A very very sensible article. Britain needs to get over it’s nonsensical, newspaper-driven aversion to raising income tax.

The deficit will be closed much sooner by tapping wealthy sources for income in addition to targetted cuts.

That’s the true test of the coalition’s seriousness in tackling the deficit.

Exactly this. When Cameron talks about “us” having to change “our” way of life and face harsh cuts etc it’s not his lot he’s talking about. After all the man himself has a fortune estimated at £30,000,000. It’s us. Class war is alive and well and as Warren Buffet – third richest man in the world – said, it’s the rich class waging it and they’re winning.

There accumulating evidence of waste in government spending:

“The National Health Service can make the £15bn to £20bn of savings needed during the next three years without damaging the quantity or quality of care – indeed while even improving the latter – according to David Nicholson, the NHS chief executive.”
http://www.ft.com/cms/s/0/6fba7dfe-e683-11de-98b1-00144feab49a.html

That says cuts in the annual NHS budget of c. £105 billion of around 15% can be made without damaging care, which is amazing. But then consider this finding of the ONS:

“The NHS has seen a year-on-year fall in productivity despite the billions of pounds of investment in the service, latest figures show. The data from the Office for National Statistics showed a fall of 2% a year from 2001 to 2005 across the UK.”
http://news.bbc.co.uk/1/hi/health/7610103.stm

“BRITISH doctors now earn more than their counterparts on the Continent, according to a new study. It has revealed that hospital consultants’ salaries increased by more than 30% between 2000 and 2004. British consultants and GPs are now better off than medical specialists in France, Germany and Denmark.”
http://www.timesonline.co.uk/tol/news/uk/health/article758105.ece

More evidence of waste:

“A £2bn scheme to improve basic skills among adults has been called a ‘depressing failure’ by education inspectors. The Skills for Life programme aims to boost literacy and numeracy skills. But the Adult Learning Inspectorate said the initiative was not working, despite the ‘extraordinary’ amount of money the government had spent on it.”
http://news.bbc.co.uk/1/hi/education/4506410.stm

“A failed government scheme to offer UK university courses online has been branded a ‘disgraceful waste’ by MPs. The e-University was scrapped last year [2004], having attracted only 900 students at a cost of £50m. Chief executive John Beaumont was paid a bonus of £44,914, despite a failure to bring in private sector backers. The Commons education select committee called this ‘morally indefensible’ but the government said the e-University project had ‘improved understanding’.”
http://news.bbc.co.uk/1/hi/education/4311791.stm

The last Labour Budget contained overall spending totals for the government that mean a cut in spending of £44 billion (using the calculations form the Office of Budget Responsibility).Of course, because Labour didn’t publish any departmental spending total plans beyond the current financial year, no one knows where those £44 billion of cuts were going to go but I’m sure they were nice and progressive cuts that wouldn’t have harmed public services or the vulnerable so how about Labour tell us where these cuts were going to fall so that the Coalition can implement them and stop the other cuts instead? After all, £44 billion is well over half the deficit so implementing Labour’s cuts should stop the Coalition needing to cut anything else at all for quite a while.

Sorry, that should be “well over half the deficit reduction required” not “well over half the deficit”.

Even more evidence of wasteful public spending:

“Some of Whitehall’s biggest computer projects have spiralled out of control, with total cost overruns of more than £18 billion, an investigation by The Times can reveal.

“Plans for new computer systems are years behind schedule and have ballooned in cost; others have been scaled back or even scrapped. Yet companies continue to make hundreds of millions of pounds in profit, with £102.3 billion forecast to be spent on government IT projects over the next five years.”
http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article5636437.ece

“The government has been accused of trying to suppress a report that found the Ministry of Defence is wasting billions of pounds every year as a result of ordering projects it cannot afford.

“The report, commissioned by former defence secretary John Hutton and led by ex-MoD aide Bernard Gray, found that the MoD is wasting between £1.5bn and £2.5bn per year. Its findings were due to have been published before MPs broke up for the summer recess but its release has been delayed, with the prime minister announcing last month that the report would now form part of a further defence review. An unnamed MoD official told Channel 4 News yesterday that Number 10 had ‘panicked’ at the findings of the report and intervened to prevent its publication.”
http://www.guardian.co.uk/politics/2009/aug/06/mod-defence-equipment-projects-waste

I really can’t understand why it is necessary to hike taxes to rein in the structural fiscal deficit when there is so much evidence of wasteful public spending.

