Showing posts with label Politics. Show all posts
Showing posts with label Politics. Show all posts

Sunday, 18 March 2012

How I'd Do The Budget

Wednesday is Budget Day in the UK. Since I have absolutely no influence whatsoever, I thought I'd blog about what I'd do, if I was Chancellor.  Most of it is to do with tidying up the tax system:-
  • Make everyone file a tax return annually and link the receipt of as many benefits as possible to that.  At the moment, less than a quarter of the UK population files a tax return.  HM Revenue and Customs spends a lot of its time chasing it's tail, collecting tax information from multiple sources and trying to cross reference it without a main data key (i.e. a unique tax number for each person).  In addition, we have multiple different regimes dishing out benefits such as tax credits for low income earners (HMRC), housing benefit (local councils), pension credit (Department of Work and Pensions), etc, etc. Each regime requires yet another set of forms, often duplicating each other. Many people don't claim benefits to which they are entitled. Others get take advantage of the lack of joined up dots and claim things to which they are not entitled or dodge taxes altogether. This will be eliminated if you use an annual tax return as the basis for all benefit allocations without the need for further applications, i.e. if you are a pensioner on a very low income, you would automatically receive pension credit without needing to apply for it separately. It will also eliminate a raft of bureaucracy since a lot of the benefit assessments can be handled automatically by the tax return software. (HMRC provides free electronic tax return filing, which automatically calculates your tax liability/refund.)
  • All couples, both married and cohabiting, to quote each other's unique tax reference numbers on their tax returns. This would allow benefits to be assessed that require information on both incomes without compromising privacy or the principles of independent taxation (eg working families tax credit).
  • Automatic transfer of unused personal tax allowances between couples.
  • Increase the personal allowance to £10,000. That was an election promise. It will increase people's disposable incomes by £100 a month and, therefore, stimulate the economy. In addition it'd take the poorest section of the population out of the tax net.
  • Increase the threshold for the 40% tax band to £50,000 to help the "squeezed middle".  Again, this would put hard-earned Pounds into people's pockets, stimulating the economy.
  • Decrease fuel duty by 8p per litre.  Once you factor in VAT, the total decrease would be 10p.  This would lower inflation, since over 90% of everything is transported by road.  (Note, today I paid 147.9p/litre for diesel.  A year ago, it was 131p.  That is money that is being sucked out of everyone's pockets but it is particularly felt by the poorer sections of society since food prices are being inflated to cover transportation costs.)
  • Impose stamp duty on the sellers of homes as well as on the buyers.
  • Remove the exemption from stamp duty on property that companies currently enjoy.
  • Change the basis for funding the NHS. (This is a whole rant on its own.). I'd scrap the current unpopular proposals and, instead, just change the basis on which the NHS is funded. The change is simple: hospitals, doctors and other NHS services only get paid when they treat patients. The current model pays out whether patients are treated or not so patient care isn't the primary focus - maintaining their budgets is. In addition, companies and units are awarded expensive contracts to provide services exclusively in an area.  Under my model, any licensed medical organisation could do NHS work, so long as it was prepared to accept NHS pay rates and deliver the accepted levels of care. Nobody gets awarded expensive contracts. Bureaucracy is automatically discouraged because it doesn't treat patients and, therefore, doesn't bring in money. Expensive PCTCTs can be disbanded because they will have no further purpose.  (You could keep one to work out what rates to pay for treatments and to administer the payment of bills, but you don't need the other 50+ "commissioning bodies".)
  • Increase tax relief for research and development.
  • Give tax breaks to companies which develop and manufacture goods in this country.
  • Change the basis of local government funding from the current Council Tax, which is levied at a series of banded rates depending on property values, to an income tax levy which is collected centrally and then distributed based on a formula determined by population and land area.  This would be fairer.
  • Decrease employer's National Insurance, which is nothing more than a tax on payrolls, by 1% to encourage hiring more staff.
That's what I'd put in my "Budget for growth".

