My son and I were playing with podcast ideas this afternoon using a video file I made after being on LBC to discuss inflation and its links to hunger earlier today.
The recording quality on this is not as good as I would like, but the file is good enough to share because the issue is so significant.
The approximate transcript is:
Hello, this is Richard Murphy speaking, and today I want to talk about a very simple and straightforward fact, which is that we do as a country need to spend more to solve the food crisis that we face. It is indisputable that high rates of inflation, low rates of pay, growth, poverty with regard to benefit payments, low pension and the difficulty that so many people face in finding sufficient work to combine with their childcare responsibilities has created a crisis for millions of people in this country with regard to meeting their basic need to feed themselves and their families, and that is, in my opinion, not only utterly appalling and unnecessary, but just plain, straightforwardly wrong.
If there is such a thing as sin, which I would define as missing the mark of what is expected of you, then this government has sinned by letting the people of this country go into food poverty.
Now the question is what can we do about it? We can't stop the war in Ukraine. We can't overnight rejoin the European Union, although that would help.
We can't eliminate all the causes of inflation immediately because we know that they are real in the sense that other countries are suffering them as well.
But we can spend more money relieving poverty.
We could also increase the redistribution of wealth from those who have it to those who don't, so that the basic needs of millions are fulfilled and that no child need to go to school hungry.
That is what we could do, and the options available to achieve that are simple and straightforward and are things like increasing the top rate of income tax to 50%, which is still low by international and historic standards. At the moment, it only goes to 45%.
Second, we could align capital gains tax rates and income tax rates. Income tax is paid on employment, and other income from work and investments. Capital gains are the profits that arise when you sell investments. They all result in pounds in someone's pocket, and the fact is that capital gains can be manipulated to massively distort the amount of ncome that is declared for income tax purposes and reallocated to capital gains for tax purposes because for most capital gains, the maximum rate payable is 20%, which is hideously low. When we see the example of the Prime Minister's own tax return, where his overall tax rate was only 22% in the last year for which it was declared, then we could do and should tackle this.
We could also charge national insurance right through the earnings brackets of all people who work. That would require some changes to income tax rates between say, £50,000 and £100,000 but we could charge national insurance at full rate on everyone however much they earn, whereas it present at around £50,000 the rate falls from 12%. to2%. That's wrong. It should carry on at all income at the same level.
Fourth, we could charge what is in effect national insurance, on investment income and on capital gains. We would call it an investment income surcharge. That is something that was done in the UK until the mid 1980s. It worked, it delivered, and it would mean that those who live on unearned income paid the same overall rate of tax as those who work for a living do. What is unfair about that?
Finally, we need to stop people hiding their income in companies by diverting it when they have spare money and spare resources. They they pay corporation tax as a result at a maximum rate of 25% when they would, under my proposals, be paying maybe 50% income tax, and according to the government, at least 45%. This abuse could be stopped by introducing something called a close company apportionment rule, which sounds incredibly complicated, but simply means that a company that has investment income which does not need it for investment in productive economic activity has to pay it out by way of dividend, and it would therefore be taxed in an individual's hands.
We could therefore force billion - and I think we're talking here about £30 to £40 billion pounds a year - into the government's hands to reallocate money to those who need it.
We would reduce inequality.
We would feed children.
They would go to school without being hungry.
Their parents wouldn't have the stress of worrying all the time abouthow they keep their children fed, warm, and clothed, as well as anbout their wellbeing.
That is what we need to do.
That is how we need to address it.
This hideous crime against humanity in this country has to end and tax is the way to do it.
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What would be the unintended consequences be of taxing investment by anybody who is ‘not government’ even more than now?
The obvious one is less investment and less ‘not government’.
And more committees of well-meaning people having to set regulations to determine if a company that has investment income really needs it, given that a lot of investment turns out to be productive only after doing it and it’s awfully difficult to predict in advance if an investment is both necessary and will be productive.
But you have to think that more central planning could move us towards greater equality of hunger and would lead to less human happiness overall.
I am suggesting taxes that we know can work and which will reduce inequality
Quite clearly what I have said is that investment will not be harmed
So what is your problem with tackling poverty, which markets clearly will not do?
Sorry, but I do not understand what greater equality of hunger means. Can you explain? Never heard of a rich man being hungry.
‘Lavrentiy Beria’ is just being sarcastic I think jenw – either that or trying to be funny or maybe he/she is just another one of those rabid libertarians who believes in trickle down theory and ignores the huge pools of cash lying around untaxed or waiting to go into Tory party coffers.
Have pity is all I can say – totally deluded.
What a pile of unmitigated shite. You do realise that this discussion is about people?
I am still trying to figure out how Laurentiy Berio has measured “human happiness overall”; it tends be something Neoliberals believe in private, but even they see the danger of making it a public issue. I am really looking forward to the explanation (hoping we can avoid the crasser follies of Benthamite calculation; but it isn’t up to me!).
David Byrne says:
your podcast was excellent; sympathetic and instructive.
In summary, you advocate the redistribution of wealth from the ‘unequal 1%’ for the benefit of the poor and needy, in particular, to eliminate hunger. Our children matter.
What kind of uncaring people are allowing this to happen? We know the answer to this question, and those guilty , greedy people in power who hold on so tightly to massive wealth need to be repeatedly named and shamed.
