12 April 2006

To beat poverty we need higher taxes.

Labour failed to meet its child poverty target because it is trying to achieve it on the cheap. It is no coincidence that the countries with the lowest poverty have the highest taxes. The Tories will claim that higher taxes will destroy the economy, but France, Germany and Scandanavia have higher GDP per capita AND higher taxes. In fact higher state spending on education, childcare etc, lead directly, in the longer term, to higher GDP.

It is very welcome that the Tories have suggested that the eradication of child poverty is an 'aspiration', but their policies suggest the opposite. We have been down the Tories lower taxes option before. It is cheeky of a party that tripled child poverty from 1 in 9 children to 1 in 3, to criticise Labour for 'only' reducing child poverty by 700,000.

Scandanavia has child poverty below 5%, we have 27% of children in poverty. If we are to reduce this poverty, we need higher taxes not lower.

8 comments:

  1. Where to begin?

    Do France and Germany really have higher GDP/cap than the UK? I think you'll find we've caught up with if not surpassed them recently, and are gaining on the Scandinavian countries (which are not as good a comparison as they're a rather different size).

    At any rate, you have to explain away how the US fits into your "higher state spending ... lead directly ... to higher GDP". Unless you follow it up with "but lower state spending can do even better", it's a bit misleading.

    When you did your 27% / 5% comparison, did you bother to check whether each country concerned defines child poverty in an even remotely similar way?

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  2. "Do France and Germany really have higher GDP/cap than the UK?"

    Yes, and they have higher productivity as well, despite a less 'flexible labour market'.

    "At any rate, you have to explain away how the US fits into your "higher state spending ... lead directly ... to higher GDP"."

    The US is a huge country incomparable with UK, France and Germany (well you use this excuse with Scandanavia!). It has huge natural resources and its dominant position as a world superpower means it can dictate world trade rules, import most of its skilled labour from abroad and run gigantic trade deficits paid for by exploiting a reserve currency maintained through military agression.

    "When you did your 27% / 5% comparison, did you bother to check whether each country concerned defines child poverty in an even remotely similar way?"

    Exactly the same way - The internationally defined 60% of median household income.

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  3. which numbers are you using when you said that France and Germany have higher GDP/cap than the UK?

    The CIA World Factbook seems to disagree with you, at least. (though they use PPP figures - then again, I'd expect the nominal ones to support your position even less)

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  4. What on earth does "internationally defined" mean? There's no such thing.

    The only definitions which can reasonably be said to exist are those promulgated by actual people, acting alone or in organisations. So, Neil, be concrete and specific: whose definition are you going by? The OECD's? The ILO's?

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  5. "whose definition are you going by?"

    OECD.

    "which numbers are you using when you said that France and Germany have higher GDP/cap than the UK?"

    The most recent IMF data shows Germany still ahead of the UK on PPP data. You are right that recently the UK has slightly overtaken France. My figures were a couple of years out of date. But German and French productivity is still much higher.

    Growth has been temporarily hampered in France and Germany by the Euro transition and continuing problems from unification. This year and next, Eurozone growth will be higher and that will probably put them both back in front.

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  6. Ok, well here's the OECD data on GDP/cap that says you're wrong:

    OECD spreadsheet.

    Can you post the URL of this more recent IMF data?

    Productivity is a separate issue, as you well know.

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  7. You asked for whose definition of poverty I was using. The OECD uses the 60% median income figure, I wasn't talking about GDP/cap when I referred to the OECD.

    Here are the IMF - GDP/cap figures that show Germany higher than the UK.

    Anyway we are quibling over pennies here. The point is, France and Germany have much higher taxation and much higher productivity and roughly similar GDP/capita. So those who argue that high taxes destroy economic performance are obviously talking rubbish.

    Give it a few years and all the investment we have lost to the Eurozone by staying out of the Euro(we were top on investment with around 25% of EU total, now we are 9% and falling and France gets much more than us), will mean that when the economic cycles even out (we are riding high on ours while EU is in a trough) we will be well behind France and Germany on GDP/capita.

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  8. Neil,

    Labour productivity is a rather difficult concept to measure. Whilst the productivity of those in employment in, for instance, France is obviously higher, the total productivity is not. This is because the productivity of those who are unemployed is effectively zero.

    Further, people in France work only 35 hours a week. Whilst the per capita productivity is higher, since businesses are opne for a shorter time in France than they are in, say, Britain, the overall productivity is lower.

    See Worstall for more and figures.

    DK

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