- Pam

Wednesday, 12 May 2010

It's over

Gordon Brown resigned yesterday as Prime Minister and the Queen appointed David Cameron PM.  The new government will be a Conservative-Liberal Democrat coalition. I failed as a sear.  My predictions for the cabinet were rubbish.  The only things I got correct were Cameron as PM and Nick Clegg as Deputy Prime Minister.  However, according to the  BBC, I did get the right the names of some of the main players: 

Mr Cameron has already begun the work of appointing his first cabinet, with the Tories' George Osborne as Chancellor, William Hague as Foreign Secretary, Liam Fox as Defence Secretary and Andrew Lansley as Health Secretary.
- Pam ("normal" blog service will resume shortly)

Saturday, 10 April 2010

At last the phoney war is over

In case you haven't heard, the date of the British General Election was announced on Tuesday, after Gordon Brown went to the Queen to request that she disolve parliament.  The big day will be Thursday 6th May.  And I can't wait.  For the last six months or so, the political parties have been indulging in a "phoney war" - the political campaign you have when you can't call it an election campaign.  (In Britain, the moment you call it an election campaign is the day the clock starts on the electoral expenses and each candidate has a legal maximum spending limit.  The clock also starts if the candidates call themselves candidates or "parliamentary candidates" so they are known as "prospective parliamentary candidates" or "PPCs".)

Anyway, the phoney war has gone on so long that I am totally bored by it.  Because of the rules regarding the life of a parliament, the election had to be held before mid-June.  I don't know how the Americans put up with a year's worth of campaigning prior to their Presidential Elections.  Don't you get fed up with it all?

It's not as if I'm a disinterested party, either.  I think this is the first General Election when I haven't been involved in the campaign, one way or another.  Once upon a time, I was a Young Conservative and a Conservative Party activist.  My politics are a bit more confused than that, though.  If you have to categorise me in terms of British politics, I'm a left-wing Tory or possibly a Lib-Dem.  Back in the '80's, I voted for Bob Hawke, Australia's most successful Labor Prime Minister.  If I was an American, I'd be a card carrying Democrat. 

I joined the Tories when I came to the UK because my friends were Thatcherite Revolutionaries and it gave me an instant social life.  Politics was fun and exciting as a YC:  lots of intrigue against the "wets" in our own party; plenty of political debates about the big issues of the day (irony of ironies, in my day, the Tories didn't "do" political debates in the senior party); we put in the hours knocking on doors and delivering envelopes/magazines.

Many of my friends date from that time and very few of them are politically active today.  What happened?  We grew up.   We got disilusioned and burned out.  We got fed up campaigning for someone/some policy that we didn't believe in.  There is nothing worse than the dying days of a government and our dying days lasted five years longer than expected (nobody had been more surprised than we were when John Major won the 1992 election.  I remember being in a state of shock).

These days, I'm an interested outsider.  The only times I've campaigned for anyone in the last 10 years is when I've supported one friend or another who has stood for their local council or for Parliament.  Unless the phone rings, I think this will be the first General Election I haven't campaigned in since I came to Britain.  (Note:  I'd been here a week when I first went canvasing for the 1989 Euro elections, so I have a long history.)

Who do I think will be occupying 10 Downing Street in mid-May?  Not Gordon Brown.  He pissed off his natural electorate about two years ago, with his clumsily placed tax rises.  He's been fighting a losing battle ever since.  Nick Clegg, leader of the Liberal Democrats, is putting up a credible campaign but it'd take a miracle for his party to win sufficient seats for them to even form Her Majesty's Opposition.  So it's David Cameron's for the losing.

It's interesting to note that the Lib-Dems think Cameron will win.  That's obvious from their arguments in various debates on BBC Newnight.  They are only attacking the Tories; they aren't attacking policy announcements, etc, from the Government. 

- Pam (don't think you'll get off lightly with me, David Cameron.  I think your latest "tax break" of £3 a week for some married couples is risible, condescending and stupid.)

Wednesday, 21 January 2009

On this day

Today is the first real day of a new era. This morning, in the White House, Barak Obama woke up as President of the United States of America. A man with lots of labels, but with whom the stereotypes fail. President. Democrat. A real African-American - son of an American woman and a Kenyan man - half African, half American. A black man who does not share the heritage of most black Americans, he is not the decendent of slaves. A politician who fought his campaign without playing the race card (much to the disgust of the Reverend Jesse Jackson, who was reported to be accusing Obama of not being black enough). The world will never be quite the same place again.

While most of the rest of the planet are just grateful to be rid of Dubya and his cronies, we did not have a vote. We are only the indirect recipients of whatever actions President Obama makes. The hopes and dreams he has to satisfy are those of the American people. I don't envy him this responsibility. If he can go even halfway to tackling the problems listed in his speech, then he will have achieved more than the last half-dozen presidents put together.

Prior to the election, much was said in the press about the reaction of Americans to Obama's ethnicity. Please, God, that this Presidency will demonstrate the fulfilment of Martin Luther King's dream, “I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.” Does his colour matter? No. Does his religion matter? No. What really matters is whether he is a man of principle and conviction who thinks through the consequences of his decisions and choses the least bad option, not the most expedient. It is doing what is right that matters, not what is easy.

