After some really unpleasant campaigning in the London mayoral elections, the main contenders have published details of their tax affairs. Boris's tax affairs are pretty straight forward - he earned a relatively large amount of money, all of his income was subject to income tax, resulting in what is an outrageously high marginal tax rate.
Ken Livingstone's declarations on the other hand show that his tax affairs appear to be a model of tax avoidance. In summary, he earns his income through a limited company (Silveta ltd - which appears to be mostly 'Ken Livingstone the company'), and then 'Ken Livingston the person' earns a small salary and dividends from the company. By doing this, he can reduce his effective tax rates, reduce his national insurance bill, manage the timing of when he pays tax to reduce tax, and can split his income with his partner to further avoid tax. His presentation of this arrangement however is extremely slippery. He claims the figures have been checked by an accountant, but if Ken had asked me for advice on what to publish to support income and effective tax rate, I would advise the following. :
You could publish details of just the personal tax return, which would indicate the tax paid on employment income and dividends on the company.
I would however point out that this misrepresents both Ken's total income and effective tax rate, if, as seems likely from the company's bank account, Ken had retained income within the company, thus a personal tax return only underdeclares income and overstates marginal tax rates when looking at a consolidated view of Ken's income.
So the most transparent approach would be to publish both Ken's personal income tax return, and details of all the income earned by Ken through his company in each period.
But what it looks like Ken has actually done is to publish details of his personal income tax return, then done an add back of a notional amount for the part of the corporation tax relating to the dividends actually paid in the period, in order to make it look like Ken has paid a higher effective tax rate. This is of course completely misleading, as it combines Kens personal income/tax with only part of Ken's income from the company to make the marginal tax rate paid appear higher. Even if an accountant had individually approved the personal tax return and the company tax return, no competent accountant would put their signature to this presentation as it is completely misleading.
Then you have to remember that Ken is the candidate who drones on about what he would like to do to rich tax avoiders, and has falsely accused Boris of not paying income tax on his income, and you have to wonder who in their right mind would vote for such a nasty, cynical, dishonest hypocrite as Ken Livingstone.
But the voters of Bradford West have proved that cynical hypocrisy is no barrier to election for left wingers who are prepared to say and do anything to get elected, but you really would have to hope that when faced with the facts about what Boris says on tax and does on tax, compared to what Ken says on tax and the convoluted arrangements he uses to avoid tax, this is an election that only has one possible result.
Friday, April 6, 2012
Monday, January 23, 2012
No child benefit for higher rate taxpayers - A political car crash in slow motion
Its been a while since the Conservatives announced that families where one parent is a higher rate taxpayer would loose child benefit payments. Since then, despite some signs from David Cameron that the Conservatives were about to row back on the policy, the chancellor and others have indicated it is still the government's intention to stop families with a higher tax paying parent from claiming child benefit.
Watching this unfold is like watching a political car crash in slow motion. There has been every opportunity to turn off the road, and no shortage of warning signs of the trouble ahead, but the politicians journey continues apace towards a catastrophic collision with the brick wall representing the reality of a policy rapidly approaching its intended introduction date that is utterly and inexcusably dreadful.
Its not so much that a Conservative lead government is putting narrow political imperatives to be seen to be kicking high earners above rational policy making - although that is obviously a problem, it is that the policy is so deeply, obviously and in fundamental respects flawed. To be more specific, the policy makes the child benefit claims of one party dependent on the tax status of another, relies on an eligibility test for benefit that can only be carried out some time after the benefit needs to be claimed, has a horribly complex effect on marginal tax rates (including marginal rates in some instances over 100%), and is desperately unfair on families with only one wage earner.
To illustrate the problems better, here is some extracts from an email I wrote to an MP in the Chancellor's treasury team.
"what has been touted as an administratively simple way to generate £1bn in revenue looks actually to be deeply flawed. I'm not particularly interested in a response - certainly not of the political justification type - just hope you can look into the issues raised below and try to avoid a nightmare.
I think there are three intrinsic features of the proposed scheme that will cause problems:
1) The plan will introduce a discontinuity in effective marginal tax rate, including a marginal rate of more than 100% around the threshold.
The size of the impact, potentially £2k or more on post-tax income will make tax planning essential for those near the threshold. At the margins, tax could completely drive economic decisions, such as whether or not to seek a promotion, or to work harder, and act as a strong disincentive to economic activity, which can't be a good thing.
