Writing intermittently on life, politics, and society

Posts tagged “British politics

Just wonderful

I went away for three days to train in development work, and returned full of vim…  Until I caught sight of an article about the latest fumduckery it appears my government plans to subject us to.

‘I would love to see tax reductions,” David Cameron told the Sunday Telegraph at the weekend, “but when you’re borrowing 11% of your GDP, it’s not possible to make significant net tax cuts. It just isn’t.” Oh no? Then how come he’s planning the biggest and crudest corporate tax cut in living memory?

If you’ve heard nothing of it, you’re in good company. The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone – and are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d’etat is taking place.

Like the dismantling of the NHS and the sale of public forests, no one voted for this measure, as it wasn’t in the manifestos. While Cameron insists that he occupies the centre ground of British politics, that he shares our burdens and feels our pain, he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century. The latest heist has been explained to me by the former tax inspector, now a Private Eye journalist, Richard Brooks and current senior tax staff who can’t be named. Here’s how it works.

At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to “large and medium companies”: it is not available for smaller firms. The government says it expects “large financial services companies to make the greatest use of the exemption regime”. The main beneficiaries, in other words, will be the banks.

But that’s not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate “of any major western economy”. By the time this government is done, we’ll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph, David Cameron said: “What I want is tax revenue from the banks into the exchequer, so we can help rebuild this economy.” He’s doing just the opposite.

My mood has officially returned to miserable.

 


At least we have a royal wedding to look forward to

So the Chancellor wanted to take credit for improved growth predictions last November, but now it has been revealed that the British economy shrunk by 0.5% in the last quarter of 2010 (zero growth if you account for the weather) he’s changed his tune:

These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December.

I think Osborne mentions the weather about 15 times during his interview with the BBC. However, highlighting the fact that the UK was brass monkeys completely elides the reaction of the private sector to public sector cuts and anticipated tax increases. I find it interesting that the Chancellor still appears confident that the private sector will pick up the slack as public sector cuts continue apace.


Alan Johnson resigns…

And Ed Balls gets a job he intensely desired.

This could get really interesting. The Tories will be hoping the appointment of Balls – a Brown ally – as Shadow Chancellor will prevent Labour from getting past the Brownite Vs. Blairite era, and tether the party to Gordon Brown in the minds of voters.

Furthermore, they probably hope that it will reopen old wounds that will disrupt effective leadership. Balls was passed over for the job the first time precisely because of his links with the much-maligned Gordon Brown, his clashes with Ed Miliband over the pace of deficit reduction, and because he wanted (wants?) to be Ed numero uno in the Labour Party.


A specific problem

Recently, Jack Straw made some comments about white girls being seen as “easy meat” by Pakistani rapists that made me feel some kind of way.

My thoughts are still rather raw, so forgive the incoherent structure.

It seems to me that Straw has tried to give structural explanations for the choices made by the kind of gangs he describes – which is better than a lot of punditry involving race and culture. Still I’m left wondering if the failings of society at large aren’t being projected onto a minority community based on the actions of a tiny criminal element in that community.

If, as straw says, young Asian men are like any others, why are the cultural differences the most salient explanation? Why not urge a conversation about how women are viewed in British society as a whole?


Lib Dems, long game?

Caught this article by John Harris in The Guardian on the Liberal Democrats. I agree with his view that in the short term at least the outlook for the party is looking pretty grim:

The fleeting burst of Cleggmania during the general election campaign now looks like something from another age. Today, an opinion poll put support for the Lib Dems at just 7%. In a survey released just before Christmas, Mori found that in some regions of the UK, it was as low as 4%. To hear some people talk, the party’s broken promise on tuition feeswill haunt them just as much as Iraq haunted Labour, and there will be no decisive recovery for years.

And now they face what could be a very grim 2011. In May, there will be elections for local councils, as well as the Scottish Parliament and Welsh Assembly – and the most positive prediction you can extract from senior Lib Dems is that things will be “difficult”. The referendum on changing our voting system has hardly fired the public’s imagination, and is widely predicted to be lost – which will lead plenty of Lib Dems to wonder what the point of partnership with the Tories actually is. Meanwhile, as the cuts finally bite, senior Lib Dems worry that their support could well plunge even lower, and the message to their activists boils down to that most hackneyed of instructions: keep calm, and carry on.

“Five months into a five year project”. Very well. Let’s see how they do.


Bad company

The rise in VAT to 20% took effect at midnight this morning, and of course the Labour Party have come out swinging, with Labour leader Ed Milliband calling on the Chancellor to apologise for what he called a misleading claim that VAT was the fairest tax to increase.

The Chancellor has argued that the VAT increase was the most progressive policy option because income increasing the level of income tax or employer-side National Insurance contributions would cost jobs, while this policy, combined with other deficit reduction measures, would increase employment.

In response Ed Milliband  claimed that: “Everybody knows that it’s poor and middle-income families that will be hit hardest”; implying that the Chancellor was fibbing when he included the VAT increase in the class of progressive policy options.

The Chancellor points to the Institute for Fiscal Studies (IFS), which has argued the policy is “mildly” progressive because the poor spend a higher proportion of their lifetime income on necessities like food and domestic fuel, which have reduced or zero VAT.

I’m leaning towards Milliband’s side on this one, as there are a few things that make me give the IFS’ argument the side eye:

  • Many reasonable purchases are not of zero-rate or reduced rate items. Wouldn’t an increase in VAT reduce the range of items that people on lower incomes can purchase?
  • Plus, wouldn’t the cost of necessities rise anyway? My understanding is that a sales tax like VAT increases the cost of doing business. Any extra costs would be passed onto customers, methinks. This would impact the ability of the poorest to make savings.
  • The IFS might be making unreasonable assumptions regarding similarities between the poor and the rich.

Politically this may be somewhat embarrassing for the government, because a 2009 statement from David Cameron contradicts the Chancellor’s assertion. Here’s what he said:

You could try, as you say, to put it on VAT, sales tax, but again if you look at the effect of sales tax, it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you. Any sales tax, anything that goes on purchases that you make in shops tends to . . . if you look at it, where VAT goes now it doesn’t go on food obviously but it goes very, very widely and VAT is a more regressive tax than income tax or council tax.

Also, spare a thought for Nick Clegg, human shield, once again facing the prospect of taking a thumping, since it was quite clear from the Lib Dem election campaign that they were all for attacking the Conservatives on this policy.


Share victory, share defeat

John Redwood has beef:

… The former [conservative party] leadership contender, today expressed irritation with the way in which Lib Dems were allowed to take credit for the “nice” things done by the coalition. “One of the things I do not like is the ‘new narrative’ that Lib Dems have come into the government to bridle the instincts of Conservatives,” he said. “This storyline entails allowing Lib Dems to claim credit for all the nice things that happen.”

Maybe, but I’m not currently seeing that narrative in action myself; Nick Clegg seems less like someone who could claim credit for reigning in the Conservatives, and more like a human shield for the more unpopular coalition policies.