22 March 2012

The Banker's Budget

At least the Lib Dems managed to get people to talk about wealth taxes, though nothing came of it.

When even land and property can be placed 'offshore' for tax avoidance purposes, you have to admit the government can't be trying that hard to tax the rich.

The richest 1% in the UK get 13% of income, have 23% of the wealth and own 60% of the land.
The top 10% have 53% of the wealth, the bottom 10% just 1.3%

These are the stark figures behind this budget giveaway to those earning over £150,000 a year.

The media consensus led by the Sun and the Mail and assorted right-wingers is that giving £42,000 every year to someone on £500,000 a year while shrinking the minimum wage in real terms and cutting £4,000 tax credits to low wage earners is good business. Good for whom?

The Tories are funded by bankers and obviously know a lot of accountants who can massage down the importance of the 50p tax rate. In its first year accounting tricks eroded the £2.7bn it would have raised in year 2. The Tories are in a hurry to abolish it before that can happen and can now claim £1.6 billion is not a lot of money when it is taken from the rich, but a fortune when it is benefits fraud. The media forget these contradictions and also forget that tax avoidance costs £40bn a year, we'll target all our resources at 'clamping down' on people claiming housing benefits which only just about pay for a roof over someone's head (if they are lucky).

The attack on Child Benefit is nothing but scandalous. All the talk by the right of simplifying the tax and benefit system and they decide to drown the simplest benefit there is in a sea of bureaucracy. Why not just increase the top rate of tax if you want to hit those on higher incomes? Far simpler and more targeted.

The only explanation is they actually WANT to means test people. Means testing hits the poor not the rich. It is the poor that have to work their way through the labyrinthine benefits system. Universal benefits are fairer because there is no stigma and take up by those that really need it is near 100%. There are only a handful of millionaires, excluding them from small flat rate benefits saves little that is almost all swallowed up by added bureaucracy of means testing anyway. Thin end of the wedge, where does this means testing stop, you could exclude the rich from the NHS if you really wanted to destroy that too. The Tories know excluding the rich from a universal system erodes their support which is crucial if your real agenda if to get rid of it.

Like the added bureaucracy added to the NHS, the Tories get a double whammy of political rewards by destroying welfare and public services. If the NHS becomes too expensive because private companies are reaping off excessive profits at taxpayer expense and service levels fall. The right just shrug and say the NHS will never work anyway. There is no political reward for them to make these reforms work, especially when the media slavishly follow the Tory line.

And it gets even better for the Tories. Local democracy has been so eroded since the 80s that it is almost meaningless except in taking the blame for the cuts. Devolve all the cuts down to local authorities especially to poorer urban areas and Labour councils take the blame for Tory/Lib Dem cuts. It's ingenious. Councils are so restricted on what revenue they can raise, with taxes capped. Almost all their income comes from central government grants they have no control over. Yet voters will blame councils for cuts, especially as the Tories own all the local press that will push that line.

Of course with smarmy Ed Balls the only figure allowed to contradict the media and government consensus, Osborne could probably get support for the slaughter of the first born in the name of slashing 'Labour's deficit' - i.e. the global financial crash that was obviously caused by one political party in the UK.

Finally, the tax allowance increase gives a tax cut to every basic rate taxpayer, so someone on £40,000 gets the same cut as someone on the minimum wage and those not working get nothing at all. So what is important is what you do to reclaim the lost tax revenues and cutting benefits and tax credits for the poorest while giving money to those on £150k plus show the regressive priorities of this government. The Lib Dems may think they are helping the poor by doing this, but 0% tax on more income means less money to fund public services and nothing helps the poor like decent universal public services and welfare.

I can have sympathy with moving tax from income to wealth - but not if you cut tax on income and don't   tax wealth like this budget. Stamp duty is a tax on moving house, not a proper tax on property and wealth. Really rich people tend not to move that often once they have got their mansions.

When even Tim Montgomerie of Conservative Home writes that the Tories shouldn't help people that made a fortune from the property boom at the expense of everyone else, we can see that even the new right can reach consensus with us on the left that the Tories are not really the party of aspiration.


  1. Well, leftie polemic apart, I'm surprised that more people don't notice how the tax system is being skewed in favour of banks, i.e. VAT increased (which banks don't pay) and corporation tax reduced is the main one.

    I'm not great believer in taxes on income, profits or output, so we'll have to agree to disagree on the 50p tax rate, key to all this is to tax the rental value of land. Then the top 1% will suddenly own 0% of the land rents, not 60%, and banks will be cut down to size etc. So the incomes of the top 1% will be reduced by the amount of unearned income they are getting. But as we both well know, taxing the rental value of land is the last thing on the Tories' mind (except for Business Rates, which is pretty much like LVT and which works just fine and as intended).

    1. I would love more revenue to come from land taxes in place of taxes on income and profit, but if we replaced income taxes altogether with LVT, I would worry we were placing all our eggs in one basket. I am a pigovian tax man at heart. Lets move away from taxing things we want to encourage like employment and wealth creation and towards taxing things we don't like e.g. - tax companies that pay low wages, pollute, poach staff instead of train them and other anti-social behavior.