Amazing I can write such a headline. Yes, that is Michael Portillo; he who the left loved to hate once upon a time.
But Portillo has grown up. I also note he’s left the Conservative party. Despite which last night he appeared on Channel 4 a a quasi Tory pundit to discuss what is not being said by politicians in our election. And he probably said the wisest thing said all evening, which went something like this:
I suspect at the end of the day there will be a lot less cutting than politicians are saying right now and a lot more tax increasing that politicians are also saying right now. And that’s simply because cutting is very, very hard. It’s only been done twice, after the first and second world wars, and unless the state of sterling requires it I can’t see it happening again now.
I don’t suspect Portillo is right. I know he is. Hence The Great Tax Parachute, which lays out a plan where there is none for cuts and where there can be none for cuts — because the people of this country will not accept them.
They’ll reject those cuts for good reason. The same debate gave all the clues why a programme of cuts makes no sense. Take some examples.
Some savings will require spending to achieve them. Tackling benefit abuse requires investment, for example. Getting people back to work requires considerable investment in counsellors, for example, And creating jobs for them to go to requires even more investment.
In the meantime, butting benefits creates unemployment. The poorest in the community will have less to spend than now. That will be recessionary. And cutting welfare services such as home helps, old people's homes, and many more care facilities slices through employment sending hundreds of thousands into benefit claiming — all just to waste a resource of enormous value to society as a whole who will then be sitting at home watching day time television with no impact whatever on exchange rates. This is just throwing resources and people’s lives away to create universal misery to keep Standard & Poor’s happy.
That is the folly of this. As Paul Krugman said last week, the rating agency process is corrupt. As he notes:
of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent — 93 percent! — have now been downgraded to junk status.
That’s not chance. That’s indication of a systemic failure, or corruption, or both.
So the real agenda we need is not cuts. It’s tax increases. and it is major financial reform. And no one (bar the Greens) are offering that at this election.
That’s why we’re heading for a miserable time.
My hope is we get PR and with it the chance for real politics and real reform to tackle this. I may be optimistic. I have to be when clutching at straws from Michael Portillo. But that’s better than despairing.
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Re:”
So the real agenda we need is not cuts. It’s tax increases. and it is major financial reform.”
Do you mean an actual increase in the rate of tax? And if so, what would you raise the individual and corporate tax rates to?
Justin
I have made clear what I think is needed in The Great Tax Parachute – see right hand column
There is ample in here to fill any structural deficit, and more besides
Richard
I have had, admittedly only a quick glance at the Tax parachute and was struck by the by the contradiction between sensible suggestions regarding tax administration and some of the short-sighted punitive taxes and tax regime changes that were being suggested. I strongly suspect that if these were ever to be implemented there would be a mass exodus of larger businesses and the high earners these suggestions unfairly target – with the consequent loss of tax revenues.
@Justin
No such exodus has ever happened
There is no evidence it ever will
Do’t believe the spin
And do answer the question – why shouldn’t the rich pay most when they have benefited most?
Or let’s put it like this. Why should the least well off pay most?
Answers?
First an answer to your question: the more prosperous will always pay more tax, that is a function of the current standard and higher rates of tax in the UK. Why is there a need to impose an additional tax of 50% on earnings over £150K (£100K) in your proposals)? If the higher rate was maintained, a hard-working person earning 150K will still be paying more tax than a hard-working person earning earning 75K.
So I cannot see where the least well off or paying the most.
As for the exodus, it is already happening and has done so over the past 3 years – you have reported as much on your blog. WPP, Shire, UBC, Regus, Alliance Boots, are gone, the global reinsurers and private equity firms are going and KPMG, in 2009 reported that there had been a marked increase in the likelihood of UK companies moving their domicile purely for tax purposes. Perhaps the point will be drummed home when somebody like HSBC, who are moving their top executives to Hong Kong and a flat rate of 17% as opposed to 50% top rate in the UK, also move their HQ to Hong Kong. Even as I write this tax officials in Zug and other similar regimes are dealing with enquiries/requests for domicile in the Swiss canton.
