I cannot believe that it’s a Labour government that’s removed the 10p tax band either. The rumbling noise you can hear? That’s Kier Hardie revolving in his grave.

what an ill-thoughtout rant.

Firstly – have labour said they can’t afford tax cuts? I don’t remember that. In fact I remember them saying at the last election and the one before it that tax revenues should continue to rise to help pay for better public services.

and thats a fair judgement for a party to make. It is quite fair for Labour to decide that rather than cut the tax burden at the recent budget, they would use increased revenues to give up to £1000 a year to the poorest parents by eliminating child benefits from means testing calculations.

They weighed up a choice between a lower tax burden or lower child poverty – and openly chose the latter.

–

As for the tories, much the same choice has been made. They have just two spending commitments as a whole. One to keep raising NHS spending in line with Labour. The other to spend 0.7 percent of GDP on international aid (as the UN wishes, and as Labour have also promised).

And so while they could then scrap the police and hand out all that cash in tax cuts – the fact is that they don’t think thats the right thing to do in government. They also understand that most people still think there are more important uses of public money than cutting the tax burden.

–

All that means that some marginal re-jigging of the tax system will make some better off and some worse off. Labour introduced the 10% rate (under Blair) making poor workers better off. Brown’s Labour government has scrapped that to make poor workers worse off.

But of course that one measure alone is hardly the basis on which either Brown or Blair could be judged. governments must be judged over a wide range of many policy decisions (including tax ones).

—

Of course the Lib Dems can ignore that – they can risk the financial sector by taxing non-doms – and they can promise tax cuts galore for anyone they like. Because they don’t have to worry about whether the economy grows, whether people are lifted from poverty, or whether cancer survival rates continue to rise.

Those things matter only to those who may at some stage be in government.

“they would use increased revenues to give up to £1000 a year to the poorest parents”

Generous benefit provision is the priority of any civilised state. But it is utterly crazy to take money away from the poorest section of the population, mess it around a bit, and then give (some of) it back to (some of) them. I’m on housing benefit myself, and I find myself doing that dread calculation every so often – is it worth my taking on this work or will I be worse off as a result of the benefits I lose? It’s a simple question of which route will allow me to pay the rent.

The elephant in the room here is tax credits, a Byzantine system that even after several reviews/shake-ups/whatevers still refuses to work. I used to be a tax consultant. Not all our clients were wealthy. Some had to have tax returns done because they were running small businesses, and they were eligible for sizeable child tax credits. One client in particular spent more money getting us to wrestle with the tax credit system than they actually earned in credits – and without our help they’d have been worse off still because they were being targeted with the dreaded clawback, despite having provided all the correct information on time. There are, as you know, hundreds of stories like that.

I’d have far less of a problem with Labour’s position if they actually had introduced taxes that tapped the rich – at least balls-out redistribution would be logical. But they haven’t. They’ve raised the threshold on inheritance tax, messed around ineffectively with CGT and accepted a miniscule pay-off from the richest non-doms in return for not taxing them properly. The child poverty provision is fantastic but should and could have come much earlier – but Labour wanted to cost a rise in the inheritance tax threshold instead.

Most horrifyingly of all, Labour has got the lowest earners in society to pay for a tax cut for the slightly better off earners. And I am living proof that, contrary to your lofty assertion, this IS a big enough issue to prompt a damning judgement of this government. I used to vote Labour-with-Lib-Dem sometimes, then after Iraq I became a more conscious LD supporter, but it was this policy, and no other, that turned me off the Labour party altogether. Obviously it hasn’t turned a lot of people off, but they’re them, I’m me.

“And so while they could then scrap the police and hand out all that cash in tax cuts ”

You’ve let my main point drift away from you here. As I make clear throughout, I am discussing the “rejigging” of the existing tax pot, not actual global cuts. And the principles of increased fairness I outline could equally be applied to a bigger overall revenue pot, if that’s what we need. As to your apparent belief that “rejigging” wouldn’t make any difference, I can only suggest in astonishment that it would make quite a hefty difference to people earning below £17,000.

“Of course the Lib Dems can ignore that…”etc

Look, this one is now really getting old. I’m quite happy to knock the ball back and forth on spending commitments (though, since I agree with pretty much everything you say about spending priorities, I suspect you just haven’t read my piece properly).

But do you seriously, seriously in your heart of hearts believe that a politcal party with 63 MPs, sixty thousand members and more policy committees, papers and reviews than you can shake a stick at could just arise as some form of random wave formation pattern? And be surviving and its core vote growing all the time on sheer opportunism? Why not actually do us the courtesy of being prepared to accept that maybe we might just mean what we say, even if you then disagree with it? What’s so threatening about that, if you’re so right? Whether you like it or not, there is a 40-page Lib Dem policy document in the public domain which outlines – and COSTS – how the reduction in income tax could be effected. That’s 40 pages more costed analysis than the other two parties have, and you can’t wish it away with this tedious catch-all knee-jerk anti-Lib Dem objection.

Is this a Liberal Conspiracy or is it not?

“[the idea that] you have to “find” some extra money from somewhere is a great big shocking freaking lying bloody lie”

But that’s what you are suggesting should be done – find more money by increasing taxes on wealth, in order to cut other taxes on income.

The idea that there is some conspiracy to pretend that it is impossible to cut particular taxes while raising others is a strange argument to make given that that is what Brown did in the budget with the cut in the basic rate, and the raising of sales taxes on booze and fags.

For most people on low incomes, increasing tax credits will boost their income more than cutting income tax would, as would other changes such as increasing the income disregard when calculating housing benefit. If the priority is to help low income earners, why cut tax rather than increasing benefits?

Meanwhile those of us that actually wish to strive for a fairer tax system, Margin, will be disgusted at what the Tories and Labour put on the table and how much they pander to big business and those with large wealth while hitting the poorest harder, and will be more inclined to go with those that have policies like the Lib Dems.

What’s the point in giving more money to the poorest if increased tax rate’s have meant most of that money going in to the coffers from them is funding it? Why go through the bureaucracy of taking money from people only to give it back?

“But that’s what you are suggesting should be done – find more money by increasing taxes on wealth, in order to cut other taxes on income.”

Nope, when I say “find” I mean literally make up the shortfall in the tax take that would result from a cut from the public purse – that option clearly isn’t available, I’m quite happy with that. This is, I believe, what politicians mean when they talk about “finding” extra money to fund tax cuts. Rejigging the tax burden without changing the overall take is a closed system, and doesn’t require any “finding” from outside.

“Brown did in the budget with the cut in the basic rate”

But he did this by slashing the 10% band! Yes, if you earn over 17k you’ll be better off as a result of this budget, lucky you! The poorest section of society won’t be. Moreover, booze and fags taxes like all indirect tax have a disproportionate effect on lower earners.