As you rightly state, the equitable taxation of unearned income and the windfall proceeds of inflation would be a good start.
Thanks David
One of the political problems to taxing unearned income more is the situation with pensioners, who currently don’t pay Nat Ins on their pensions. Although if it meant a decent health service and care service I am sure some( myself included) will see the benefits.
Rules for pensioners – in the form of an extra allowance – could easily be created
But at some level of income – the national average? – a pensioner does not need an advantage, I suggest
So, above that why not tax the same?
I agree with all of what has been written, but I think we need to “situate it”. To do this I propose we play “let’s pretend”. I’m Mystic Meg or Nostradamus
It is 1999 & you have come for a seance. (for this to work – imagine it really is 1999). You have a smile on your face, the future is bright, the future is Tony & Nude Labour. The tories are dead.
the spirits are upon me – I’m feeling all funny, but what I see is not funny:
In 2010 a tory government will delibrately make people poor and over time kill 130,000 due to cutting government funding of public services. Doctors will see a pay cut of 35% (and nurses) by 2023, Public Librararies will close by the thousand (money cut to local gov), Starvation will plague the land: food banks by the thousand will open, millions will use them – or face starvation, A real plague will plague the land and hundreds of thousands will die – because of tory underfunding of the NHS. Boris Johnson the great fatberg will become Prime Minister & the Uk will vote to leave the EU. Rivers will overflow with shit, no river in England will be fit to swim in, people will be unable to heat their homes, the rich will be a great deal richer
At this point – the punter – his/her jaw dropping ever lower says: “OK pal nice story but I want my money back – call yourself a seer – you need help”.
We (the country) have allowed ourselves to be massaged into not seeing things the way they really are. This is partly due to the passage of time – somebody 10 in 1999 (& thus unfamiliar with realities then) is 35 now. They will have been groomed to accept the current situation. Tax top rate of 50%? – for much of the ghastly Thatchers “reign” it was closer to 70% – (in a country far far better off than the pathetic pile of crap it is now).
Hayek’s “Road to Serfdom” was 100% correct – elect a socialist gov and it will lead to both fascism and poverty – the tories are facists in all but name, the country is on its knees in the gutter. What Hayek omitted was the role of the press in grooming people to accept the unacceptable (I have no doubt that Nemesis, the goddess is pissing herself with laughter – straight replay of 1930s – 1940s Germany – population groomed to accept vileness – scapegoats a-go-go: Jews then “immigrants” now – camps on the way). The tories are little different in their urbanity from many of the leading Nazis (both sets being world-class liars).
It struck me the other night – the hardest part of getting old/older is not the accumulation of knowledge (one tries to live and learn) but a growing understanding coupled to the ability to compare what was and is. For those that have read this – now go back to the list at the end of Richard’s piece, and pretend you are in 1999. Why would anybody produce a list like that (in 1999)? Hungry children? But this is not Africa your 1999 persona would note. Well it is now pal – & quoting: “but if you want to know who is really to blame – you need only look in a mirror”. (yup unfair ro readers of this blog – but I’m not feeling very fair minded today).
““but if you want to know who is really to blame – you need only look in a mirror””.
Mr Parr, I am 100% with you. I look at this (myself), and ask myself; what have you done to prevent this – through your life? Nothing; at least nothing effective. I have failed, and my generation has failed – spectacularly. No excuse.
Gullibility on this sclae, over this time scale just doesn’t work as an excuse.
Excuse my ignorance, but I was shocked to read “at around £50,000 the rate falls from 12%. to2%”. What is the supposed justification for this (valid or otherwise)?
You have then paid your insurance
That is the supposed justification
It is now utterly unjustified when NI is just a tax with marginal relevance fo determining pensions – and then rather unfaurly
Yes – if you just look at income tax and primary class 1 (employee) NICs, the tax rates are essentially 32%, 42% and 47% (that is, 20%+12%, 40%+2% and 47%+2%).
To put is another way, for each 20p or 25p more in the £ paid as additional income tax by employees paying higher or additional rate income tax payers, the person gets 10p back as lower NICs. If you include secondary class 1 (employer) NICs, and ignore deductions for the employer, it is 40.2%, 49.0%, and 53.4%.
Compare that to the headline income tax rates of 20%, 40%, 45%. The difference is +20.2%, +9%, and +8.4%. Or to put is another way, people on the basic rate are being taxed much more than they think on each additional £1 their employer lays out, and taxes on earned income are much less progressive than the headline implies. Throw in some capital gains (taxed at 10% or 20%, sometimes 28%) and you see why some people gloated about paying less tax than their cleaner.
It is similar but not quite so extreme for the self-employed – no 13.8% employer NICs, and the rate of class 4 NICs falls from 7% to 2%. So that is rates of 27%, 42% and 47%.
More here: https://ifs.org.uk/taxlab/taxlab-key-questions/should-income-tax-and-national-insurance-be-merged
(the graph is for 2021-22, so the additional rate threshold has reduced to £125k now)
Outrageous. Thanks Richard.
the tax/ni burden is at the highest rate ever, we should be cutting not increasing it
Why, when the resulting distribution of resources in society results in gross injustice and tax could put that right?
Or are you happy with gross injustice?
What about the argument that people sometimes lose money on investments? Supposing you lose £50000 one year and gain the same amount the following year?
Losses can be carried forward
Next…..