There will need to be many complex anti-avoidance rules around artificially reducing income for those just above the threshold or in the first year of the change, and opportunities for professional advisors to have a field day, at a time when the tax system is crying out for simplification.
The last time something with an effect on marginal tax rates as crazy as this was tried was Labour's anti-avoidance rules around restrictions on pension tax relief for high earners. The system was ludicrously complicated, understood by very few taxpayers, slated as a complete dogs breakfast (e.g. http://www.economist.com/node/15580725), and rapidly reviewed. The child benefit proposals probably affect a much larger group, who are much less able to deal with the financial consequences than those in the £130k+ income bracket.
2) The tax charge on one person could depend on the child benefit claims of another.
This makes anti-evasion and anti-avoidance measures extraordinarily difficult to frame and enforce. Some habitual benefit claimants are already adept at disguising from the authorities when they are in a relationship or living with someone who actually earns some money if it affects their benefit. I thought the party was trying to move away from this type of nonsense, not introducing the regime to an entirely new part of the population.
For example:
One assumes where parents live apart/are no longer in a relationship - the higher earner cannot possibly have to repay child benefit, as they won't necessarily even know if it is being claimed.
This will leave a whole range of opportunities for some people to avoid the charge. If parents separate during the year - will subsequent child benefit claims be clawed back? How will the authorities determine who is in a relationship (if they aren't married)? What if a family lives together, but owns two homes - with one parent registered at each - how does the government intend to police when repayment of child benefit is required in this instance, or will it just be an honesty box?
Why is the party increasing the 'couple penalty', rather than reducing it?
3) The test for the trigger can only be performed at the end of the tax year, at which point tax is assessed on the benefit claims during the period, so it will be unclear what the tax effect of an action might be until some time afterwards.
This increases the burden of tax planning, and could result in some nasty cashflow problems around tax return time for people with already stretched financial resources. There are two problems scenarios, failing to claim child benefit then suddenly losing income, and claiming child benefit and unexpectedly hitting the threshold. How would you respond to the following scenarios created by these plans in a surgery situation:
- I thought I was going to be under the limit, but I forgot about the dividends on a few shares I own. If I had of remembered, I would have asked my employer to pay me less in March(!!!), but that £500 now means the taxman wants to reclaim £2,000 from me for the child benefit claimed by my wife, and I can't find that type of cash - I'm the only earner, my wife stays at home looking after the children.
- My husband was earning £50k a year, but he lost his job just before Christmas. The Chancellor said it was sensible for me not to claim child benefit, so I didn't, even though there will no longer be a higher rate taxpayer this year. Now we are in real hardship, and they won't let me backdate a claim for child benefit.
This makes a nonsense of the Chancellor's claim that higher rate taxpayers shouldn't claim child benefit. At the very least they would be advised to claim the benefit and put it in the bank.
The points above are mostly applicable to people near the margins, but looking at the policy politically, there will be a major hit on all higher tax rate families. Working people, particularly in London and the South East have been absolutely hammered under Labour - they pay higher marginal tax rates, higher stamp duty, and I think the reason why we have a Conservative prime minister is that in constituencies across the south voters like this were fed up with a bloated and ever increasing state, squandering taxpayers money and mortgaging their children with its borrowing, leaving them picking up a grossly disproportionate share of the bill. If you wanted to devise a magic bullet carefully targetted to do maximum damage to Conservative core support, I don't think you could do much better than attacking families with one parent working on the high tax threshold, the other staying at home looking after children."
Watching this unfold is like watching a political car crash in slow motion. There has been every opportunity to turn off the road, and no shortage of warning signs of the trouble ahead, but the politicians journey continues apace towards a catastrophic collision with the brick wall representing the reality of a policy rapidly approaching its intended introduction date that is utterly and inexcusably dreadful.
Its not so much that a Conservative lead government is putting narrow political imperatives to be seen to be kicking high earners above rational policy making - although that is obviously a problem, it is that the policy is so deeply, obviously and in fundamental respects flawed. To be more specific, the policy makes the child benefit claims of one party dependent on the tax status of another, relies on an eligibility test for benefit that can only be carried out some time after the benefit needs to be claimed, has a horribly complex effect on marginal tax rates (including marginal rates in some instances over 100%), and is desperately unfair on families with only one wage earner.
