Sandwell Council are at it again. Our supporter drove through the Borough just this morning only to be assaulted by the latest issue from their publicity department.
So where and when are these consultations? No point looking at this poster for that sort of information! The only thing you can be sure of is that they finish on the 25th April. Is the date something ends really the post useful piece of information to give?
The poster exists purely and simply to direct us to a website… Surely that can be done more cheaply?
I’m assuming that schools consultations are mainly of interest to parents who actually have children in the education system – so why not send children home from school with a letter about these meetings? This could always be backed up with reminders on community notice boards and in shop windows. And of course the information is online, and there’s no shortage of posters advertising the website as it stands!
Every event, indeed every thought that occurs to Sandwell Council seems to find itself emblazoned in 12inch high letters on most flat surfaces in the vicinity.
If you’d like to ‘Have Your Say’ on how Sandwell Council is spending your money then why not write to them?:
Sandwell Council House,
Did you know that 13% of UK adults face an effective marginal tax rate in excess of 70%? That is, for every additional £1 of income they get, the government will take at least 70p.
For 7% of adults it’s even worse: they face an effective marginal tax rate of 90% plus, meaning they lose at least 90p of every extra £1 they earn.
So who are these people? Mega-wedged investment bankers busily inflating more debt balloons down at the Wharf, perhaps? Rock stars? Undeserving plutocrats having their pips squeaked by our Socialist rulers?
Ah, no. Worst case for all of those high-rolling groups is a marginal tax rate of 41%. The only people who face 80, 90, 100% tax rates are the poor.
That’s because when they earn more, they not only have to pay tax, but they also face the progressive withdrawal of welfare benefits, such as housing benefit. Their Effective Marginal Tax Rate (EMTR) is consequently much higher.
The latest facts are set out in the Institute of Fiscal Studies’ Green Budget published in January. And here’s their overall summary showing how many people are on different Effective Marginal Tax Rates (EMTR):
Labour has made much of its programmes to make poverty history. But as the IFS analysis so clearly highlights, in time honoured tradition, their approach has weakened incentives for the poor to help themselves. The Joseph Rowntree Foundation summarises the key IFS findings for people of working age thus:
"Work incentives are most weakened through the withdrawal of means-tested benefits and tax credits, not through high rates of income tax. Over two million workers in Britain stand to lose more than half of any increase in earnings to taxes and reduced benefits. Some 160,000 would keep less than 10p of each extra £1 they earned.
Overall, reforms under the Conservatives acted to strengthen average work incentives whereas Labour’s reforms to date have weakened financial work incentives on average: since 1999, tax and benefit changes have increased the average EMTR by almost three percentage points."
Another IFS paper charts the history. To understand what’s happened, focus on the purple line: it shows the minimum effective marginal tax rate paid by the 10% of workers facing the very highest rates- they pay at least that much.
As we can see, under the Tories, the worst placed 10% of workers were those paying the 40% higher rate of income tax. Which is what we would expect. But since 1999, the worst placed 10% of workers are no longer those 40% income tax payers: rather, they are poor people facing crippling withdrawal rates on their welfare benefits.
This puts complaints about benefits scroungers into their proper perspective. No matter how much you and I may criticise them, for someone facing a 90% – or even a 70% – effective tax rate, working harder and longer is just not a rational option. And that feeling is reinforced when they hear tales of benefit recipients who’ve gone out to earn more, only to face later demands to repay hundreds of pounds in overpaid benefits: DWP’s systems are simply unable to keep track of their earnings in the context of Brown’s fearsomely complex benefits system.
Brown’s means tested benefits for pensioners have similarly undermined incentives to save for retirement. Just at the time when another of his master-strokes (dividend tax) put the boot in on our company pensions, his pension credit system has blown the incentive to save in a personal pension. Why bother, if the government will only grab the benefit by withdrawing its own payments to you?
The reality of Gordon Brown’s war on poverty is that by hugely expanding the scope and magnitude of means tested welfare benefits, he has made it much harder for the poor to earn their own way out of poverty. Even if they might want to. Despite all his talk about hand-ups replacing hand-outs, he has seriously reinforced long-term welfare dependency.