You go Bob – way to use the qualitative over the quantitative.

You can produce a list of ‘waste’ as long as your arm. It what it all adds up to in the real world that counts. Waste is easy for papers to speculate on – much harder to actually quantify effectivly. If it was as easy as the Conservatives coming in and just looking down the departmental budgets and removing the line labeled ‘waste’ I think we’d all be much happier.

So no matter how many lists of ‘evidence of waste’ you can provide you aren’t making any clearer an argument.

I feel Bob’s points are relevant.
Personally I would go further.
Trident has to be scrapped.
The present and last government want to spend £26 billion on Trident. Ongoing cost will be over £1 billion every year. The government plans to keep the submarines in service for another 20 years, which would cost over £26 billion. This is is more than double the official cost of building Trident – £12 billion.

Operating Trident submarines £277 million
Nuclear Warhead programme £410 million
Conventional forces £308 million
Other costs [ £ 60 million
Annual total £1055 million (£1 billion)

Trident is costing the taxpayer over £1 billion every year. The government plans to keep Trident in service for 26 more years, until 2025, so the total cost would be over £26 billion.

Perhaps as a country we need to look at our role in the world. Are we a nuclear power and if so, is the there a cheaper way to deliver these weapons.
Thank you for CND some of the figures

“The progressive credentials of the government can also be judged by the extent of its willingness to go through with plans to align rates of capital gains tax and income tax in the face of concerted opposition from the Conservative backbenches and the right-wing press.

These must not be watered down. Only the rich will pay more tax as a result of this change. ”

Well, y’know, there’s a slight problem with this. Raising CGT that is.

Can I assume that the intention is to actually raise more tax revenue? Yes?

Well, you see, there’s actually no evidence that raising the CGT rate will increase revenue collected.

http://www.adamsmith.org/blog/tax-and-economy/you%27re-allowed-your-own-opinions-on-taxes/

Or for the actual HMRC table, here:

http://www.hmrc.gov.uk/stats/capital_gains/table14-1.pdf

Lawson increased CGT in the late 80s. Revenue collected from CGT then fell for the next decade. Adjusting for inflation (those HMRC numbers are nominal, not real) aside from the very tippy toppy of the stock market/internet boom, revenue from CGT did not recover until 2006/7 or so….by which time the CGT rate had been reduced, recall?

So it would appear that there really is a Laffer Curve and that the revenue maximising rate for CGT is rather lower than the current income tax rate.

If you want to bash the rich, fine, if you insist that CGT shuold be higher for moral or equity reasons, fine. But there’s really no evidence at all that it will increase revenue collected…..which is, I think, what we’re all really interested in at present?

When Blunkett was education secretary, he was issuing more than one new policy, regulation, ministerial letter etc etc every day – the LibDems kept track and published figures showing that schools were buried under a mountain of paperwork. By 2000, the New Labour government had sent out 315 consultation papers, 387 sets of regulations and 437 sets of guidance to LEAs since May 1997.
http://www.independent.co.uk/news/education/education-news/teachers-warn-of-action-over-flood-of-paperwork-698137.html

Understandably, head teachers and senior teaching staff were driven round the twist by this. It quickly got to the stage where they realised that there would be some new bureaucratic missive which they had to read through, comprehend and implement every day. The predictable outcome was a dramatic rise in vacancies for head teacher posts and an increasing recruiting problem in filling the posts. But nothing deterred Blunkett.

By 2006, The Guardian was reporting:

“A shortage of headteachers in England and Wales has escalated into a leadership crisis, according to a survey published today which describes an ‘alarming’ turnover of senior staff in state secondary schools.”
http://www.guardian.co.uk/uk/2006/jan/12/education.schools

By 2006, The Guardian was reporting:

“A shortage of headteachers in England and Wales has escalated into a leadership crisis, according to a survey published today which describes an ‘alarming’ turnover of senior staff in state secondary schools.”
http://www.guardian.co.uk/uk/2006/jan/12/education.schools

Bob, you are so right.
Many good leaders are reluctant to apply for headships. Although I do blame New labour managerial intiatives, this started in the eighties with the introduction of the NC and OFSTED.
The old school inspector system involved better personal who would give heads ideas on how to improve. Also they were constantly in the school supporting the head and senior leaders and making sure the changes were in place.
OFSTED’s mantra is “You crap. ”
HMI “You crap but we suggest you do this ”
What I would say is that not all the strategies were incorrect. the work on AFL and how science works have been a success
But the money wasted on headlining initiatives such as extended schools have been a waste.