Re: tax credits, I’ve partly answered your point above – they don’t work, they’re expensive to administer, so why bother? Why not cut out the middleman? I’m not sure how you’re costing your assertion that tax credits would make people better off than a tax cut – doesn’t that just depend on how big the tax cut is?

5. One thing for certain is that taxing the poorest more is worse than both cutting their taxes or giving them increased benefits.

I believe this year I will be something like £50 or something better off, this will be at the direct detriment of the cleaners and more low skilled staff in my place of work who will no doubt take as much of that if not more off of their take home pay. The insult here isn’t that the poor are being made to pay tax to allow people like me some tax relief, it’s that it’s being done over such pitifully small amounts of money that you have to ask what the hell the point is of doing it in the first place…aside from of course giving those that are truly paid better a hundred quid or so more?

Alex

Lets take a parent of one child on £8k a year shall we? They will now pay 10% more tax on about £1000 of income – thats £100 a year.

That same person will be able discount around £40 a week in child benefit – and so will benefit from knocking £2000 a year income from their means benefit calculations – which child poverty campaigners estimate would be worth around £800.

So how is that bad? Do you want those families to be worse off?

-
And you’ll note that

“They’ve raised the threshold on inheritance tax” (under Brown)
Messed around ineffectively with CGT (under Brown)
accepted a miniscule pay-off from the richest non-doms in return for not taxing them properly. (Under Brown)

“I’d have less problem… etc”
So the windfall tac (under Blair)
Extension of NI (under Blair)
introduction of the 10% rate (under blair)

so you must be praying for Blair to come back.

—-

likewise

“Contrary to your lofty assertion, this IS a big enough issue to prompt a damning judgement of this government. I used to vote Labour-with-Lib-Dem sometimes, then after Iraq I became a more conscious LD supporter… ”

Well ho hum – an Iraq Lib Dem who isn’t going to vote labour for yet another reason (on top of the real one).

At least if (as many of us do) you want to vote lib dem – do it because they are a voice for liberty on important matters like ID Cards and longer detentions. Not because they can promnise economic puppies and sweets all round. Do it because they were the only opposition to Iraq. But don’t pretend every new issue is the reason to vote for them instead of the others.

—

next up
I do appreciate you are talking about ‘re-jigging’ things – but there are consequences to those re-jigs. Big economic consequences in some cases. And the Lib Dems don’t have to worry about those very real issues that could cost human beings their jobs and homes.

-
oh – and the lib dems (ignoring the present poor polling) don’t get by only on populism. Obviously there is some protest voting, but they also remain a firm and valuable voice for liberty. They opposed war, they defend civil liberties – and people quite righlty back a party for that.

I’d hate you to think I was attacking the lib dems as mere opportunists.

I but as some one who would love the Lib Dems return to their Kennedy highs in the pols – and go further – I can’t stand the pretence that people back them for such weak and clearly unimportant economic thinking.

Lee

Have you done the maths on this? Childrens charities were pleased with the budget for the net redistribution of money to poor kids.

Frankly if some one gives me £30 and takes £10 I’m OK with that.

I don’t pretend labour and the tories have a perfectly fair set of policies – or that either do what I’d ideally like to see happen.

But I’m also not foolish enough to think that an ideal is possible just because the Lib Dems pretend it is. trade offs are needed. pandering to business does, sadly, secure jobs – which in turn enrich the working people. If it were not so and we could generate employment without giving in to the rich, that would be great. But we can’t. And we shouldn’t pretend otherwise.

And until the lib dems start to recognise that in its policy making – it won’t progress towards the 30% of the vote it rteally needs to shake up British politics.

Sadly though, doing so might see idealists like Alix move on to the next party offering hugs and puppies.

“Re: tax credits, I’ve partly answered your point above – they don’t work, they’re expensive to administer, so why bother? Why not cut out the middleman? I’m not sure how you’re costing your assertion that tax credits would make people better off than a tax cut – doesn’t that just depend on how big the tax cut is?”

For any given amount of money, let’s say £4 billion, increasing tax credits will do more to boost the incomes of low income earners than tax cuts will.

I chose £4 billion because that is the amount that researchers, who are much cleverer than I, say is needed in order to hit the target for halving child poverty by 2010. Their recommendation is that this should be done by increasing a mixture of tax credits and universal benefits (child benefit). You can’t lift 1 million children and their families above the poverty line with a £4 billion income tax cut, but you can by increasing child benefit and child tax credit. More at http://www.jrf.org.uk/child-poverty/ if you’re interested.

Point being that if your concern is for low income earners (and I agree with you and Lee that it should be), then cutting income tax is less effective than increasing benefits. The budget also included a rise in National Insurance for those earning £35-40k, btw.

That said, I’m all for increasing wealth taxes and redistributing wealth

Margin4 Error:

“Alex

Lets [sic] take a parent of one child on £8k bla bla bla…”

The error here is “Alex”, who does not appear on this page. The author is called “Alix”.

I have no idea what the blogosphere would do without my crucial interventions.

For any given amount of money, let’s say £4 billion, increasing tax credits will do more to boost the incomes of low income earners than tax cuts will.

The problem is that the tax credit system works extremely well on paper, but not quite so well in reality. There are costs – in time and effort – required to claim them. Whilst an economist could easily argue that the benefit outweighs the costs (since poor people’s time isn’t worth much to begin with), the fact remains that the time and effort required to claim is putting a substantial number of people off. And this equation does not cover the time and effort of the people who administer the system, all of whom requiring paying out of the same pot of money that is used to pay the benefits.

Secondly, tax credits add to the problems facing those whose incomes go from ‘low’ to ‘not quite as low’; these people often find that a huge proportion of their increased income simply vanishes once the reduction in benefits kicks in. A tax cut causes no such problem.

Tax credits produce some very good ‘best case’ scenario outcomes for poor people, assuming that their incomes are fairly static. It all looks pretty good on a spreadsheet, but there are some problems that only become apparent when the system has to cope with the dynamic real lives of actual people. However clever one has to be to grasp the numbers, it is undoubtedly nowhere near clever enough to actually solve the problem.

I rather suspect that along side most left-labour-liberals around the turn of the twentieth century Mr Kier Hardie would have been a proponent of Free Trade and therefore likely absolutely appalled at all the tariffs we put on our productivity by way of payroll and income and corporation taxes.

Just as with subsidizing housing (which means subsidizing the already-haves in the form of landowners) you cannot, logically, help the poorest just by trying to fight the symptoms of a fiscal system that is always going to be bad for them. You’ve got to change that system and eradicate the ultimate causes of poverty and inequity.