Good luck, Mr President.

- Pam

Monday, 22 December 2008

It's the Economy. Stupid!

A month ago, the British Government issued its "Pre-Budget Report" (a.k.a. a mini-budget that covers government spending). If you click on the link and look at the fourth item down, you'll see that from midnight on 30th November 2008, VAT was cut from 17.5% to 15% in an effort to boost the economy.

This VAT cut is the Government's main weapon in fighting the current recession. They estimate that it will add a £20bn stimulus to the economy. How?

The theory put out by the spin-doctors is that the cut will lower prices in the shops, consumers will stampede snapping up cheaper goods and thus spend the country's way out of Recession. Looks good on paper, doesn't it? But will it work? I don't think so.

(VAT stands for "value added tax". If the business is VAT registered (i.e. all businesses with sales > £67k), then they can reclaim the VAT on goods/services they've purchased by offsetting it against the VAT payable on the sales they make. Therefore, they only pay VAT on the difference or on the "value added" to the goods or services by their business. VAT cannot be reclaimed on purchases for private use.)

From the moment I heard it, I've been trying to figure out how it will stimulate the economy. And each scenario I come up with, doesn't work. Here's why:-
  1. It misunderstands the way business thinks about VAT because in virtually all businesses it is excluded from decision making calculations. Cutting it won't affect a multi-national's decision to build a new factory - that will be decided by the cost of the capital needed to fund the investment. And few banks out there are making money available to borrow at an affordable price. If the VAT cut offers any advantage, it is to cash-flow only since it slightly lowers the amount of cash businesses have to pay out to their suppliers and/or to the VATman. Even this, though, comes with barbs attached: for the first month or so, businesses will still be paying out VAT at 17.5% on invoices received prior to the cut-off but will only be able to recharge their clients/customers VAT at 15%.
  2. A 2.5% discount is useless at enticing consumers back into the shops when the 25%-50% discounts already on offer have failed. This response to the VAT Cut was raised by most political and economic commentators: consumers aren't shopping because they're worried about jobs, credit card bills, the price of fuel and mortgages. Cutting VAT won't affect that behaviour because it is only pennies - it doesn't put a lot of real money in our pockets. When your credit card is maxxed out and you are worried that you won't have enough money to buy petrol to get to work at the end of the month, the last thing you're going to do is go out and buy a new dress! This is the reality we are living with: the average Briton is carrying £4,000+ in credit card debt; mortgage interest rates are still rising, even though the Bank of England Base Rate has fallen to 2% (those on variable mortgages are paying close to 7% interest); in the past 9 months, the price of petrol and diesel increased by a third with knock-on price increases for virtually everything that is shipped by road. (FYI, for routes out of London, public transport is frequently more expensive than driving.)
  3. Where will the additional money go? Out of the Country. Whilst grocery items (food, toiletries, etc) are either made here or elsewhere in Europe, much of the "discretionary spending" items (clothes, shoes, household goods) are made in China, Vietnam, India, Africa, etc. If the consumer does go out and spend on nonessential items, they'll be purchasing cheap goods made in China or India and ultimately their purchases will benefit workers/investors in those countries and not here. Just as in the US with George Bush's Economic Stimulus Package, it will stimulate their economies and not ours.
For my £20bn, I'd like the Government to spend the money on something concrete HERE instead of exporting it to China. This country is crying out for capital investment: new roads, new railway tracks, a mainline rail hub at Heathrow, additional housing stock, a new storm-water drainage system for London (to stop effluent being washed into the Thames/flooding homes each time it rains for more than 10 minutes) etc. Why not use the £20bn to directly fund capital projects here???

Instead of funding public works, the Government is actually cutting them. An example: because the private companies involved can't raise capital, the Government has CUT the number of apartments that will be built in the Olympic Village to the minimum allowable under the IOC athletes' housing rules. This is in a country where we need an estimated 250,000 more homes just to meet current demand, in a city where the premium for new builds is still 100% over the cost of the build.


The lower rate of VAT will exist for 13 months. What worries me is that the VAT cut is short term but the long term costs will be with us for many years. To quote from the BBC
"..[The Shadow Chancellor]..George Osborne said the government's package of measures would double national debt to £1 trillion.

"He said this would leave "a huge unexploded tax bombshell timed to go off under a future economic recovery".

"He said Chancellor Alistair Darling was giving away £20bn but taking back £40bn through tax hikes."