When CGT is low, all manner of income is re-worked to be CGT. When it’s high, that income is moved back to where it should be – income.

So it’s no real wonder that total take decreases. It’s alright, though, because the money is still taxed at income rates – which is perfectly fine by me.

If the government increases VAT, I shall :’(. If they increase income tax for anyone but the top earners, I shall .

It’s fairly obvious to me that if you cut public spending, then those sections of society which are most dependent on public spending are going to suffer the most, and the lower down the income scale you go, the more dependent, on average, you will be on public services, so the more you will suffer. There is no way to avoid this, it’s not ideological, it’s just a fact. So this idea that you can cut spending without affecting the most vulnerable is a nonsense.

What no one on the left seems prepared to explain is why the majority of the population should share the pain, but the “vulnerable” (i.e the nations chain smoking daytime tv watching cheap cider drinking chavs), one of only two groups who actually saw their standard of living improve over the past ten years (the other being Mr Mandelsons “seriously rich” friends) should continue to be insulated from economic reality.

What no one on the left seems prepared to explain is why the majority of the population should share the pain, but the “vulnerable” (i.e the nations chain smoking daytime tv watching cheap cider drinking chavs), one of only two groups who actually saw their standard of living improve over the past ten years (the other being Mr Mandelsons “seriously rich” friends) should continue to be insulated from economic reality.

The rich therefore should pay more tax , as they are one of the groups who benefitted under the dark days of Labour
Also chain smoking, daytime TV, cheap cider drinking chaps could cover many groups. Many of the journalists I know certainly could be described in those terms.

@ 15 – “The rich therefore should pay more tax , as they are one of the groups who benefitted under the dark days of Labour”

I wouldn’t disagree in principle (apart from the problem with defining “the rich”; some on LC appear to believe it means anyone who has a job paying more than min wage, that, and the Laffer curve effect). But by the same logic it surely means cutting welfare, as it’s recipients also benefited under Mr Browns famously “prudent management” of the economy ?

So give us a ball park figure Matt.
Over £1,000,000 a year

@9: “Trident has to be scrapped.”

America’s formidable nuclear arsenal failed to prevent the bombing of the US embassies in Nairobi (Kenya) and Dar-es-Salaam (Tanzania) in 1998 or the earlier bombing of the World Trade Centre in 1993 or the 9/11 attacks in 2001.

Britain’s existing Trident missiles didn’t stop the London bombings on 7/7 in 2005. Since three of the implicated terrorists came from in and around Leeds, should we have taken out Leeds with a nuclear strike? Hardly.

No one has yet figured out a dependable way of winning what have been dubbed Fourth Generation Wars:
http://en.wikipedia.org/wiki/Fourth_generation_warfare

But nuclear missiles launched from submarines aren’t much use. In a letter to The Times last year, three retired military commanders urged the Government to scrap the plan to replace the Trident nuclear deterrent:
http://www.timesonline.co.uk/tol/news/uk/article5531461.ece

‘…There is no way to avoid this, it’s not ideological, it’s just a fact. So this idea that you can cut spending without affecting the most vulnerable is a nonsense.’

I don’t see how cutting Trident is going to effect the ‘most vulnerable’.

‘But by the same logic it surely means cutting welfare, as it’s recipients also benefited under Mr Browns famously “prudent management” of the economy ?’

That’s a rather unusual use of the word ‘logic’.

It’s not a matter of tax rises being progressive – who seriously expects a LibCon government to be progressive?

It’s a matter of them being sane, being willing and able to do the math under the standard assumptions of mainstream macroeconomics.
With the economy weak, a pound of spending cuts leads to about 80p worth of extra budgetary costs, for at least 5 to 10 years. So to save 75 billion to deal with a fundamentally short term problem like the deficit, you would need to cut 5 times that: 375 billion.

The total UK budget is 520 billion. You could possibly, as Simon Jenkins suggests, almost entirely eliminate defence spending. Or perhaps get rid of all the military _except_ Trident, because if we got rid of the rest, we might actually need it…

That would be 40 billion, about 10% of the required savings.

So cuts on the scale needed to change the numbers are simply not going to happen. The question is, why are so many people making noises as if they will?

There are two plausible theories.