That starts with the land question, Many would also say it ends with the land question. Someone said to me yesterday that “you could tax all the land value and throw the money raised into the sea and it would still benefit the economy” – because it tackles the land question, makes work more productive, eradicates property based monopolies and so on.

In the long run, as Asquith said, “In almost every aspect of our social and industrial problem you are brought back sooner or later to that fundamental fact.” Better sooner than later I’d say.

“Lets take a parent of one child on £8k a year shall we?”

By all means. Bear with me while I reproduce Excel in comment box format.

Labour 08/09
8000 less personal allowance 5435 = 2565.
2565 @ 20% = £513 tax

Lib Dem tax policy (assuming a basic rate of 18%, rather than the 16% most recently costed, because that depends on Local Income Tax which I personally am not keen on)
8000 less personal allowance (5435 plus what was the 10% band, most recently 2150 = 7585) = 415
415 @ 18% = £74.70 tax

Child benefit would be slightly increased. The only benefit the Lib Dems are interested in removing is tax credits, for reasons supplied (and not nearly fast enough for my liking).

Summary is here:
http://www.libdems.org.uk/media/documents/policies/Tax%20Supplement.pdf

I suspect the green tax take would have to be revised in the light of the latest budget which is why, by way of a makeshift offset, I haven’t costed the proposed reduction in NICs on this 8k.

I don’t get the relevance of your affectedly world-weary “pandering to business does secure jobs” line. Who mentioned increasing corporation tax? We’re talking about increasing taxes on personal accumulated wealth – or, actually, on abolishing reliefs available on them, which is a far more effective way of increasing the tax take than actually putting the rates up. Your tone here is quite revealing. You have come to believe that holding the aim of reducing income tax can only be the product of misguided idealism which ignores what you conceive to be cold, hard realities. Yet clearly, from what you’ve said, you’d be in favour of it if it could demonstrably be done without either affecting benefits or damaging business. So… well, why aren’t you?

Using Alix’s figures, for a cost of £16 billion, the Lib Dem plans involve a tax cut for someone earning £8,000 with one child of £438.30 per year (or about £8.43/week).

For £12.5 billion, Child Benefit could be raised by £20/week.

For £4.2 billion, there could be a £16/week increase in the child element of the Child Tax Credit

So that is between just under two and two and a half times as big a gain in weekly income, at a lower cost in non-means tested benefits, and massively lower cost in tax credits.

Rob – I take the points about the problems with tax credits, but for all that it’s still the case that scrapping tax credits and using the money to cut taxes would leave most poor families worse off.

Thanks Julian

I humbly apologise.

-

Alix

the proposed cut of 2% in the basic rate would of course cost a great deal of money – where would that come from? (ignoring of course that having complained tax cuts can be found, you are now simply suggesting a different way of finding in your figures that would target children in poverty far less well.

and

as is often said of tax credits – how would they be removed without either
a) making poor people who get them much poorer
b) costing the taxpayer a fortune for additional benefits to people with more money than presently targeted.

–

And I never said I was against cutting any specific tax – I pointed out that neither the tories nor labour were lying about reducing tax. The money must come from somewhere, and while labour and the tories are pretty honest about that dilema – you claimed otherwise.

DonP, the relevant trade-off as far as I’m concerned is between income taxes and wealth taxes, not between income taxes and benefits. It tends to become a discussion about the latter only when – forgive me – statists get hold of it. But you’re starting from a position of assuming we have a Lib Dem government which has collected this extra money and discussing ways of spending it in the particular context of families and the child poverty target, and since you haven’t mentioned hugs or puppies at any point, I’ll happily go with that

On the one hand, people who have children are performing an important societal service and, I agree, should be supported (though there are plenty of libertarians here who will disagree right there and I’ll leave them to speak for themselves). Child benefit seems to me to be the only way to effect this. I am pretty immoveable on scrapping tax credits because, in addition to what Rob said, they actively cause suffering when the system goes wrong for people and I’ve seen it happen. The real human cost of tax credits outweighs the paper benefit of how much they cost society, and since child benefit is a much more reliable mechanism for delivering extra money, why not just do it that way?

On the other hand, an effective economy should reward productive activity from all its citizens, and having children is only one form of productivity. If all the extra tax collected from a shift onto wealth tax was pumped into child benefit, that would become the new market choice – much as not working sometimes is for me when the earnings won’t offset my housing benefit loss. There is therefore a balance to be struck between increasing child benefit (which, as I say, is a Lib Dem policy too) and cutting taxes at the bottom of the scale where they will benefit everyone, not just those with children.

Your particular context here, the child poverty targets, has rightly had specific funds allocated to it. The Lib Dem tax plan simply allocates funds to another economic priority – cutting taxes across the board. To be perfectly honest, I think we should have a go at inheritance tax – that’s not part of the current costed plan and would be the easiest way of stumping up for more child poverty targets. I think this is why the Labour inheritance tax threshold raise – when the money had been earmarked for child poverty – particularly sticks in my caw.

Let’s talk economic competence. Labour swept into power in 1997 using a variety of issues as their plank, including using the slogan “No more Mr Boom and Mr Bust” to sum up their economic policies. Well they did replace them, but instead we’ve now got Mr Boom-and-Bust in charge.

Gordon Brown took the credit for the longest sustained period of growth since anybody remembers, though it was built on the back of the biggest credit bubble north of the south seas. The glut of consumer spending has been matched by government spending growth, yet now Brown’s successor as Chancellor is vilified for the complacency his first budget even though the Treasury is shackled.

We could speculate forever about future events on the markets, but none of us is looking forward with great optimism.

And I’m not even going to mention the sell-off of gold reserves.

Compared to what has gone on up til now, I’m not sure that the LibDems lack of track record in economic management counts against them in the slightest.

Thomas

To be fair – there is still no bust – so that ‘promise’ (as it were) has probably been kept.

After all – with the asian financial crisis, the dot.com bubble bursting, and now th credit crunch – the UK has prospered. In the first quarter of this year employment continued to rise quickly (166,000 jobs created in three months) and no few people expect a recession.

indeed the economist has just published an article showing that of the G7 – the UK has the fastest per capita GDP group over the last five years. (significantly, Japan is second despite some negative and innacurate perceptions of their economy).

So while Labour failed miserably on the ‘whiter than white’ pledge about sleaze – it has undoubtedly done well on the economy. Unless of course you’d like to (and i’d advise against it) argue with results.

“the proposed cut of 2% in the basic rate would of course cost a great deal of money – where would that come from?”

Look at the link I provided earlier. It’s a costed plan for providing the 2% cut amongst other things.

Now, there’s plenty one could get one’s teeth into here. For example, the position on green taxes has now changed with the allocations in the recent budget – so is my leaving the NICs reduction out a sufficient offset? Debatable.

