I have already written about funding the NHS this morning. So let me offer another idea on how to funf flood defences.
As is now apparent flooding is going to potentially cripple significant economic activity in the UK unless it is tackled. This is not just because of short term interruption. Food production and tourism are both under serious long term threat unless major issues are addressed. And then there's the problem of what to do about housing when we already have a shortage. For each reason serious investment is needed.
Some time ago I co-authored a report with Colin Hines entitled 'Making Pensions Work'. Its thinking has now been largely absorbed into the Green New Deal. What we pointed out was that the UK pensions industry receives an enormous subsidy from the UK government each year. When we did the stats the subsidy was about £38 billion a year to create pension saving of £80 billion, much if which was then used to fuel stock market speculation rather than create new investment and so jobs in the UK. The figures will have changed since then, the principle won't. The net effect was, we argued, that much of this subsidy was as a result captured for the benefit of the City and its bonus culture rather than for the benefit of pension savers and the economy at large.
What we proposed as a result was something quite simple. We suggested that 25% of all pension fund contributions should be required to be invested in new job creation in the UK as a condition of the tax relief given. Investment in hypothecated government bonds dedicated to this task would perfectly fit that bill. These hypothecated bonds could, of course, be used to fund flood defence work.
The result would be the release of £20 billion of funding for the UK economy. And with that we could have all the flood defences we needed whilst creating tens of thousands of UK based jobs.
Another one for the manifesto, anyone?
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I’m afraid this is another example of your ignoring EU law. A country cannot give a tax break for investment into local businesses that does not apply to other EU and EEA businesses. See the Kingdom of Belgium case just the other week. Clear discrimination, free movement of capital and State Aid issues.
Yes it can
We do it all the time
Noticed targeted capital allowances?
You’re wrong on this one
Not at all – capital allowances are available for, eg, business expenditure into heat/electricity generating plant or machinery. The plant/machinery can be purchased from any company anywhere in the world. You, on the other hand, are suggesting that pension relief only be available if 25% of funds are invested in the UK. There is no current rule like this in the UK, and nor can there be. It’s clear discrimination in favour of UK businesses and against EU businesses – hence a serious free movement of capital/services problem. Anyone with knowledge of EU law will confirm this to you after a moment’s consideration.
I should add that the State Aid issues are more difficult, as what would otherwise be State Aid can be permitted where sufficient measures are put in place to prevent distortive effects – this is something the UK already had to go through when setting up the Green Investment Bank. It might be possible to put similar measures in place for your proposal, but considerable thought would be required given its much expanded remit. You could doubtless find someone to look into this further, but I suspect their time would be wasted given the discrimination problems noted above.
My point remains – you brush these issues aside even though in the last few years EU challenges have cost the UK taxpayer £10bn or more of refunded tax.
I’m not brushing over them – it’s vert clear that all across Europe such issues are managed quite effectively and I am quite sure they could be in this case
How to fund flood defences? The waste of £billions on Trident replacement has already been discussed here. Plenty of spare cash there!!
This suggestion may be below the belt but I make it anyway. How about getting rich individuals and corporations who we know are cheating on their tax to make a contribution?
When a car is taxed it displays a disc on the windscreen. Similarly, in years gone by, insurance companies supplied a plaque to be displayed on the front of buildings that they had insured so that their fire brigades would know which fires to put out, and which to allow to continue burning. Surely it would not be unreasonable to apply similar principles to victims of flooding. If you’ve cheated on your tax you don’t get help. If you want help, show that you have paid your tax. I know that sounds nasty, but then, tax cheats are themselves immoral.
Just a thought.
I don’t share your view
I can’t tell you who is cheating and do not expect HMRC to do so
It’s not a question of “management” – having a tax relief that discriminates in favour of local businesses and against those in other EU countries is clearly problematic. Other UK tax reliefs don’t discriminate in this way, and I doubt you’ll be able to point to any elsewhere that do.
The ECJ was very clear the other week in the Kingdom of Belgium case:
“It must be held that, by adopting and maintaining the tax reduction in respect of contributions paid to a savings pension in so far as that reduction is applicable only in respect of payments to institutions and funds established in Belgium, the Kingdom of Belgium has failed to fulfil its obligations under Article 56 TFEU.”
If you can point to tax regimes that work the same way, or authorities that support your position, then please do so. Otherwise it would be graceful of you to admit there is an issue here that needs to be properly considered.
In previous correspondence I gave always acknowledged this to be an issue
But nothing stops marketing the scheme in this way
Referring to my last comment, sometimes “tongue in cheek”just does not work.
I was of course trying to make the point that infrastructure to help flood victims has to be paid for and those cheating on their tax are not making their full contribution. Of course I would not want to see flood victims deprived of help if they had not paid their tax. But it would not be a bad thing to make it clear that tax cheating deprives society of the infrastructure to help victims. But is that not all part of the campaign?