Given that much of yesterday's Tory tax plan was well-trailed and had been subject to comment here beforehand there would seem little left to say on that issue now that the announcement has been made. Except, that is, to consider how it was announced and why it happened in that way, and the one unexpected element, which was an increase in the dividend tax rate by 1.25%.
Dealing with the latter first, this should be seen for what it is. It is a sop to criticism. It supposedly addresses the issue of national insurance avoidance by those who pay themselves using dividends from limited companies. I have no particular problem with tackling that issue, but there is a flaw. The implication is that genuine investment income - the dividends received in ISAs and by savings institutions, interest and rents - should all remain exempt from this charge. Implicit in this move was another attack on working people as a consequence, with the very obvious intention being that genuine wealth should be untouched by the demand that it contribute to society. The bias could not be clearer.
Then there is the way in which the announcement was made. It was deeply partisan. Rishi Sunak took much pleasure in announcing that he was imposing a tax on Scotland, Wales and Northern Ireland. It is apparent that they were not consulted.
The claim was that there was no alternative to raising tax was also wrong. As I noted yesterday, there is a substantial government underspend against budget already this year, whilst all deficits are being covered by the Bank of England quantitative easing as a matter of fact without inflation risk arising as a result, and so that claim was completely untrue.
As for there being no tax alternatives, that was also incorrect. I have shown that making NIC a more progressive tax could raise £14 billion a year, which is all that was required.
Capital gains tax could raise maybe £9 billion a year if rates were the same as income tax. The capital gains tax allowance could also have been reduced.
An investment income surcharge could raise maybe £7 billion a year.
And if the tax reliefs on pensions and gifts to charities were restricted to basic rate tax more than the required sum to supposedly meet this need could have been raised.
So, even using the Tory logic that tax funds spending (which is untrue) there were ample opportunities available. But they were not chosen. And that is indication of their true intention.
As I have noted this morning the most plausible interpretation of that intention is to capture yet more tax revenue for private gain. That must be the case because it is not clear that these tax increases were needed and in the case of social care at least it is not at all clear that there will be any on the ground impact arising from them. In that case it is entirely reasonable to look for the real motive for yesterday's action and if one that is entirely consistent with their other actions in other areas can be found - and flooding wealth upwards has been the whole aim of the Johnson government - then it is reasonable to conclude that it reflects policy.
The regressive nature of the plans for social care and NHS funding are not, then, accident. They are by design. And that is what is so troubling about them. We have a government that in the middle of crisis is only concerned with the self-interest of a few. That's becoming increasingly obvious. I just hope the electorate realise.
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With regard to your last sentence, I’m not sure many will. Within a couple of days, there will be something else making the headlines and many will have moved on from this. I really hope I am wrong, though.
Craig
Pray, someone well-informed about the wisdom of Neoliberal Conservative Government, tell me; what happened to the £350m per week (£18.2Bn per annum), saved by the Neoliberal triumph of Brexit from the grasp of the EU, that was going to fund the NHS? Please do not tell me that it has gone with the wind; like a Conservative Manifesto Promise, or a mere Brexit Protocol? Surely not.
Could it be that the Conservatives were being economical with the actualité; then and now? Surely not.
Could it be that the electorate in this country is now voluntarily embracing gulliblility, or cynical self-deception as preferable to the reality thay have allowed to be created by Neoliberal Ideology? Surely not.
Should we be surprised if the Scots sensibly choose to leave this dilapidated ‘Precious’ Union? Surely not.
I note that the Guardian presstitute stenographers are happily plying the Narrative that the populace in the old red wall new tory belts are happy with the callumny of ‘it needs paying for’ and why should we get it free when other countries (USA) have to get insurance etc.
https://www.theguardian.com/society/2021/sep/07/its-unfair-stoke-on-trent-voters-see-social-care-tax-rise-as-unjust-but-necessary
Why aren’t the Guardian publishing you instead?
Virtually impossible to get in there now
Is that because of the Editor, who is an American?
Is there a chance this is being thought of by the treasury primarily as a deflationary tool rather than a revenue generating one?
I thought this today given it will raise relatively trial sums unrelated to the cost of solving the problem it’s suggested it will solve (which would have otherwise been funded in part by QE), but it will have proportionally high impact in reducing immediate spending power compared to other taxes, and is far more palatable to the electorate and the government than raising interest rates …
(I’m not suggesting this is desirable, just that the government has a strong incentive to dampen down the risk of potential inflation to reduce the risk of any subsequent interest rate rises).
Interesting idea…..
Just finished plugging in the tax increases into various business cash flow forecasts. What is particularly striking is the rising cost of employment, which is making various labour saving projects immediately more viable. Hardly surprising as Economics 101 tells us that the last thing that should be considered when coming out of a recession is tax rises.
The more I think about it, the more I see this Government is about the exercise of power without responsibility.