Then there’s the corporation tax measures – what’s the point in reducing the rate by 1% when you’re going to take away nearly the same amount in reliefs (answer: because reliefs are easier to abuse; much better to give them across the board in a rate cut).

You might well ask why the contingency fund has obviously arisen from a “that minus that equals that” calculation, rather than being set as an advance aim as a contingency should be (and you’d be right).

You might point out that the rise in the higher rate income tax threshold to 50k is all but wiped out by the concomitant rise in the NIC 11% threshold – wouldn’t it be much more sensible to reform the whole regressive NIC thing anyway? Yup, totally with you there, no idea what that bit’s all about.

You might point to the fact that I conceded earlier that local income tax would make the basic income tax rate even lower so why aren’t I agreeing with that (good question; I’ve yet to arrive at exactly what it is I don’t like about LIT).

Above all, you might say, well, if this costed, workable plan is so marvellous how come I’ve never heard of it? (Another good question; you have now).

But just saying, in effect, “Well, that’s obviously all untrue, where’s it *really* going to come from?” ain’t going to cut it

M4E:

Frankly if some one gives me £30 and takes £10 I’m OK with that.

But wouldn’t you rather someone gave you £20?

Funny though Margin4Error. I distinctly remember sitting in my stockbroker office in 1988 and the employment figures came out and one of them said – “oops…employment increase, recession must be on the way”. Apparently there is a bigger correlation between employment starting to rise (after a fall that is) and a downturn in the economy.

But the bigger issue I have with what you say is that more than ever before that economic prosperity has been purchased with huge amounts of debt and it was a deliberate policy as it turns out of Messrs Brown and Eddie George.

It’s not sustainable, and the people who will be hurt if it comes to an end, abrupt or otherwise will, of course, be middle and lower tiers of working folk who have been persuaded to jump on the land-debt-money bandwagon for fear of being left out permanently.

The existing unaffordability of housing proves, in fact, that it has not been the untrammeled success Brown and Darling have wanted us to believe for the past decade. It has been incredibly skewed in favour of the asset rich. Great work for the party of the working man and woman!

Alix

Thats link is not a costing – thats a campaign slogan.

explanation.

It plans to cut support for pensions – but there is no analysis of how this would damage pensions saving in the UK (or benefit, it has nothing there – nothing at all)

a hike hike in taxes on small business (end of taper relief) – so where is the analysis of how many jobs that would damage and how much the additional welfare costs would cost the taxman – or the analysis of how much those additional closed or constricted businesses would no longer pay in tax?

“additional environmental taxes” is three words – not a tax proposal – not analysis of revenue – not a study of how to levy a set sum of money by taxing behaviour taking into account resulting changes in that behaviour.

“remove some corporation tax reliefs” Which ones? without knowing that how on earth could it be costed? how can we know the number of companies would move their tax base to another country? how can we know what other changes in behaviour (and so revenue) would result? It doesn’t even bother to say which reliefs.

–

ukliberty

thats exactly the same thing – And I’d like both of them just the same for it.

–

Jock

a rise in employment after a fall – There has been no fall. It has been rising for about 15 years. Having said that, employment can in theory (though rarely in practice) rise alongside a recession.

But I’ll grant you that there are a couple of odd indicators of recession.

Long term yeilds on credit for example, dropped to a cheaper price than short term yeilds in the USA in late 2006 (or so I read at the time) – and that is a sure fire indicator when figures from previous recessions are considered.

The same didn’t happen in the UK though. (according to same study)

Also – in what way is debt not sustainable?

The UK is of course far less indebted than many other countries – For example – the UK’s entire debt, public and private, comes to less than 100% of GDP – ie less than one year’s wealth generation.

That is less than Japan’s public debt.

And of course our debt ammounts to around a mere seventh of our total aseset wealth, suggesting little long term disconnect there.

When a person borrows three times their income to buy a house – we don’t assume that is a mistake. Yet people imagine exactly that across the economy as a whole.

and no one has ever explained to me why debt levels in the UK are unsustainable – other than to list various gripes that do nothing but show no economy is perfect (eg house prices, individual bankruptcies, and so on).

sorry for my long and somewhat untidy posts people.

I love both economics and politics – and have long since hated almost every instance where they collide.

Politics tends to make for bad economic understanding – and vica versa – hence it frustrated me to see this article nigh on ignore the economy and its many vagaries in an attack on two parties that at least grasp it’s importance, if not its nature.

M4E, I’d be concerned about the overhead. What is the cost of ‘fiscal churn’?

“I love both economics and politics – and have long since hated almost every instance where they collide.” Yet the two are intrinsically linked – it must be a love-hate relationship!

To be fair, it would be advisable not just to look around you, but to look a bit deeper. It’s what is so good about the Economist and the statistics it rolls out – every article is a perfect introduction to contemporary issues of that particular subject for anyone who comes at it afresh, not the whole story, not the complete background, but enough of a taster to encourage interest and inspire investigation with an odd juicy tidbit.

The UK is prospering, well, maybe in general terms, and certain sectors (like goldigging celebrity divorcees) are definitely raking it in, but the figures provided in the budget show a precarious situation and there have been any number of reports about how inequality is growing – not everyone is sharing in the spoils, nor are those most in need sharing as much as those with greater prior advantage.

…the acronym NEET has been coined in response to a newly identified significant trend, while the housing market has become inaccessible to some and an investment vehicle for others creating a lower age bar to prosperity. Simultaneously pension values have diminished, while government welfare has created a dependency trap for large numbers of elderly. Many students even, having been compelled into the debt spiral, are increasingly finding that the social mobility promised by their access to further education has shrunk. We work the longest hours in the developed world and our children are the least happy. All this with an aging population represents an economic timebomb.

If our future is secure, is this the future we want? Our prosperity may be ensured, but the profits have been divided legally but unjustly, where they haven’t been wasted on wars and pork-barrel political expediency. Oh, we’re doing so well we can even afford enough police, we can pay for adequate reform and rehabilitation of criminals! All those immigrants don’t just love it so much here, but they want to get away as soon as they can. Oh, universal peace and prosperity has been instituted and we can afford to extend our liberty to rest easy.

Smiles and pats on the back all round, no discontent to be seen, the current party of government is impervious to criticism (if, indeed, there were any)! So successful and prosperous have we become that poverty is no longer a priority or a challenge!

No – we may lead the world in many areas, but we lead it in the bad ones too.

Of course all the statistics provided by the government provide a rosy picture, and spin still provides the headlines of a confident Britain in Bloom, punching above our weight. Go to Dewsbury or any other invisible town, however, and you’ll find governmental and social failure on every street corner, and, at some level, in every home.

