Tuesday, 16 December 2014

How Labour can balance the books

With Ed Miliband now committing a Labour government to continue the austerity programme, albeit on a slower scale than the Tories, now is clearly the time for some proposals to be considered which make that awful prospect less harmful. By the way, a warning: Anyone who thinks that ten directors of the failing taxpayer-owned bank, RBS, should be paid £5.5m this year in allowances, or the CEO of Easyjet deserves £7m, look away now! This is about a bold Labour government transforming the way the economy is organised, not tinkering with it so that nothing actually changes fundamentally. How can it be sensible to have a situation where taxpayers subsidise the low wages paid by tax avoiding firms, thereby creating a deficit, which entails job and welfare cuts? That is simply nonsense!
   Furthermore, there is plenty of evidence suggesting the strong links between inequality and growth. In fact, the OECD has stated that inequality actually "hinders growth", and that if the gap between rich and poor had not widened since the 1980s, the UK`s economy would be more than 20% bigger now.
    It is well documented how Osborne, in his autumn statement, had to confess to the existence of much lower tax receipts; the OBR estimates that the total collected by the end of the 2014-5 financial year will be £646bn, £54bn less than Osborne predicted, and by 2017-8 receipts are still likely to be £23bn lower than previously thought. The chancellor also professed yet more determination to rid the country of what he called "morally repugnant" many years ago, tax avoidance. But like all Tory chancellors when facing the financial results of their mismanagement, Osborne chose to ignore the obvious and fair ways of solving the problem.
      The amount of income tax being collected is below the government`s expectations because so many working people are earning so little, they pay very little direct taxation, although why the chancellor and his advisers did not expect this, in view of how much is paid out in housing benefit and such like, beggars belief. Another reason is that so much tax is avoided, by rich individuals paying unscrupulous accountants to use the latest loopholes to divert their money from its rightful destination at the Treasury, and by businesses using similar methods to avoid paying their correct share of corporation tax. Without concerted action by all members of the international community, the end of such avoidance, not to mention the more obviously "illegal" tax evasion, appears unlikely in the imminent future.
 If companies simply refuse to accept their responsibilities to the countries where they do their business and make their profit, the government has to resort to more extreme measures. If businesses refuse to pay the correct amount of corporation tax out of their profits, the money has to be paid before it becomes the company`s "profit". The method is simple; raise the minimum wage to £8 an hour or more, with immediate effect, rising further if corporation tax continues to be avoided, and collect the tax as income tax from the workers. That way, much less tax is avoided, and furthermore, the workers would no longer be requiring state subsidies, so government expenditure could be reduced. What is really important, of course, that such a boost in pay would increase demand for goods and thereby stimulate the economy. Yes, demand for Bentleys might fall slightly, but the economy as a whole would benefit hugely. Companies with very small profit margins and few staff could apply for exemption, but the multinationals and such like would face massive fines if they failed to comply. The role of trade unions would be enhanced by the need to ensure the new rates were being paid to all staff.
    At the top end, the so-called "Laffer Curve" has been well and truly de-bunked by the economist Piketty, so there is no reason not to raise income tax rates for the obscenely rich to 60-70% for incomes over £200,000 per annum. A top rate of 60% existed for most of Thatcher`s time as PM!
   Profiteering private landlords would see, with wages rising, opportunities to add their vast wealth and increase rent, so that would have to be prevented; setting up an Ofsted-type government agency to inspect and grade all rented properties, so that the rent charged would have to be within set limits, would be vital if the current levels of tenant exploitation are to be decreased.
   The role of Britain in the world would need to be re-examined. Which is more important? The need for Britain to maintain, at vast expense, a huge military capacity, so that we can patrol the seas, police the middle east and interfere in other countries` business, or develop a society where all inhabitants can have equal choices and opportunities?
The mansion tax idea must not be dropped, whatever the "cash-poor" millionaires might say, and stressing how anyone connected with tax avoidance schemes in any way will never be awarded, or allowed to keep their honours by a Labour government, can only benefit the Treasury.
 At the moment Labour plans to raise the minimum wage by 2020; this is unsatisfactory both electorally and economically. Yet again bolder policies are the only answer if the electorate are to be won over; tinkering is no longer an option when the country cries out for transformation.

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