I know others have already done some of this, but I couldn't resist looking at who wins from the Tories proposed tax reforms. So I've looked at each of the main reforms and simply decided who wins most - the top 10%, or the rest. That, broadly speaking is higher rate taxpayers, or the rest of society (just over 10% of taxpayers in the UK pay at the 40% tax rate).
¬? Cutting income tax from 22% to 20%
Cost £7.4 billion. The biggest winners are those who have highest income - because they save right through their tax band. The poorest don't win - they don't pay either rate. Standard rate taxpayers on average earn about £18,000 per annum according to current HMRC data that I've extrapolated. So they will save about £220 from this. Higher rate taxpayers will save over £600 on the other hand. Overall winners therefore are the best off. They get almost £2 billion of the benefit.
¬? Raising the tax-free personal allowance from £5,035 to £7,185 and abolish 10% tax rate
Cost £5.9 billion. The rich will save at 40% on the increase I.e. £860. The poor will save about £210. Overall winners? £2.7 billion of the cost goes to the top 10% in society.
¬? Reducing the higher rate from 40% or raising the starting threshold to £33,300
The Tories didn't even price this. But all the savings go to the rich, by definition.
¬? Scrapping stamp duty on shares
Cost £3 billion. Almost all wealth is owned by the top 10% - but let's be generous and only allocate only 75% of this to them - that's £2.25 billion to the top 10%.
¬? Scrapping employee tax perks, incentives for research and development and the film industry, and tax credits for higher earners
Employee perks, saving £1.1 billion, other savings £1.2 billion. The savings on corporation tax will cost the top 10%. At least half of all perks go to them too. So, let's cost this at £1.8 billion to the rich.
¬? Replacing inheritance tax with a short-term capital gains tax
Cost £2.6 billion. All inheritance tax is paid by the top 10% as only 7% of estates pay inheritance tax, and capital gains is almost entirely paid by the top 10%. That's all to them then.
¬? Corporation tax would be cut by £8bn
£4.4 billion saved by broadening tax base though. The rich own shares (just about by definition) and the rich make up by far the largest group of private pensioners. Let's say that's only £3.2 billion to them then.
The summary:
£11 billion (near enough) of savings to the rich out of the total identified here of £20.2 billion. Or 54% to the top 10%. Never let it be said the Tories don't look after their own.
What does this remind me of? The following quote came to mind:
"The only thing that really matters in your country is those 5% of the people who create the jobs that the other 95% do. The truth of the matter is a poor person never gave anyone a job, and a poor person never created a company and a poor person never built a business and an ordinary working class guy never drove economic growth and expansion and it's the top 5% to 10% who generate the growth for the other 90% who pay the taxes to support the 40% in government. So if you don't feed them [i.e. the 5%] and nurture them and care for them at the end of the day over the long run you've got all these other people who have no aspiration for anything more than, you know, having a house and a car and going to the pub. It seems to me that's not the way you want to run a country in the long run so I think that if the price is some readjustment and maybe some people in the middle in the short run pay a little more those people are going to find their children and their grandchildren will be much better off in the long run. The distributional issue is the one everyone worries about but I think it becomes the tail that wags the whole tax reform and economic dog. If all you're going to do is worry about overnight winners and losers in a static view of life you're going to consign yourself to a slow stagnation."
That sounds like Michael Forsyth justifying his proposals to me, but it wasn't. It was Alvin Rabushka, inventor of flat tax in conversation with me earlier this year, and he gave me permission to published the (recorded) conversation.
Nice, isn't it? But he's the sort of guy who's influencing this thinking.
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Okay Richard, the Tories look after their own, i.e. 40% tax payers, and Labour look after their won, i.e. the very low paid/those who claim all benefits going, no real news there, lets be honest, it’s the ‘middle’ England bracket that has always been hard done by and always will be no matter who is in power!
Solution, if Tories are in get a high paid job, if Labour get in quit the job and let them keep you.