The most likely is that the cuts are almost entirely symbolic, some visible pain inflicted on the poor to appease the Daily Mail and the backbenchers. That done, they will start on the necessary tax changes to get some serious cash from those who have it:the comfortable majority. Worstal could even be right about some specific tax change not increasing revenue, but that just means you need to pick another change: it obviously true that total revenue could be increased. There are plenty of countries, including most of our neighbours, who have higher tax/gdp ratios than the UK.

The less likely, but more scary possibility is that they actually believe what they are saying. They could actually have fallen for some weird version of cult economics that thinks you can run a first world country in economic hard times, collapse the tax revenues, but nevertheless stop at some point before ending up with the public services of Somalia.

Higher income taxes are usually posited as the solution to wealth inequalities, but I never understand why they are they considered so progressive.
Isn’t it the people with existing wealth and resources who are rich, not those who are working and earning their money through useful work? Even someone who earns a huge wage, like £200k a year, is never going to reach that super rich elite league.
Same with capital gains. Why tax gains, when it is their capital you have a problem with?

“the “vulnerable” (i.e the nations chain smoking daytime tv watching cheap cider drinking chavs),”

Leaving aside your prejudice (and the above is dealt with by taxes on booze and fags already), its because vulnerable also refers to a whole range of people who – get this – are vulnerable. Cancer patients, disabled people, pensioners, ex-servicemen (yes they get classed as vulnerable and in priority need) etc. People who have great difficulty securing employment at the best of times, and who will probably be forced into destitution if the right keeps up its war on people who failed to donate to the conservative party. We are already getting reports of terminally ill cancer patients being told by jobcentre staff that they are fit to work and so should come off disability.

“standard assumptions of mainstream macroeconomics.
With the economy weak, a pound of spending cuts leads to about 80p worth of extra budgetary costs, for at least 5 to 10 years.”

Those aren’t the standard assumptions, sorry. Those are extremely biased, way out of the mainstream, party political made up assumptions actually.

You’ve been reading Richard Murphy again and I claim my £5.

@Zebura

The idea that capital is fully owned by private individuals, who get to do what they like with it, is a pretty good working definition of capitalism.

Expecting the tories to be progressive is a stretch, expecting them to abolish capitalism approaches the implausible.

@Worstal

Ok, what multiplier would you use?

To be specific, take the few million cost of the subsidised loan to Forgemasters. (counting only the difference from a commercial loan, not dishonestly lumping up the whole thing _and_ expecting it to to be paid back in a single year, as someone above did). Estimate the net annual cost of another 180 unemployed non-taxpayers.

In order for that to be less than say 60% of the saving, each extra unemployed person would have to cost less than £12,000 to the government. That will be less than the tax most of them currently pay, let alone the benefits and extra services they will consume.

Sure, in the long term, things would adjust, but not within the 5-10 year window required to prevent the deficit becoming an unsustainable burden.

Deliberately tanking the economy in order to create an artificial crisis that justifies moving to US/Polish levels of tax and spend is, apart from anything else, highly risky, with a big risk of overshooting. I don’t think the more moderate Conservatives would stand for it: the worry is that some of the Lib Dems will be all but demanding it.

@ 22 “We are already getting reports of terminally ill cancer patients being told by jobcentre staff that they are fit to work and so should come off disability.”

Indeed, a change brought in by the last government, to get people off DLA and onto job seekers allowance. As ever the left ignored the problem for so long it became impossible to solve it fairly, so they used a big stick.
For every person being treated unfairly though there are 10 with “bad backs/anxiety/depression” (conditions that many people miraculouly mange to work with) who are at least in theory being forced to look for a job, at last. They are all appealing, of course, because being on JSA means less money to piss up the wall and means they have to sign on every two weeks, go for job interviews and tedious stuff like that. Oh and while it’s under appeal (6 months on average and rising) they continue to get the higher DLA rate.

I came across this news report from January 2006:

“Work and Pensions Secretary John Hutton has unveiled plans to get one million incapacity benefit claimants back into work, saving £7bn a year.”
http://news.bbc.co.uk/1/hi/uk_politics/4641588.stm

“As ever the left ignored the problem for so long it became impossible to solve it fairly, so they used a big stick.”

Actually “the left” were the ones trying to deal with it, by advocating phased re-introductions to the workplace, less discrimination against people with disabilities etc. What “the left” weren’t doing was sending press releases to tabloids adocating disabled people were forced to work, reinforcing a set of negative steroetypes about people on DLA, and conducting a rather immature debate about unemployment that – even in a recession – stupidly thinks benefits are the problem rather than the lack of vaccancies, lack of skills, poor transport etc.