Yesterday I suggested that the taboo on tax increases had been broken. I still think that true: Philip Hammond will get his NIC increases through. But equally it is now very obvious that many Tories are going to gave him a hard time on it, and so will John McDonnell.
John McDonnell justifies this on the grounds that if tax is to be increased the people targeted are the wrong ones to ask for additional payment. At least that makes some sense, although he is ignoring the fact that this change is progressive overall.
The Tories are simply stuck in dogma. I find it extraordinary that a Tory MP can say he (for it was, of course, a he) did not become an MP to raise taxes. That scores very highly on the scale of economic illiteracy. As a matter of fact there are occasions when tax must be increased; to help beat inflation or to calm an over-excited economy, for example. He may not recall such things and under any government he might chose both may be unlikely, but they have happened nonetheless and tax increases are wholly appropriate in that case.
As they also are if the government needs to spend more on health, social care, education, the justice system, housing, benefits and pensions, the environment and other pressing issues (as most people would wish) and avoid the risk of inflation. But he'd rather avoid the tax charge than supply the services people want, and which the nation can afford because it has so many people in chronic under-employment.
As a measure of negation of duty the refusal to increase tax is, in that case, a pretty good guide to who is irresponsible and who accepts the obligations of government. It's just a shame that it appears right now that the only party capable of forming a government is the one that is very obviously most unsuited to the task.
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And that is why the “natural party of government” only falls when it’s failings can no longer be hidden by the MSM that is always at it’s behest. The greatest weakness with democracy I would suggest.
I didn’t become an MP to raise taxes.
The Tories become more like the American Republicans every day.
You made me stop and think when you said “there are occasions when tax must be increased; to help beat inflation”.
I was struck that inflation is measured largely on the basis of things bought by the ordinary man in the street, so it seems that to defeat inflation through taxation it is the average man who must be taxed more to reduce his or her spending power?
Or did I completely miss something?
Of course if it is used to reduce spending power
Spot on
It destroys money
The current meme being put about right now, that the Chancellor needs to build up a “War Chest” to prepare for a possible Brexit-related downturn, is just ridiculous.
Apart from the fact that no facility actually exists for the Gov to “store” this rainy-day treasure, it’s the exact opposite of what the Gov would need to do in the event, i.e, spend far more in order to stimulate the economy, rather than slam on the brakes!
An aviation analogy works here: if your aeroplane is stalling, the very last thing you need to do is pull up; you’ll crash and kill yourself. Counter-intuitively, you need to push down in order to build up speed, then pull up gradually once your airspeed has increased sufficiently for you to stay airborne.
If there is indeed a Brexit-induced downturn, this Gov is all set to turn it into a depression.
I believe Teresa May has stalled the Class 4 NIC increase, she has indicated it will be reviewed in the autumn, presumably when the second budget is announced?
If it is dropped from the current Finance Bill, or the statutory instrument is deferred (if that’s how the change will be made) we have yet another example of the barking madness of the right. Philip Hammond is right, it is time to address the imbalance between tax paid by the employed and self-employed.
I despair, yet again, the bully “boys” are in charge of the State.
Hammond has now met one of the key criteria for governments losing elections. Disenchant a large sector of those who voted for you last time. This could run and run.
Sorry for being off topic but there was a interesting discussion between Ann Pettifor and a man (didn’t catch his name) from the Institute of Economic Affairs. It was about Money – How to break the power of the banks.
If you have the chance it is worth listening to:
http://www.bbc.co.uk/programmes/b08gy87s
Thanks
Whilst we’re being off-topic, I see the Fiscal Credibility Rule is about to celebrate its first birthday, or close enough to it. The first article I see seems to be 10th March 2016).
Is there any chance of a roundup about what we’ve learned of the detail over the last year?
What specific plans look to be included?
How much is the capital spending side just a bringing forward of national infrastructure pipeline projects plus some housing?
How do spending plans adapt as new Conservative infrastructure spending announcements are made?
Now new nuclear energy provision must be backfilled into the energy and sustainability parts of the programme, how much of a dent to budgets will that prove to be?
Are there any indicative cost-benefit analysis or cash-flow projections on any of this?
How quickly do soft investments into skills and training start to yield returns?
Is bond issuance likely to be matched to any projected stream of returns on the investments made?
How much are Labour likely to realize from realistic estimates of curbing tax evasion, closing avoidances and poorly designed allowances?
How much seems to be needed from new taxes and raising tax rates?
How does it mesh with tax simplification?
How will they manage not to reduce investment in the very private sector they are seeking to stimulate?
How reasonable id the plan to leverage in £150bn of private sector investment?
Are there any boosts to GDP growth and revenues forecasts that have emerged?
How much growth looks reasonable from the plan?
How realistic does eliminating the public sector current deficit look in the light of additional current spending plans?
Is that to be eliminated by the end of a 5 year term or average to zero over all 5 years of a first Labour term?
How does the reducing debt to GDP by the end of the term target look?
How likely are Labour to be able to use the ‘fiscal policy not working, ZIRP’ get out clause?
How badly could these plans be knocked off course by lower than expected growth, a mild recession a significant global recession?
Could you recap the sectoral balances side of the plan?
What are the chances of the plan being altered and a looser set of plans emerging?
Would any such move dent McDonnell’s fiscal credibility, such as it is.
I get the impression that we’ve learned almost nothing new. I suspect the plan hasn’t developed very far in all the turmoil of reshuffles and advisors jumping ship. This is probably not helped by McDonnell seeming to spend more time providing media cover and attending protests than he does on the day job.
An article rounding up progress as a ‘where we are one year on’ would be nice and is something I’ve been unable to find elsewhere so far.
Given the rule makes no sense why bother analysing it?
Given that labour is going to the party most affected by boundary changes, and the reduction of 50 seats: it would seem irrelevant to say they are a party that could ever form a government. Ever.
Not only the changes above, but also several factions within the party that can barely bother to admit either exists.
So they’ll be going into the next election minus around 25 seats from the seat reduction, then around 40 from the boundary changes.
Their only chance to win is by a loose agreement with other minority parties, which they won’t do. Hey, half of them don’t talk to the other half!
While conservatives are good at kissing and making-up at elections, labour just kick each other’s behinds harder!
Is it any wonder voters are confused?
I’M confused, and I don’t read newspapers!
That’s without an electorate firmly wedded to the idea that government can continue to fund services by cutting taxes…
How anyone expects labour, as a socialist party, to win elections when the vast majority of the print media are owned by the sort of people who should never be allowed to own newspapers, is another story (which won’t be printed)