Inflation is a case in point. The official figure hasn’t strayed outside of the desired band ever since, well, ever since they changed the formula to exclude housing costs. Recent increases in prices for commodities (from oil to grain) have pushed up the price of my two pints of milk from the corner shop by 44% in 5 months and mean essentials will have to be measured seperately in order not to mess up the narrative or upset the confidence in this illusion.

But we shouldn’t worry about that should we now that the summer of excess is over as climate change means we can wake up to a year-round party, can’t we?

M4E, I politely suggest you are being a little naive.

> introduction of the 10% rate (under blair)
But it was Brown’s idea. If I recall correctly, it was even prefigured in his pre-election conference speech in Blackpool.

“Thats link is not a costing – thats a campaign slogan”

Really?? It would never have occurred to me to go doorstopping with a tax comp and a page full of dense tables but perhaps this is where I’ve been going wrong… As the header makes clear, that’s a supplementary note to the main tax paper:

http://www.libdems.org.uk/media/documents/policies/PP75%20Fairer%20Simpler%20Greener.pdf

Environmental taxation is discussed on pp26-29, the corporation tax section follows and makes passing reference to the various reliefs to be tackled throughout.

I was in two minds whether to provide this link, since it’s now clear that you’ll only be satisfied the package works if you’re able to sit down in front of the spreadsheets and have Vince on hand to talk you through it. Which is, if reductivist, fair enough I suppose, and I could wish that the other parties’ policies were scrutinised as closely. Or that they published them online.

Re: CGT. The point of a business, obviously, is to trade. The vast majority of successfully operating businesses are simply not going to be selling off their assets all the time. There are two circumstances in which a business might be selling an asset:

1. When replacing a worn-out asset with a new one, in which case any proceeds from the sale are subject to rollover relief anyway, which is a 100% relief whereas CGT is only (at most) 75%.

2. When downsizing and/or disbanding, when the jobs concerned have already been endangered or lost. In this scenario, it’s the shareholders and creditors of the business who lose out because less is left in the liquidation pot, but they were taking the risk anyway.

Ooh, missed a bit. Pensions – this is discussed p18, para 2.3.4. The title of the section is “Reducing tax advantages for the better off” – because that’s the point right? This is ultimately supposed to be about the fairness of the taxation system. The relief removed would be the *extra* 18% relief higher rate taxpayers get when they make pension contributions – they’d still get the same basic 22% relief everyone else does.

Benefits, that’s dealt with in a different paper and I’m much less familiar with the area, but go to the website, click on The Party, and dig around in policies, it’s all fairly self-explanatory.

Thomas

inequality has grown – but its worth noting this is not “rich get rich – poor get poorer” stuff – rather its a rich get rich, – poor get richer less quickly”.

And while I’d like to see it the other way around, it is not in itself a weakness that is likely to undermine our economy.

And then you do the usual thing – you list lots of imperfections like students having debts, and children being unhappy – and housing being expensive. All of which is true to some extent everywhere, and none of which is particularly unsustainable economically. Indeed with some such suggestions (pension values falling) there is a real mysnoma to be challenged.

take that pension claim

Axa studied this last year and found that the average retiree in the UK has higher disposable income than their european counterparts in germany, france and spain.

Steve Folkard of AXA quoted at the time “With the majority of Europeans having less disposable income in comparison to their UK counterparts, it is hardly surprising they favour a common (eu wide) pensions system that could bring their financial situation inline with the more affluent UK.”

indeed in 2006 the pension “blackhole” was a surplus in the UK thanks to recovery in share prices and other assets, along with greater investment in pension schemes by employers and employees.

-

and then you commit the worst spin of all when this discussion take place.

rather than explain (as I asked) in what way any of that makes the economy weak and unsustainable – ie. instead of argue with results as i challenged – you spin it into a social debate about how we want to order society – and make the assumption that I arrive at my question beause of naivety or ignorance.

so take a look back – you’ll note I didn’t say we live in nirvana – I didn’t say everything was perfect. – I didn’t say society was fair.

I said it is hard to argue with results in regards to Labour’s handling of the economy, which has seen constant growth in employment and gdp per capita despite low inflation and various choppy economic waters. And I said no one has ever made a case for believing the various imperfections in the UK economy are anything more than that – imperfections – not indicators of unsustainability and thus doom.

please don’t take this as an attack on you – I don’t intend it that way. It is just frustrating that when I ask question about various prevailing “wisdoms” on the economy it is annoying to see them go unanswered amid accusations of naivety.

Frank
it was indeed – i was making a slightly sarcastic point – sorry –

UK Liberty

I’m guessing it is zero in our example.

as a notion it is that the government takes money from the tax payer in taxes – then gives it back in healtcare provision, education, benefits, and so on – and because that involves admin, we get less back than was taken for no productive purpose. (wealth is effectively destroyed by that process).

I don’t agree with the small state notion that this matters much as a whole, since redistribution is worth some administration cost.

but in our simple transfer of cash example, I get back the same in both cases, so the fiscal churn is zero – no wealth was destroyed.

Alix

I do like Vince – and I am still miffed that he was deemed ‘too old’ for the lib dems.

But what you have linked to (again) is a campaign leaflet – not a costing. (please read on – this is and important explanation of what I’m getting at – and I’m sure you’ll agree if I manage to convey my point more adequately than at present.)

for example – on the green taxes issue it says

“However, we are also committed to
increasing the share of total tax take and GDP
represented by environmental taxes – with
offsetting tax cuts in other areas as set out
elsewhere in this paper. In the course of a four
year Parliament we will increase the level of
environmental taxation to at least the 3.6% of
GDP figure achieved in 1999. This means raising
approximately £8 billion in current values. This
will come from three principal sources – aviation,
vehicle excise duty, and fuel duty.”

I see no problem with that. From a social policy position I agree with it whole heartedly. However – reading on I find no reference to any study on (for example) possible job losses in the aviation sector caused by increased tax on that sector. I find no reference to a study of how a shift from passenger tax to aeroplane tax would affect the price of travel (would it bring prices down or put them up?) I find no reference to the possible reduction in connections between cities, and the economic consequences of that – other than an electoral sop to the highlands and islands that says they will be an exception to some proposals.

And this is what I’ve been getting at. It is easy to talk in etherial terms about policy matters with economic consequences because those consequences are complex and people are more comfortable with generalities.

But once in government a party can’t ignore those consequences any more. The net result of the plans you have listed might be a loss of 1million jobs – and thats hardly a social policy ambition for an decent party.

–

consider your comments on the risk of capital gains tax issues.

you yourself make no mention of investment decisions. you don’t mention for example, the impact this change would have on the balance of risks for expanding companies.

a firm faced with the choice of investing in a new machine to increase output (and employ more staff) undertakes a number of calculations – and weighs a number of risks.

if the cost of selling that machine off in a year’s time if a contract falls through is high, they may not buy it in the first place.

again – these matters need greater analysis. And criticising a government because it doens’t offer hugs and puppies because its analysis deals with the complexities involved is wrongheaded.

