It is Obvious

Chris Rick has got altogether too much to say

Head for the hills

Posted by chrisrick13 on December 7, 2014

It is obvious: we can all fool ourselves

I have spent most of a week avoiding inane commentary on the Autumn Statement.  This meant little time in front of the tv.  Something I am trying to diminish anyway.

I did hear one commentator who stood out from the rest as saying something sensible.  His views coincided largely with mine which might have had a lot to do with it.  However he did add some useful information.  Over history Mr Laffer has stood and been counted.  No government has managed to get more than 37% in tax out of the population.  That means that there is a delicate balance.  You can lean hard on the people and get your 37% of a reducing amount or you can let up a bit and encourage people to work and get a smaller take of a larger pot.

Gordon Brown thought he could get the better of Mr Laffer and created complex taxation law.  The only thing he did do was to cut the efficiency of government and industry by giving them a lot more work to do to dance around the margins of the tax laws.

Simplification is possible and would provide visibility.  That would give no chance for the sleight of hand increasing taxes that people did not realise were increases.  Take away NIC.  I hate it and so many people think it is not a tax – but it is.  Then put the tax allowance at the minimum living wage.  This way you will avoid a lot of taking and giving back.  Increase tax rates to where you want them and make the first band twice the national average wage or thereabouts.

Put other bands in that take more off the well-paid…but not too much more or they will spend a lot of their time avoiding tax altogether.

Put in transitional measures (over say 5 years) so that those on the boundaries have time to arrange their affairs to their best advantage.

Then create some (small) department to deal with the boundary cases.

This will put a lot of civil servants, tax advisers, accountants, lawyers and others out of work or at least out of pointless work.  When they turn up for their job seekers allowance put them on the minimum living wage and ship them  in buses to places where they can do some useful manual labour.   If they perform badly sack them and don’t pay benefits.

Fixing the country’s problems is easy.

The other thing the commentator said was that we had committed inter-generational theft.  We had lived very nicely for a many years and had left the bill to our children.  I’m talking to you  – baby-boomers.  Can’t say I would blame the current generation if they chose not to pay.

The problem is that we have, as a nation, to pay off our debts at some time.  That will be painful.  A few cuts in spending will not do it.  For the moment we are borrowing money cheaply.  Our national debt is slowly growing but it is not the same beast.  It is like a human body where even the cells in the deepest parts are replaced every 7 years or so.  Each month some of the debt matures and is paid back to the lender.  This is usually done by borrowing the money off someone (usually the person who is being paid off) AT THE PREVAILING RATE.  The debt is ‘rolled over’.

That is fine until someone spots how many clothes the emperor has on.  They say: this UK Johnny does not seem to be doing too well.  If they want me to lend them money then I need more interest.  Suddenly there is not enough money for anything and nobody will lend us money at any rate.

At that point there is no ring-fencing.  Doctors don’t get paid.  Hospitals have no money to buy drugs off drug companies.  There is no money to put diesel in the engines of tanks, planes and ships.  Policemen are not paid and firemen also.

We can either choose to sort ourselves out or let a banker in Beijing/Frankfurt/New York do it for us.  I know which I prefer but I don’t see any politician prepared to do it.  I don’t see many people anywhere who can accept that there are bills coming due that will need sacrifice to pay…and paid they will be.

It is obvious: we can all fool ourselves up to the moment when nobody else is fooled

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