To illustrate the problems better, here is some extracts from an email I wrote to an MP in the Chancellor's treasury team.
"what has been touted as an administratively simple way to generate £1bn in revenue looks actually to be deeply flawed. I'm not particularly interested in a response - certainly not of the political justification type - just hope you can look into the issues raised below and try to avoid a nightmare.
I think there are three intrinsic features of the proposed scheme that will cause problems:
1) The plan will introduce a discontinuity in effective marginal tax rate, including a marginal rate of more than 100% around the threshold.
The size of the impact, potentially £2k or more on post-tax income will make tax planning essential for those near the threshold. At the margins, tax could completely drive economic decisions, such as whether or not to seek a promotion, or to work harder, and act as a strong disincentive to economic activity, which can't be a good thing.
There will need to be many complex anti-avoidance rules around artificially reducing income for those just above the threshold or in the first year of the change, and opportunities for professional advisors to have a field day, at a time when the tax system is crying out for simplification.
The last time something with an effect on marginal tax rates as crazy as this was tried was Labour's anti-avoidance rules around restrictions on pension tax relief for high earners. The system was ludicrously complicated, understood by very few taxpayers, slated as a complete dogs breakfast (e.g. http://www.economist.com/node/15580725), and rapidly reviewed. The child benefit proposals probably affect a much larger group, who are much less able to deal with the financial consequences than those in the £130k+ income bracket.
2) The tax charge on one person could depend on the child benefit claims of another.
This makes anti-evasion and anti-avoidance measures extraordinarily difficult to frame and enforce. Some habitual benefit claimants are already adept at disguising from the authorities when they are in a relationship or living with someone who actually earns some money if it affects their benefit. I thought the party was trying to move away from this type of nonsense, not introducing the regime to an entirely new part of the population.
For example:
One assumes where parents live apart/are no longer in a relationship - the higher earner cannot possibly have to repay child benefit, as they won't necessarily even know if it is being claimed.
This will leave a whole range of opportunities for some people to avoid the charge. If parents separate during the year - will subsequent child benefit claims be clawed back? How will the authorities determine who is in a relationship (if they aren't married)? What if a family lives together, but owns two homes - with one parent registered at each - how does the government intend to police when repayment of child benefit is required in this instance, or will it just be an honesty box?
Why is the party increasing the 'couple penalty', rather than reducing it?
3) The test for the trigger can only be performed at the end of the tax year, at which point tax is assessed on the benefit claims during the period, so it will be unclear what the tax effect of an action might be until some time afterwards.
This increases the burden of tax planning, and could result in some nasty cashflow problems around tax return time for people with already stretched financial resources. There are two problems scenarios, failing to claim child benefit then suddenly losing income, and claiming child benefit and unexpectedly hitting the threshold. How would you respond to the following scenarios created by these plans in a surgery situation:
- I thought I was going to be under the limit, but I forgot about the dividends on a few shares I own. If I had of remembered, I would have asked my employer to pay me less in March(!!!), but that £500 now means the taxman wants to reclaim £2,000 from me for the child benefit claimed by my wife, and I can't find that type of cash - I'm the only earner, my wife stays at home looking after the children.
- My husband was earning £50k a year, but he lost his job just before Christmas. The Chancellor said it was sensible for me not to claim child benefit, so I didn't, even though there will no longer be a higher rate taxpayer this year. Now we are in real hardship, and they won't let me backdate a claim for child benefit.
This makes a nonsense of the Chancellor's claim that higher rate taxpayers shouldn't claim child benefit. At the very least they would be advised to claim the benefit and put it in the bank.
The points above are mostly applicable to people near the margins, but looking at the policy politically, there will be a major hit on all higher tax rate families. Working people, particularly in London and the South East have been absolutely hammered under Labour - they pay higher marginal tax rates, higher stamp duty, and I think the reason why we have a Conservative prime minister is that in constituencies across the south voters like this were fed up with a bloated and ever increasing state, squandering taxpayers money and mortgaging their children with its borrowing, leaving them picking up a grossly disproportionate share of the bill. If you wanted to devise a magic bullet carefully targetted to do maximum damage to Conservative core support, I don't think you could do much better than attacking families with one parent working on the high tax threshold, the other staying at home looking after children."
The email was acknowledged with a response indicating that the points would be considered. But that was in 2010 shortly after the policy was first announced, and still the car moves on towards the brick wall.