@Justin
Absolute amounts are not the only issue
Proportionately is the basis of justice
Progressive proportionately is the basis of fair tax
You seem to be ignoring that fact
As for people leaving – almost none of those companies paid UK tax so there was no cost and 1,000 people went to Switzerland last year. Stop bullshitting
Richard,
Whilst I agree that the risk of mass departures from London has so far failed materialize, I also think that the figure of 1,000 arrivals in Switzerland is itself total horseshit.
The figure only reflects the number of UK nationals applying for work permits in the Swiss financial industry. It therefore fails to take into account two critical populations:
– non-UK nationals leaving London: those are especially important since non-UK nationals make up 40% of the UK financial services’total workforce, and probably closer to 80% of the higher-earning positions away from back-office, administrative and secretarial functions. These non-UK nationals are generally more likely to leave since they have no attachment to the UK and often moved to the UK initially due to its favorable tax regime;
– the UK or non-UK nationals moving to Switzerland with their entire businesses, i.e. hedge funds and other financial entrpreneurs. In that case, no work permit is required, and typically a company will be created.
My sense is that the number of departures is well above 1,000, but not (yet) of a magnitude that amounts to an “exodus”.
@Ted G
So we agree again you have overstated your case
As ever you will have to
@Richard Murphy
I did not realize I was even making a case. I was only pointing out that the figure you quote is at best irrelevant, and at worst misleading.
My view is in any event that it is not about quantity, but quality; or rather it is more about the number of people leaving, but who they are: On the basis of a (non-scientific) observation of my kids’ school enrolment and of my wife’s various charities (both in North London), I believe that there is a trend of foreigners leaving, that most are high-earners, and that they are either returning to the united States or Europe (depending on their place of origin), or moving to Asia, but only few of them are moving to Geneva.
So far, the numbers are not big, but that does not make the tax policies any less stupid. For every one household leaving with gross income over £150,000 and the tax revenues associate with it, one needs to find another 9 that agree to stay. So there is very little room for error and it is frankly not a risk worth taking.
@Ted G
So some temporary residents are going home
Wow, tell us news
@Richard Murphy
It depends on your definition of “temporary”. Many of them have been here for several years, had come here because of the favorable business and tax environment, and would have stayed on if things had not become so difficult.
More importantly, there is no rush of newcomers replacing them. The place is really viewed as unattractive. You can dig your head in the sand Richard, but in the end you will have to face reality.
Richard,
This is coming out this morning on Bloomberg. There is a lot of hot air for sure, but two comments are spot on:
– if you are Amercian or French, it is very easy, even tempting, to leave; and
– if you lose only one guy on $5 million, it takes a lot of work to make up the loss tax revenues from other people.
Richard,
This is coming out this morning on Bloomberg
http://www.bloomberg.com/apps/news?pid=20601109&sid=aDfD84fRUvv0&pos=10
There is a lot of hot air for sure, but two comments are spot on:
– if you are Amercian or French, it is very easy, even tempting, to leave; and
– if you lose only one guy on $5 million, it takes a lot of work to make up the loss tax revenues from other people.
[…] I would remind him that wiser people than he think […]
@Ted G
How convenient that you forget the domicile rule
Which fact undermines your whole argument
As you well know
Richard, we are going to close this debate because I am also getting bored.
But I really do n ot understand why you throw in the domicile rule into this debate. The domicile rule only applies to unremitted foreign earnings, not to onshore income. Anyone who earns $5 million on this island, regarding of their domicile status, will pay full UK tax.
This is what we are talking about here.
Now let’s move on. Work to do.
@Ted G
Feel free to give up
It will be welcome relief from your stupidity
For example, the number of people earnings $5 million here is tiny
And most do not pay much tax anyway, and many of them are non-doms, as we all know
So very politely leave, and please feel free not to come back. You’re a time waster – like those whose cause you argue