Look, first off, do you think now that we’re a good seven or eight posts into some fairly technical discussion we might finally dispense with the pointlessly irritating “hugs and puppies” line? The not-altogether-pleasant implication of featherheadedness behind it is becoming more bankrupt every time I post and answer your questions.

Everyone else on this thread, whether they agree with me or not, is quite happy with the idea that there is an argument to be made for a *fairer taxation system*, which is what we’re discussing. It’s a simple aim that either you agree should be a priority or you don’t. Bollocks to hugs and puppies.

“again – these matters need greater analysis”

Yup, sounds great – I literally don’t know whether they carried out this analysis or not – you’d be quite entitled to call up and ask. Although qualitatively it looks to me as if the proportion of businesses that would be affected in the way you describe is going to be vanishingly small. What’s to stop a business in this situation simply putting the profits of a sale into a ten year supply of stationery and claiming rollover relief? Rollover is available on qualifying purchases up to six months before and two years after the sale of the asset – it’s hardly a tight window. And while we’re quantifying vaguely, the cut in corporation tax rates combined with the removal of tax reliefs still leaves business better off by £200m net. So, if the analysis you cite here was carried out, and it was found that the costs to business would be less than 200m, would that satisfy you that the position is neutral?

I put this question to you to highlight the problem with your approach, which is the same one you’ve exhibited throughout. You’re basically arguing that nothing should ever change because this or that delicate balance would be overturned, and there can be no overall aim great enough to overcome even the most limited objection. So, if you’d like to stop backing yourself into an ever-smaller and more technical corner and just concede that, frankly, you don’t think a fairer taxation system is a worthwhile aim, then we can agree to disagree. But your objections – while perfectly valid in the sense that one should always question the precise outcomes of a policy and weigh up the good and the bad – are far too precious to constitute serious opposition to the principle of a fairer taxation policy, which is the aim of the package.

Alix

Reading your last post it appears I have been horribly inadequate in explaining myself. So let me try again and I apologise for not being clearer previously.

I would hope it was clear that far from what I’ve said that I don’t oppose change. I would also hope it is clear from what I’ve posted that I don’t oppose the Lib Dem’s ambitions. I certainly don’t oppose fairer taxes. (who on earth would?)

My criticism of the article was simply this.

Changes to tax require serious analysis for their impact on the economy. Labour can claim some credit here given the strength of the economy over the last ten years. The Tories have (fairly) restated their intention to make no or very very limited tax and spending pledges until better economic assesment is possible. Yet your article attacks those two while you laud the Lib Dems, who as hopefully I’ll now better explain, are the only party that largely ignores the economy when talking about tax.

Thats it – thats my criticism.

So on specific points

Change isn’t bad – I just think it is ridiculous to propose (for example) changes to taper relief without weighing up how many jobs and start-up firms the changes would create or destroy.

After all – how fair is a tax system that increases unemployment and so causes more child poverty?

Likewise, I don’t oppose changes to taxation on aviation. I just think we should assess the impact on the costs of flights, the routes likely to be lost or gained, and the consequential loss or gain in jobs.

after all – how fair (or good for the environment) is a tax system that shifts long haul stop-overs from london to paris and so costs us jobs but doesn’t reduce flights globally?

—

and finally – you do realise that claims of neutrality in these matters is the biggest lie of all. It is based on the view that an ignorant electorate will assume there is little consequence if a measure is declared ‘neutral’ or (properly) ‘revenue neutral’

but a tax cut for BP paid for by a tax hike on Mrs Miggins’ Pie Shop is hardly neutral for Mrs Miggins – or her various suppliers and employees who would lose out.

So what use is it that changes to CGT might result in an effective tax cut to business of £200million if the changes involved drive thousands out of work?

Alix

You should also keep in mind that my ‘hugs and puppies’ comment is not born out of malice.

If you follow football or cricket or any sport you will know well that you tend to criticise your own team more vehmently than others when things are wrong.

I’m not a Lib Dem, but I am liberal and I am very much ‘of the left’.

And as such my anger at the lib dems over this is born out of that same feeling that I desperately want them to be better than they are. In other regards I am similarly critical of Labour for the same reason. (I despair at the plans to extent detention for example, all the more because it is is being pushed through by the left)

M4E, Wat Tyler had this to say about the cost of fiscal churn in early 2006:

We have no official UK estimate, but we do know it takes place on a massive scale: even families on incomes of £55,000 are eligible for Child Tax Credit. My own estimate, based on ONS data, is that the UK’s fiscal churn is of the order of 10% of household incomes, or some £70bn pa. This relates just to cash benefits: adding in health and education benefits would almost treble the figure.

ukliberty

Thats quite a figure – and given the source is probably an over estimate – but perhaps not a wild one. However, as I say, fiscal churn is in effect a price that must be paid for redistribution of wealth.

Transfer payments like tax credits, housing benefit, incapacity benefit, child benefit, and so on are of course money taken from “the tax payer” and given to “the taxpayer”

But ‘the tax payer’ is not homogenous or one person. So we take from the rich and give to the poor – and whinging complaints about fiscal churn is hardly a credible reason for not taking money of taxpayers to provide free healthcare or a basic income for all.

I do understand much better from that where you’re coming from. Any mention of Mrs Miggins’ pie shop in particular is always guaranteed to mollify me…

My doubt about your approach I think remains as follows: we obviously agree that tax cuts and/or benefits in some proportion (leaving that to one side for now) should be increased to help the less well off, provided the effects on economic growth are not deletorious. Your default assumption about the Lib Dems seems to be that they have not, and never, taken this into account when formulating tax policy, whereas your default assumption about Labour tax policy is that any incidental nasties that affect groups of individuals must be the result of someone having taken a “sensible” approach that takes account of “complexities”. I don’t think one needs to be wildly partisan in either direction to take the more balanced view that a major party which draws up a tax policy is likely to have people working on it who knew what they were doing, costed it and carried out risk analysis on its measures.

This is a basic assumption of good faith in governance and I don’t see why it’s so much harder for you to make the leap with one party as with another. I can see, for example, what a worthy redistributive idea tax credits were in principle. Not one I necessarily agree with, and the flaws in practic discredit them entirely in my view (not least the fact that families on high incomes can still claim a few hundred quid a year – hardly redistribution from rich to poor). But that doesn’t mean I don’t believe Labour’s economists don’t basically know what they’re doing – they just take a different, more benefit-driven approach.