As someone who was a public face for the Conservatives in Cambridge, I know several people who have raised concerns about the effect of this proposed policy with me - in an 'apoplectic with rage' kind of way. The response if the policy is actually implemented doesn't bear thinking about for the government.
Monday, January 9, 2012
Executive pay is out of control
Executives of large companies are a classic example of the agency problem. They are in place to serve the owners of the company, i.e. the shareholders, but it is all too easy for the directors of large companies to put their own interests first, and line their own pockets with remuneration packages that frequently bear little relation to their performance or what a genuine free market would offer them if shareholders had their say.
Its certainly true that the difference between a good manager and and bad manager can make a significant difference in terms of absolute value to a large multinational company. Trouble is, the senior management team are only one part of the equation, and paying a sizable part of the income of a company that may have a vast income generating asset base seems to be no guarantee that you will get management that is even adequate, let alone high performing.
Over the last few years, executive pay seems to have risen out of control. Managers are paid for high performance, and paid off handsomely when they fail. This has come about as the selection and remuneration of senior management has become ever more the decision of other senior managers, and less and less something that shareholders have any serious say over. Remuneration committees benchmark pay according to whatever other companies are paying and then a little bit more to recognise just how special the new managers that the same people have just appointed are, which can provide a self perpetuating cycle of higher pay. As many councillors have discovered, having an 'independent' panel review pay, where that panel is not actually paying the price itself, can often also have an upwards only impact on reward.
Both the Prime Minister and Labour want to see something done about this. I dare say most of the motivation for this sudden interest is political expediency. The gap between rich and poor, and a few managers on extraordinary salaries whilst western economies are floundering are not unimportant - but we never hear similar concerns raised about the income of Premiership footballers or lottery winners. Ultimately Executive pay is mostly the concern of shareholders - but that still means it is the concern of large numbers of people, for example most people with private pension savings. For a a number of reasons shareholders do not currently have a proper voice in setting Executive pay, and government action is now long overdue.
Labour as ever miss the point, in calling for extra transparency. Annual reports for listed companies have no shortage of detail on executive pay, it doesn't need more taxpayers cash being squandered tabulating this information.
It remains to be seen what the Government has in mind in terms of empowering shareholders, but the first step to a proper solution is to understand the problem. Large plcs usually have a very diverse shareholder base - so it is hard for a group of shareholders to get enough support to block excessive pay. Many individual shareholdings are now held in nominee accounts - where by default shareholders are often denied invitations to vote on executive pay and attend AGMs. The situation is worse for investors in unit trusts or pensions, where decisions are taken on behalf of investors by scheme managers - who may be rather closer to the executives of companies, than they are to their investors.
So I have a suggestion for government for how to tackle executive pay excesses. With the ready availability of online account servicing from most providers, it should be made compulsory for the 'beneficial owner' of every shareholding in listed companies to be given the opportunity to vote electronically on all company resolutions via the fund or nominee account manager. It should then be compulsory for senior executive remuneration to be subject to approval by these beneficial owners, and it should be possible for small groups of shareholders (say any group with the support of 5% of the shareholders) to propose alternative remuneration schemes.
This would not just apply to shares held in nominee accounts, but also to shares held in pension funds and shares held in unit based investment funds. The fund managers should be required to make the beneficial owners aware of all the companies that their funds are or may be invested in, and give them the opportunity to indicate how they would like to vote on any resolutions, which should be binding on the fund manager for the part of any shareholding attributable to the beneficial owner. This would do away with cosy block votes for fund managers, and herald a new age of shareholder activism.
It might be that shareholders continue to support large executive pay packages that seem to pay out regardless of the long term fortunes of the company - its would be their choice, and it may be in their interests to do so. But more likely I think it would result in executive pay being reigned in, and more importantly, becoming much more aligned to long term shareholder interests.
Its certainly true that the difference between a good manager and and bad manager can make a significant difference in terms of absolute value to a large multinational company. Trouble is, the senior management team are only one part of the equation, and paying a sizable part of the income of a company that may have a vast income generating asset base seems to be no guarantee that you will get management that is even adequate, let alone high performing.