Tax cuts etc again are not the answer, spending the tax take as if it was your grandmothers pension is the key, stop wasting it!
Jason
Where is this waste? Can you prove it? Can you show the public sector does the job worse than the private sector?
Please show me the evidence. I’ve never seen it. I’ve seen lots of rhetoric – but real economics, real data, real evidence. No, none at all.
My evidence. Look at water since privatisation. A success? No. Likewsie rail. Look at electricity. And on, and on. When there is a monopoloy (as there is in the vast majority of really important services as we have no resources to create excess capacity) then the state wins.
When choice is possible the market wins.
There is no one solution. And both are run by people. And they’re flawed (like you and me) and change their minds (like you and me). But you’re calling that waste. I call it normal.
Richard
Jason,
Socio-economic inequality has grown expodentially under under the Thatcher, Major and Blair governments, due to the end of the post second world war social democratic settlements, and the implementation of neo-liberal idology.
That leads to an increase of relative poverty for the lower socio-economic classes.
I agree they are people, and we all get it wrong, however, unlike them I am not responsible, nor have any interest in the job of being responsible, for the biggest corporation of all, the UK.
My argument is our taxes can not be getting wisely spent, OR, they are not being honest and taxes should go up and not by tinkering around the back door.
I am also not saying the public sector is better or worse, after all most of the waste has gone outside the public sector to private firms contracted in, but when these firms tender and then don’t deliver or the price has to go up, it is the tax payer who has to pay, so where is our ‘warranty’?
ISoft, and the NHS as a recent example of private sector and public money.
Yet our money, and that is what taxes are; our money is spent in such a way that I for one see no return, whether that is TRUE or a MISUNDERSTANDING on my behalf doesn’t really matter, it’s the perception that counts.
We see more money than ever being poured into the NHS which is still struggling, with hospital ward closures abound, and that is just my local hospitals (those that are left) and they serve a very large area after having seen a hospital closed some years ago. The staff in these hospitals are great, I know first hand of their dedication, and they deserve better, and not more administrators or high paid consultants.
We see high paid consultants and their firms being paid huge sums of money for advice, but surely within the government system, i.e. civil service, there are equally talented people, why is it always the first reaction to go outside and bring in a consultant who will ask for your watch in order to tell you the time?
Privatization of utilities to which you refer are not part of my waste argument, but, lets look at them, they had under government control suffered no reinvestment but funds taken to prop up other areas of government funding and then the great sell off for a one time cash inflow, and under private control they have still suffered to pay ‘fat cat’ salaries and shareholders. Personally, I don’t believe our water, electric and gas should be private, but that is a personal opinion, it may be right it may not be, but as a utility as mentioned above is not a luxury this really shouldn’t be in private hands.
As for proving waste, I have no way of accessing that kind of data, it would be in so many different places, and I for one don’t have either the time or inclination to look for it, but, and this is what counts, I personally see (perceive) a crumbling infrastructure and a government looking at more ways of getting its hands on taxes (I am not arguing if planning is good or bad) to fill a huge hole, left in part through their own miscalculations, and I am left with the conclusion they must be wasting our money?
Jason,
I was involved with two British industries in the 1970s neither of which would invest in the future. Both are no longer with us. In the two cases I refer to (the car industry and amunitions) the mainland Europeans took over because they were making a far superior product and were prepared to reinvest, retool, reskill at ten yearly intervals.
It is no different today, within the accountancy profession the buzz word is outsource, why, because it is cheaper than employing and training someone here in the UK, the UK has always been blighted by short sighted monetary gain, here and now with little thought to the future, same with governments, nothing they do is for the long term, on the basis the next ‘lot’ in will change it all anyway.
Jason,
You seem to be addicted to this site as much as I am!
I did quote mainland Europe, and I do admit to that of the 1970s. Theoretically, and possibly practically mainland Europe has persisted with the post second world war social democratic settlements.