In one sense, the different relative positions of the two parties could be said to mitigate far more clearly against the integrity of Labour – they’re in power; they’re going to make deeply unlovely decisions that probably make some of *them* wince, like putting off child poverty funding in favour of costing an inheritance tax threshold rise, or bringing out a cut for those on middle income at the expense of those on a low income. Because, obviously, they want to stay in power to effect the rest of the Grand Plan. But there comes a point when the political decisions a party makes to stay in power interfere unacceptably with their own stated mission, let alone abstract principles of fairness. That point was passed with the removal of the 10% band. Incidentally, and as a further sidelight on where *I’m* coming from, I was being absolutely honest earlier. That really *was* the moment I lost it with Labour. I’m not an “Iraq Lib Dem”. I happen to be very interested in tax because I used to be a tax adviser, and my other interest is, as you may have gathered, that I earn less than 17k. So it’s really not that unbelievable that this measure should have changed my thinking fundamentally.

“I just think it is ridiculous to propose (for example) changes to taper relief without weighing up how many jobs and start-up firms the changes would create or destroy.”

But (a) I’ve shown insofar as I can without any figures that loss of taper relief would be unlikely to affect the majority of businesses and (b) we neither of us know whether such an analysis was carried out or not. Your suggesting that it needs to be done does not mean it wasn’t. See above.

“So what use is it that changes to CGT might result in an effective tax cut to business of £200million if the changes involved drive thousands out of work?”

Well, now we’ve come full circle. I started out by saying it was unacceptable that one group of individuals (those earning less than 17k) should have to suffer in this way, and you effectively said that that was the harsh economic reality of the situation, the Lib Dems never have to count the economic cost to business etc etc. And now you’re saying that a policy that wouldn’t affect the overall position of business (that was my point, rather than that it was a tax cut as such) is still unacceptable because of the human cost, and suddenly now the Lib Dems don’t count that either.

If you can be sympathetic to a hypothetical group of people who lose their jobs BECAUSE their companies downsize or fold BECAUSE they’ve been crippled by the removal of a relief that a normal business will only ever have to make use of a few times in its active life, and ASSUMING that any deletorious effects of this can’t be offset by the accompanying rates cut, why can’t you be sympathetic to a *real* group of people with a much shorter causal chain guiding their financial fate: they’re about to get costable amounts poorer per month BECAUSE of a tax hike.

Alix

As you say – Labour in power do face the trouble of having to do some less than pleasing things. They have to do that because they want to stay in power to keep doing the nicer stuff. They also do that because the economy requires it in some cases.

And to an extent that is an advantage to them. Because that gives them a record to back them up.

In effect, my lack of anger over some people being taxed more on incomes of £17,000 and less is offset by Labour’s other actions – or more accurately their other consequences.

in itself removing child benefit from means testing acts as a sign of intent. It will reduce child poverty and help the poorest parents a great deal – even if they are on the now higher taxed incomes.

And I guess I trust Labour’s decision to raise those funds in part by making people without kids and on low incomes somewhat poorer, because I have grown to trust that they make such decisions on the basis of sound economic planning. Their record serves as strong evidence if not proof of that.

The fact is Labour have run the economy well for what is now around eleven years. They have overseen the creation of around 3million jobs. And perhaps most notably they have overseen falls in poverty among the elderly and children.

So to an extent I can reasonably trust that alternative options might lead to those same low paid and now higher taxed people ending up unemployed, or more accurately, I can reasonably believe that alternative options might lead to fewer people getting better paid jobs or just jobs at all if unemployed.

–

Opposition parties can’t mimic that trust – so they must earn a different sort of trust, by being open and detailed or by accepting they can’t commit on popular policies because the analysis does not back that move.

And Lib Dem tax policy shows no sign of either. They have lots of popular tax policies (does any one of them not look like it would be popular on the face of it?)

But they have no detailed analysis of the consequences of such moves. And yet surely given how nice all their proposals are, they would be done by Labour (or the tories before them) to win easy votes while in office if there were no negative consequences.

So it frustrated me that your article was so extremely negative about the two parties who seem to appreciate that the economy is complicated – and so positive about the populist party. (which oddly for the lib dems, is what they are on tax policy, despite taking much harder and more moral positions on social and ethical matters.)

We need to demand more of the Lib Dems if we are to get them the influence they should have.

M4E – I think you’ve swallowed a propaganda pill on the inequality issue.

Yes, the rich have got richer faster than the poorer members of society, but equally it isn’t true that those who you class in the ‘poor’ section of society can be lumped together and dismissed with a generalised assumption that they must all have also seen their living standards improve, although at a less impressive rate.

I was trying to infer the point that there has grown a significant underclass which has fallen through the net, but this will not be substantiated by any figures quoted by any official source for the simple reason that they don’t show up in any – by definition they are social drop-outs.
I recognise that the nature of the problem is hidden by resistance to acknowledge circumstantial evidence as conclusive, but there is a complete failure to address the common indicators for people who exist and survive outside legal recognition.
On a personal level it is commonplace to see beggars, prostitutes and drugdealers on the corner at the bottom of my road, whereas ten years ago they were nonexistant there, while squats and homelessness levels have doubled in my town during the same period.

The simple fact is that the people at the bottom are still in abject conditions, just that there are now more who could be classified at the level that this was previously calculated at, so I can only understand your definition of poor if it really refers to the middle classes, which alone expresses a great deal about the change in attitudes since Labour came to power.
Aren’t we all middle-class now?

-

On the point of the security of our future I was talking purely in terms of finances, not social ordering (although the link between the two is inescapable).

Any formula for the sustainability of debt provisions depends entirely on the ratios that are calculated.
In terms of mortgage finance, banks previously ensured that deposits covered lending (when the clearing banks developed or bought investment arms this was expanded to include the fluctuating value of their investments, though the ratio remained similar ie 1:1 or thereabouts).
Yet Northern Rock went bust as a result of having a ratio slightly above 2:1.

In terms of house-buyers, mortgages were originally calculated at about 3X annual salaries while during the recession of the early nineties most repossessions were a consequence of lending at abnormal rates of 4.5-5X annual salaries.
The sub-prime market in the US imploded when it was found mortgage applications were being generally accepted for 6X salaries, while it hasn’t been extraordinary for banks in the UK to lend 9 or 10 times annual salaries in recent years.

I don’t see how conditions have changed so much to amount to a paradigm shift of this order, as the fundamentals of affordability haven’t changed.

The growth in the housing sector was a temporary bubble based on the prospect of stable-to-falling interest rates, bet there is a floor to how low they would and could go, so while many people have benefitted, they have all benefitted at the expense of later entrants to the market.