Ouch! I've heard commentators say that it will take at least 20 years of tax rises to pay it back. In addition, the increase in National Debt will handcuff our economy, decreasing prosperity long term. It also makes us more vulnerable to economic and political shocks worldwide. Remember, he who owns the debt, calls the tune. (Don't believe me? Check out the Oscar nominated documentary: I.O.U.S.A. recently featured on the BBC.)

This is going to be an interesting few months, particularly if I'm proved right.

- Pam

Saturday, 17 May 2008

What Gordon did next

Or should that be "How Alistair fixed it for Gordon"?

On Tuesday, the Chancellor of the Exchequer, Alistair Darling, dug the Prime Minister out of a hole and announced the equivalent of a u-turn over the abolition of the 10p tax band. In an "emergency budget", it was announced that personal allowances would be increased by £600 for all taxpayers whilst the starting level for 40% tax band was lowered by £600, so that the net benefit would only be felt by the UK's 25 million basic rate taxpayers who will get an extra £120 per annum in their pockets.

(Cue much dancing and rejoicing in the streets by worried Labour politicians).

So what does this mean? Is it a good thing or not? The devil, as usual, is in the detail.

Firstly, it doesn't take effect until September, so the poorest taxpayers must struggle through until then. They'll get a £60 "bonus" in their September pay packets, followed by £10 a month there-after. Bad thing.

Secondly, does it alleviate the extra tax they will still have to pay? The answer is MAYBE. It depends how you look at it. If you are comparing last year with this year, it can be argued that your taxpayer is better off because the main tax band, the "basic rate" band, has also decreased from 22% to 20%. And then you have to factor in the annual inflation-linked increase in personal allowances...

Let's use a hypothetical low income earner, who earns £11,000 per year and call her Jo Broke . Click on the image to make it bigger.


Jo paid £1,003 in tax last year. If Tuesday hadn't happened, she'd be paying £1,113 in tax this year, an increase of £113. However, because the abolition of the 10p tax band was kept so quiet, Jo would have been expecting to only pay the £890 of scenario 2. Thanks to Tuesday, she's still paying £113 more than she expected, but it's less than last year. I think I'll leave you to draw your own conclusions on whether she has got fair treatment.

And what about the people who earn enough to pay 40% tax? Thanks to Tuesday, they'll be paying an extra £120 in tax this year. Since anyone earning £40,835* or more pays 40% tax on their earnings over that sum, that is a hell of a lot of people who will feel aggrieved come September. Me? I feel aggrieved now.

- Pam





* Let's put a salary of £40,835 into context: it's about 1/6 of the average house price in the UK. In most industries, it's a starting salary for bottom level management.

Tuesday, 29 April 2008

Thanks Gordon

So much for the increase in personal allowances* at the start of the new tax year on 5th April. I just got my April payslip - my take-home pay has gone up by a whole £1.25 a month!

Thanks, Gordon. Your fiddling with the tax bands and National Insurance** rates makes me SO much better off. Based on the change in personal allowances alone from £5,225 to £5,435, I should have got an extra £17.50 per month in my pocket. But no, you had to find another hidden way to claw this money back.

- Pam (not a happy taxpayer)




* The portion of income that is tax free in the UK.
**Just another tax despite its name. The common belief that this is state pension contribution and National Health Service contribution is wrong - the money goes into the general tax pot. It does, however, earn you "points" towards your state pension.

Monday, 21 April 2008

Dear Gordon

May I be the first to congratulate you on achieving something that was once thought impossible: making your political party, the Labour Party, unelectable. The Conservative Party must be so grateful - it has taken you less than a year as Prime Minister to achieve something which they have been working towards since 1997.

How could you betray your core voters? The 3.5 million low paid workers who will be worse off following the abolition of the 10p lower-rate tax band at the start of April. Did you think nobody would notice when you buried it in the detail of your last Budget as Chancellor? Were you surprised, last week, when your back benchers reported the feedback from canvassing for the local elections? Or were you so busy wooing George W. and the candidates for the American presidential elections that you didn't notice? Did they even know who you were?



Oh, come on! Don't look at us with your bloodhound eyes and expect the electorate not to feel aggrieved. It may only be a few Pounds month, but to someone earning less than a tenth of your salary, those people you've just hit hardest, that is a lot of money. Your press release today may talk about "looking at further help for the lower paid", but treasury sources have already admitted to the BBC that there aren't any funds available and won't be until 2009/2010.

What are you going to do about it?

