The Institute for Fiscal Studies says there will be a £39 billion deficit in the UK’s budget. As my friend George Irvin points out today in the Guardian this is not a problem unless you choose not to tax the rich.
Peter Wilby (Comment, 11 April) is right: our tax system is regressive and desperately needs overhauling. He asks how the extra £39bn cited by the Institute for Fiscal Studies could be raised. I chair an informal group of academics for Compass currently looking into tax reform and working with a large tax model based on the government's own figures supplemented by Family Resources Survey data. Early results show the following. First, the government could raise nearly £20bn per annum by introducing new tax bands of 50% on incomes above £100,000, 60% above £250,000 and abolishing the national insurance cap so that contributions are paid at 11% all the way up the income ladder.
Second, minimal reforms to council tax - for example, introducing land value tax at a relatively low rate - could raise an extra £7bn per annum. Third, the UK could save £12bn per annum alone from axing the following (all expressed in annual costs): ID cards (£3bn); Trident (£3bn); Titan prisons (£2bn); Iraq and Afghanistan (£4bn). Add the above together and you get £39bn per annum. Note that not a single social programme need be cut.
Furthermore, as both the Tax Justice Network and the TUC have argued, abolishing tax havens and tightening tax loopholes would bring in roughly another £25bn (half from personal and half from corporate taxation), so there's room both for plugging the budgetary shortfall and easing the tax burden on the bottom 40% of households while spending on a green new deal.
Yes, we can spend our way out of recession; indeed, doing so will raise even more tax revenue which hasn't been included above. If the rich paid their fair share, there would be no fiscal crisis. The notion that Britain is broke and spending cuts are inevitable is rightwing tosh.
Prof George Irvin
Hove, East Sussex
I am a member of the group George refers to.
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That’s leftwing tosh, professor, and I’m not a Tory.
I know things tend to go in cycles, but haven’t you learned anything from the failings of Chancellor Healey and his policy of soaking the rich? It doesn’t work because it has the effect of killing enterprise.
What I suspect you really want is high tax on the privileged and unenterprising, including inherited wealth and lottery winners, as a means of redistribution. That is somewhat difficult though, as it highlights political prejudices, so instead you say “hit ’em all and darn the consequences”. If that would raise £20bn, I’m a Dutchman!
There are other ways to fill the blackhole that is expected. One of them could be to look at government wastage…I read recently that it was estimated that just under £100bn a year was wasted by the UK government. Perhaps if tighter controls were in place and a modicum of common sense employed, the UK government could actually solve the problem for itself?
John Buckles
Efficiency has to be a given in any system, but let’s not use that to distract from the gross injustices that are occurring under our noses. The same people who have always used this mantra as a way to ‘solve’ budgetary deficiencies are the people who have caused the worst meltdown in living memory.
If all the structures that were in place for the last thirty years (and still are) were necessary for global economic prosperity why are campaigners constantly calling for more justice, more recognition of global poverty, uncovering a distasteful shadow industry in falsehoods, and raising awareness that things are very, very wrong in our wealthy world? It simply hasn’t worked. A new way is needed.
That’s not the inefficient public sector’s fault – but it does need an overhaul.
The fault lies with the ever present doctrine that the rich know best. Twas ever thus.
I was just drawing attention to gross inefficiencies that waste a lot of money each year. Just think if half of it could be cut…the deficit would be met and additional funds made available to infrastructure, schools hopsitals and increased overseas aid etc.
John
The analysis you refer to came from the Tax Payer’s Alliance. That is an utterly discredited source – even amongst Tories
Whenever able people look for these savings they never find them
Of course there is waste in government(let’s start with Trident) but not of the sort you describe, or in that scale
And they’ve never created a loss on value of the scale the financial markets have managed
Richard
Prof Irvin is essentially calling for a top marginal rate of income tax of 61%. That’s a legitimate position to hold, but why not say it? Is he too embarrassed?
I have looked at Prof Irvin’s CV and, as expected, he has absolutely no experience of the business world and obviously knows nothing about wealth creation. People don’t pay tax at these levels: they stop work, leave the country or find some way of getting round it. Whether this is desirable or not misses the point: the fact is at best it might produce no change in total tax take and at worst reduces it. Let’s be pragmatic here.
I am reminded of J-B Colbert’s maxim, “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” So true.