired legislation, but taxpayers would have been bankrupted within a year or two. At this rate, we still might.
The application of pressure and the negotiation of concessions is a valuable and indeed crucial part of the Parliamentary process, but those concessions won in return for votes are meant to be improvements in the Bill being debated. By all means discuss more safeguards, re-wording or sunset clauses, but simply selling or buying votes in return for taxpayers’ money being poured into one constituency or another demeans the process and does nothing to improve the legislation.
This seems to have been pork barrel politics of the worst kind – a Prime Minister buying the survival of his Government by splashing cash on particular parts of the country in return for the local MP’s support. The sum suggested by the Conservatives is anywhere up to £1.2 billion, which equals almost £50 for every household in the land. I don’t suppose the price matters so much if you can force taxpayers to foot the bill for you.
If the allegations are true that Gordon Brown effectively used to taxpayers’ money to buy the votes of the Democratic Unionist Party (DUP) on 42 days internment without charge yesterday, it is a national disgrace that bodes extremely ill for taxpayers.
An interesting piece in the FT today reports that a House of Lords report has concluded that the Government’s non-dom tax plans are "essentially unworkable", and will damage Britain’s competitiveness.
No great surprise there, but the Lords report also criticised the unfinished nature of much of the non-dom legislation when it came into force in April, another confirmation of the Government’s slide into chaos and incompetence.
The Lords report also called for two changes to the legislation, which highlight how the new non-dom regime will not just hit the rich:
1. Non-doms stand to lose their personal allowances if they have more than £2,000 of foreign income, a figure which the Lords report recommended be raised to £6,000.
2. The report called for special treatment for overseas students in the UK for full-time education.
Now I don’t think being a full-time student or having £2,000 in foreign earnings classifies you as being well-off!
What a shame, then, that the debate over non-doms was so one-sided, missing as it did the fact that not all non-doms are rich, and that if Britain’s tax regime is potentially uncompetitive for foreign workers, it is also uncompetitive for the increasing number of skilled and internationally mobile British workers who can (and are) up sticks and leave. Far better to reduce taxes on British workers than increase them on foreigners.
It may be true that the Conservative plans to increase tax on non-doms were more practical than the Government’s, but we must not forget who started the debate. Is the Shadow Chancellor a true friend of wealth-creators? We will have to wait and see.
This week’s non-job from South Gloucestershire Council:
“Community Engagement Manager
£43,596 – £47,918
Under the direction of the Head of Safer and Stronger Communities:-
As you would expect from a high performing Council, we offer excellent benefits including:
Anything else the council wants to offer as way of benefits? In tough economic times, councils shouldn’t be recruiting at the rate they are, stuffing Town Halls full of non-jobbers while the taxpayer has to foot the bill as well as struggling with the soaring costs of food, utilities and fuel.
We’ve all had to put up with Councils scaling back bin collections and bringing in new charges for services we all expect our Council Tax to pay for. As the front line crumbles, the fat cats sit bloated in the Town Hall counting their up their money. Will this ‘community engagement manager’ make a blind bit of difference to taxpayers in South Gloucestershire? I doubt it. If they were being paid to empty your bin, deliver meals on wheels or tend the public parks, then it’s a service people consume and reasonably it requires payment through tax to complete the exchange. If government got back to basics and provided services people expect, rather than filling its payroll with an enormous bureaucracy, they’d be able to lower taxes and provide services people want.