"The consensus on tax within the political establishment isn’t matched by the population at large. The same YouGov poll (pdf) that found strong support for David Cameron’s Conservatives found even greater support for tax reduction: 67% of all voters said that the government should tax less and spend less and 20% said the tax and spending mix was about right. Only 8% of Labour supporters want more tax and spend, but our political leaders are deaf to these new facts. They are still living in the 1990s, when voters thought Britain was underspending. I imagine Cameron, Brown and Clegg going home to watch This Life DVDs and to listen to Portishead. They are all out of step with the new mood of voters. Voters want a refund from a political establishment that has wasted much of the extra taxes that have been paid."
We’ve blogged the fantasy Gershon "efficiency" programme many times (see all previous blogs gathered here). As you will recall, this was Brown’s 2004 Budget headline to save £20bn pa by improving public sector efficiency by 2007-08.
Most of the subsequent "savings" have of course been pure fiction. The NAO concluded only one-quarter of the announced savings are "reliable", with the rest comprising deckchair rearrangement or service cuts (many of which- such as kicking patients out of hospital early- have expenditure increasing knock-ons). Worse, the programme has spawned its own Whitehall "Gershon" industry, inflating costs even more.
This morning BBC R4 Today interviewed Sir Peter Gershon himself about the whole nonsense.
Asked about that damning NAO report, Gershon pleaded the old "leading edge/frontiers of knowledge" defence – measures of success have had to be developed from scratch, so of course there are a few rough edges. He also threw in the "long-term" defence – the first three years are just a downpayment on a thousand years of efficiency (OK , ten years).
And could he name one tangible real world saving? Yes, he could- NHS procurement of pharmaceuticals, where £1.3bn had been saved over three years.
Procurement. An interesting answer, reflecting the latest scorecard presented by the Treasury alongside the Budget (see chart above).
As BOM readers will know, the Simple Shopper spends getting on for £200bn pa on procurement, and routinely pays way over the odds for everything from spy planes to post-it notes. So there’s definitely scope for improvement.
Do we believe the Treasury numbers? Even if we do, buying more cheaply from external suppliers is not really what we’d call an efficiency gain. It’s simply exercising the Big Buyer Power that Tesco and Sainsbury have been wielding for years. The real business of efficiency is reorganising working practices to produce the same (or better) stuff more cheaply. There is no evidence Gershon has cracked that.
Given the dire circumstances, Ron Sandler’s plan to dismantle Northern Rock is the best taxpayers can expect.
He plans to shrink the operation drastically, halving the asset base in three years, repaying the Bank of England loans, and cutting staff by one-third. It’s certainly the right direction, but before popping any champagne corks taxpayers should remember the following.
First, selling mortgage books in current market conditions will not be easy. Sandler should make sure he holds out for full value.
Second, the easiest assets to sell will the best. Which also applies to the NR mortgagees who will be persuaded to remortgage elsewhere. In three years time, taxpayers could find themselves left with the problematic rump.
Third, it’s not at all clear how he proposes to unravel the offshore Granite funding vehicle (see previous blogs eg here).
Fourth, the NR statement talks of rebuilding its retail deposit base so it can reduce its reliance on fickle wholesale funding. Right now, with the Rock’s market leading rates, that’s probably going quite well. But that’s because the HMG guarantee remains in place, which, as we’ve blogged many times, makes NR savings products highly attractive.
What happens when the government guarantee goes? Yes, most of the deposits are likely go too. Or to put it another way, taxpayers will have to go on guaranteeing NR’s deposits into the forseeable future.
We are a very long way from being home and dry.
PS We’ve reminded ourselves of some details from the US S&L crisis. There are some spooky similarities, including how, during the Go-Go 80s, the S&Ls diversified their funding sources from boring old retail savings accounts to wholesale funding via an array of intermediating sharks. Small town S&L managements were way out of their depth. Oh, and the subsequent bail out cost $160.1 billion, of which $124.6 billion was directly paid for the U.S. taxpayer.