You could argue that it is too early to jump to conclusions about our economic prospects in the medium term, but because the liberalisation of our markets lead to gains based upon an increase in middle-range participants, any reduction in disposible wealth, of either a real or relative variety, is directly reflected in the value of shares.
So, when pensions funds are in surplus as a result of inflated dispoable income levels they will fall back to underlying levels during the rebalancing period.
The question we should be asking is not whether this economic truth is valid any more, but how long the falls will continue until we reach justifiable levels – some commentaries I’ve read speculate 10 years may be a conservative calculation, though I think optimism is a commodity traded in every market and the bulls will return much earlier than that.

To be strident in apportioning blame, this goes back to the badly instituted change to the tri-partitie regulatory system, which allowed the responsibility for management of the interconnectability between financial sectors to be avoided, if not neglected.
As a result, instead of each sector providing support for the wider market in times of trouble, the rules of play were inverted and a cascading domino-effect infiltrates every area.
The lack of thinking in the change to the tri-partite ‘regulatory’ system meant the anarchy of laissez-faire conditions had been instituted on finance houses and banks, with individual traders becoming more influential and outside restraints lifted, except as a matter of recourse when things went wrong, as they inevitably have.

Finally, we must ask why the changes were brought about.
If Gordon Brown thought he was doing the right thing, then it was done incompetently.
If Gordon Brown was undertaking a politically motivated reform to benefit Labour-voting aspirant lower-middle classes, he has been short-sighted and socially divisive.
However, if Gordon Brown knew what he was doing, then he will have blood on his hands, because (and this depends on the scale of the downturn) it will lead to anything from calls for more centralised planning to more radical economic intervention of the totalitarian kind.
This, we shall have to wait and see.

I simply don’t buy the argument that politicians just try to deal with present conditions, otherwise they would all be far more liberal – I think those of the right and the left try to provoke the consequences that they, by their own biased analyses, will satisfy their own particular political utopianism.

Wow – I’m quite glad this discussion is still going on as I did want to come back to it. I’m sorry in advance if much of what I have to say seems aimed at Margin4Error – it’s not personal!

First, you said somewhere about being interested in politics and interested in economics but a bit disappointed or something when they come together. I completely disagree. The only real purpose for economics is to describe, predict and assist in the management of human social systems that politicians seek to control.

As Galbraith used to describe (with a bit of hubris I’d say!) economists just like to draw a veil over their theories, make them appear complex, and worse, hard and fast scientific rules to retain their mystique. The only hard and fast rule is that humanity thrives on trade – even personal relationships are about trade at heart. As history has shown the systems used to facilitate and account for all the possible trades are more flexible than a text book economists would dare to acknopwledge for fear of being drummed out of his “profession”.

Second, in response to my post about debt levels being unsustainable, whatever the overall gearing level of the economy the point is the vast majority of our money supply is secured on an asset bubble and created to sustain that bubble in one great big pyramid scheme of getting the least able to afford it to prop up the bottom of that pyramid. Gresham’s Law is going to kick in at some point when people are paying well above the long term trend line to prop up that bubble.

And all because we do not have a stable mechanism for producing the currency required to monetize and facilitate trade. Because we have privatized the creation of money through debt. The equivalent in the natural world is privatizing the air we breathe and charging us for breathing it.

But onto your discussion with Alix about politicians playing fast and loose with the economic consequences of their policies. I half agree and half disagree.

First, where I disagree is that I do not agree that politicians do need to quantify the exact effects of everything they promise. Or at least they should not do. That we demand details of eocnomic consequences in order to decide how competent they might be “running” the economy is a function I believe of the loss of ideological politics. It is almost a cliche now that ideology has gone from politics and we are in an era of “who can manage best”. Well if that were the real question, we’d elect Terry Leahy, not Cameron, Brown or Clegg, or Darling, Osborne or Cable. In fact, we more likely realize that the Terry Leahy’s of this world do well because they are not trying to “manage” such a complex thing as an entire national economy. There isn’t a single politician I believe has the ability or potential to be able to do that, and the fact that they try to persuade us that they do betrays an egomania that ought to disqualify them entirely from consideration.

No, we need to get back to choices based on ideology and, one the conomy at least, I believe a truly liberal ideology is the only one that has the potential. In my liberal ideology I’d be selling concepts, not details, just as Maggie did in the run up to 1979. In my case it would be tariff eradication and and end to the land and monetary monopolies. Anyone whose success depends on the current inequitable system working for them is gaining at the expense of others – that’s not how free trade is supposed to work. So the current inequitable system simply has to go.

Where I half agree is that if a political party, any political party, decides it’s going to play the details game, the game of vyeing for title of best middle management if you like, then yes, they do need to do the background sums and predictions. SO the Lib Dems, if they are not going to rise above that, do need to have that detailed chimera of competence. But let’s face it, for all the disputed success of Labour, in their first few years in power they did keep using the mantra that it was only when they got their feet under the desk and got the real opportunity to pour over the books that their detailed policies could become more concrete.

Finally – why I think it is important that we do need to get away from this deckchair rearranging politics…and that is that the boat on which the dekchairs currently stand is sinking. Go back to the beginning of this comment – everything’s about trade. The way we are now able to trade is very different to that in the past and will become increasingly so in the age of mass interpersonal communications. For the first time really in human history since village settlements started talking to each other we are able to trade one to one. The unsophisticated can now trade in almost as many currencies as exist on the planet according to what is convenient to them at the time. Indeed they are even able to work and earn money in several different jurisdictions at once. The need for national currencies is disappearing and the need to find a different way of paying for whatever “public” services we decide we need is increasingly necessary. The alternative is that governments become less not more liberal as they join the ever increasing paper chase to try to find where their citizen tax-payers are earning their money, how much and how much they should be taxed.

There are three tools at the disposal of government in economic areas – regulatory policy, fiscal policy and monetary policy.

Monetary policy is now being lead by the failures in regulatory policy, with the Bank of England trying to resist inflationary demands (an additional £6bn was pumped into the system today, against bids for £30bn), leaving Alistair Darling nowhere to go politically in his budget as regards fiscal policy (taxation and spending) without admitting to the failure and making a reversal.
It was unfortunate for him that he was unable to make any headlines to divert attention from this reality, thus the do-nothing 08Budget could easily be interpreted as complicit with such an admission of Labour’s economic failure.

Ultimately I’m making the case that there is divergence between the statistics that calculations are being made upon and the reality that they are supposed to reflect – a case that the government is out of touch, or not willing to admit as much.
In the end it won’t matter as the market will make their judgement and the government will have to respond.

Liquidity problems, unbearable deficits and deflation/stagflation were faced by Heath, Wilson and Macdonald, who each used up their political capital to try to force a resolution, but all three failed.
Brown doesn’t have the luxury of any of the controls they had, so his hands are tied – unless he has already accepted defeat at an election he has show he has made a choice between abandoning any political programme and the alienation of large sections of society.
The next few weeks are the decisive period, but I fully expect Gordon Brown to continue to dither.