- Pam

Friday, 10 August 2007

The congestion charge <<<< Rant >>>>>

Stephanie asked me to explain London's congestion charge. Where do I begin? I'll try not to rant too much, but I warn you this will be long. :o)

The charge was introduced about 4 years ago, first in Central London (in the area that would correspond to most cities' Central Business District or "downtown") and then, in February of this year, it was extended westwards to cover the mainly residential area of the London Borough of Kensington and Chelsea (K&C). The original charge was £5/day; once the extension was put in place it rose to £8. Wikipedia carries a useful summary. The hours are currently 7am to 6pm, Monday to Friday.

The charge works because London has the world's largest network of CC-TV cameras*. If your vehicle is spotted within the Zone, during the hours of operation, you are required to pay the charge or be fined. However, it doesn't matter if you enter the Zone once or twenty times in that day, you only pay one charge.

The whole thing was devised by our car-hating mayor. The publicly espoused theory is that it will get cars off the road in Central London, thus improving air quality. In reality, it is an extra tax on drivers and residents of the zone:-
  1. The majority of vehicles in Central London are there because they have to be and can't avoid it. That has been the case since the 1960's. Only very wealthy people EVER drive into Central London to go to work, shop or visit the theatre. Nobody else could afford to park. Parking is limited and prohibitively expensive. I once paid £40 for an afternoon, when public transport problems meant driving in after work was my only option to meet my friend.
  2. I did used to drive across Central London to go to work, back in the days when I lived in Catford and worked in Ealing. I drove because it was my least stressful option - if I took the train, I would have to change trains at least twice, and deal with up to 5 rail companies. The biggest stress was that I couldn't rely on my connections actually connecting with each other. The drive across London was the quickest, least congested route. This is my vested interest.
  3. There is an oft-spouted statistic that London's congestion increased by 16% in the 5 years prior to the Zone. What isn't usually mentioned is that actual vehicle numbers DID NOT increase. The increase in congestion is down to a) poor phasing of traffic lights; b) bus and cycle lane schemes that make at least one lane of the road in question unusable to cars and trucks; and c) various "traffic calming" measures, which remove part or all of one lane's-worth of road thus narrowing a not-wide road still further.
  4. Prior to the extension of the Zone westwards, traffic in Central London had returned to it's pre-Zone levels. Air pollution has increased.
  5. There was no call to extend the Zone westwards. In fact, many local residents strongly protested against it. The Mayor did a "consultation exercise" and announced before it was over that he was going to ignore the results and go ahead anyway. With the exception of a few major roads like the A4 (the Great West Road), drivers in K&C are usually local residents. This wasn't even the most congested borough in London (I think that title goes to mayor-loving Islington). What K&C is, though, is packed to the rafters with wealthy people who don't support the mayor. (Can anyone spell vindictive?)
  6. Residents of the Zone get a 90% discount. Given that there is little off-street parking, this means that they are forced to pay an extra tax of at least £200 per year if they own a car even if they don't drive it every day (plus an admin charge for buying their season pass). If they don't buy a season pass, they don't get the discount. Call me stupid, but wouldn't this encourage Zone residents to drive so that they could get their money's worth?
  7. You can't run an account. It's not like the e-tolls they have in Australia, where your account is debited every time you, say, cross the bridge over the Brisbane River. If you pay the Charge and don't use it, it's your loss.
  8. As usual, the Charge has hit the poorest the most: cleaners, workers at Smithfield Meat Market, tradesmen. Take the workers at the meat market: most start work at 3am, finishing around 9am. At 3am, their transport choices are walk to work or drive. Few have the option of catching a night bus (which run hourly, take forever, don't connect up with other night buses and don't have full London coverage). Traditionally, they drove and parked in the car-park under the Market. At £5 a day, many struggled to make ends meet. At £8, who knows?
  9. The Mayor is currently threatening to increase the Charge to £25 for drivers of 4-wheel drives, high performance vehicles and larger engined vehicles. Given that they log into the DVLA records to identify the car when you pay the charge, I'm assuming that this will hit drivers of all 4-wheel drives, not just SUVs. So, if you drive a Subaru sedan in London, look out!!! (All Subaru vehicles are 4-wheel drive; even their smallest compact car.)

The biggest irony of the whole thing is that Central London is not the site of the most congestion in London and never has been. I think the award for most congested road is still held by the South Circular, closely followed by the North Circular (in my book, the South Circ wins as it isn't a real road - it is a series of roads signposted into a route and joined at intersections). There is one point on/near the South Circ at Forest Hill where, if you close the road, you can gridlock all of south London.

That's enough ranting from me. I warned you it would be long.

- Pam

* One quarter of all the world's CC-TV cameras are in Britain. Half of those are in London.