Which should make them less competitive than neo-liberal Britain, Especially as they are higher taxers and higher spenders than Britain.
Although they have a good social protection system, reasonal economic growth, and societies that are more civil than that of the Britain.
I wish better for all the world. In addition, I know that the social democratic model is riddled with problems but it was the best system Britain ever had regarding socio-economic equality.
Neo-liberalism and globalisation has to be stopped, otherwise we are all on our way back to the start of creation or evoloution, depending on your perspective, if we are lucky.
I have no problem with the general argument but I do have a problem with the ‘no waste’ in public sector segment. Look at the Quangos. Stuart Jones I’n sure would have plenty to say on the subject, given that he’s a constant critic of local, publicly funded organisations. I’d also refer Richard to the very public recorded cost escalations in central government IT projects of which computer Weekly is a high profile and frequent critic. And that’s before we start dissecting NHS funding.
To the more salient point about hard facts, when government is incapable of balancing its own books (quote literally), including HMRC, over which the PAO has frequently been critical, it’s stretching credulity to assume there is no waste. I’d suggest we’re not likely to argue the principle in the end, just the size!
You can say what you like about Burning Our Money but I suggest you both are at opposite points of the spectrum who, perchance are actually saying pretty much the same thing – once you strip away the political rhetoric.
Dennis
Don\’t get me wrong. I\’m not for one minute saying there\’s no waste in the public sector. What I am saying is that mismanagement is normal because we are human. There\’s also massive waste in the private sector. My point is this. The public sector may waste less in pursuing its activities than the public sector would if asked to do the same tasks.
Of course we can ask if the task should be done – but I think we should assume the NHS is good thing. I very much doubt the private sector could come near it in efficiency IF the NHS were allowed to drop its quasi market model which is currently make it work with its hands tied behind its back.
Declaration of interest: my wife is a GP who reckons the private sector has no hope of dealing with the complexity of that task.
Richard
We might almost be agreed but through different logic. Much of the former public sector has been privatised and I’m not counting that. You cite water- terrible going to bad and in some areas not so bad. Electricity/gas/telco: utilities that arguably should be in private hands. Pricing? Consumers seem to have won. Infrastructure like rail services – customers have lost. Airports? Customers win. Quangos? More now than ever, some with ridiculous titles.
It is in the retained semi-public and public sectors – the cases I cited and PFI where it’s definitely gone pear shaped and where critics make the direct link between taxes paid and consumed.
I suppose I should also declare my son-in-law is a mid-level NHS procurement manager and he knows the kind of waste arising from NHS procurement ‘automation.’ We’re not talking moot points here Richard but very large sums of money the electorate can ‘see.’
Private sector? Well – I didn’t know we were casting a general economic net over the thing. but yes – estimates suggest more than $3 trillion is wasted globally in the supply chain. It’s just not very visible. I’d bet if you did a rough tot up, you’d find way more public sector waste globally. But on a retail price/cost/value basis, retail business has done a decent job at pegging price over time.
I am more concerned about the obvious things. Balancing the books within £500 million is good enough? Can’t attract CAs to central finance departments? Says a lot don’t you think?
And yes – the flat tax guy is barking if he thinks that’s a solid logical argument.
Okay, a quick post before I finish for the day:
To be very simplistic Richard, when you have mismanagement in the private sector and prices go up, to some extent the end user has a choice, do they continue to buy or do they find a new supplier; but when mismanagement happens in the public sector then taxes go up and we have no such choice to make, except, to employ ever more create ways of legally reducing our tax burden.
Hence, I go back to my original argument; that it is how our taxes are spent should be addressed as much as your argument for making tax mitigation harder and therefore the tax system fairer for all.
A bit like Den said, we are arguing for the same thing, just from different perspectives. I guess in an ideal world, our tax system would be clearer and in turn fairer with less chance of clever exploitation and in return our taxes would be spent better resulting in either better services/infrastructure or reduced tax burdens.