Over the last few years, executive pay seems to have risen out of control. Managers are paid for high performance, and paid off handsomely when they fail. This has come about as the selection and remuneration of senior management has become ever more the decision of other senior managers, and less and less something that shareholders have any serious say over. Remuneration committees benchmark pay according to whatever other companies are paying and then a little bit more to recognise just how special the new managers that the same people have just appointed are, which can provide a self perpetuating cycle of higher pay. As many councillors have discovered, having an 'independent' panel review pay, where that panel is not actually paying the price itself, can often also have an upwards only impact on reward.
Both the Prime Minister and Labour want to see something done about this. I dare say most of the motivation for this sudden interest is political expediency. The gap between rich and poor, and a few managers on extraordinary salaries whilst western economies are floundering are not unimportant - but we never hear similar concerns raised about the income of Premiership footballers or lottery winners. Ultimately Executive pay is mostly the concern of shareholders - but that still means it is the concern of large numbers of people, for example most people with private pension savings. For a a number of reasons shareholders do not currently have a proper voice in setting Executive pay, and government action is now long overdue.
Labour as ever miss the point, in calling for extra transparency. Annual reports for listed companies have no shortage of detail on executive pay, it doesn't need more taxpayers cash being squandered tabulating this information.
It remains to be seen what the Government has in mind in terms of empowering shareholders, but the first step to a proper solution is to understand the problem. Large plcs usually have a very diverse shareholder base - so it is hard for a group of shareholders to get enough support to block excessive pay. Many individual shareholdings are now held in nominee accounts - where by default shareholders are often denied invitations to vote on executive pay and attend AGMs. The situation is worse for investors in unit trusts or pensions, where decisions are taken on behalf of investors by scheme managers - who may be rather closer to the executives of companies, than they are to their investors.
So I have a suggestion for government for how to tackle executive pay excesses. With the ready availability of online account servicing from most providers, it should be made compulsory for the 'beneficial owner' of every shareholding in listed companies to be given the opportunity to vote electronically on all company resolutions via the fund or nominee account manager. It should then be compulsory for senior executive remuneration to be subject to approval by these beneficial owners, and it should be possible for small groups of shareholders (say any group with the support of 5% of the shareholders) to propose alternative remuneration schemes.
This would not just apply to shares held in nominee accounts, but also to shares held in pension funds and shares held in unit based investment funds. The fund managers should be required to make the beneficial owners aware of all the companies that their funds are or may be invested in, and give them the opportunity to indicate how they would like to vote on any resolutions, which should be binding on the fund manager for the part of any shareholding attributable to the beneficial owner. This would do away with cosy block votes for fund managers, and herald a new age of shareholder activism.
It might be that shareholders continue to support large executive pay packages that seem to pay out regardless of the long term fortunes of the company - its would be their choice, and it may be in their interests to do so. But more likely I think it would result in executive pay being reigned in, and more importantly, becoming much more aligned to long term shareholder interests.
Tuesday, July 5, 2011
Why I won't be protesting in Cambridge on Saturday
Most of my knowledge of the English Defence League comes from having recently read most of the website for EDL Cambridge.
In short, they don't much like Muslims. They think they are all terrorists (or rather they think all the radical ones are terrorists, with radical defined as being a muslim that wants to practice their religion in a mosque in the UK). They are bigoted, and ignorant, and not very bright - in ways that would be amusing if the consequences of their behaviour weren't so seriously negative (e.g. "In Britain women should be free to wear what they choose.... Muslim women caught wearing the Burkha should be punished to the fullest extent of the law.", or "If we were in the countries these Muslims are from we would respect their way of life. No one would build a Church in say, India and absolutely no one would practice Christianity in Saddam's Iraq.")
They are are planning a protest March in Cambridge next Saturday (9th July) to oppose plans for a new mosque in Cambridge.
For many reasons, I would like to register my protest at the EDL's planned march.
Firstly, I am a strong supporter of religious tolerance - even if I can't accept the beliefs involved in any particular religion. History has demonstrated time and time again that the world is a better place if different religions can happily co-exist in the same place. I believe this is possible, but not if even a place like Cambridge cannot permit a major world religion to build places of worship.
Cambridge is a city whose success has been built on a global economy. The knowledge based industry that supports so much of the City's economic activity is based on a University that seeks to attract the best academic talent from around the world, regardless of race, colour or creed. As a result, Cambridge is a diverse tolerant place, which are among the reasons why it is such a good place to live. Also partly as a result, the muslim community in Cambridge is very diverse, coming from many different traditions, covering many races and nationalities. It also means they have outgrown their current mosque. The proposed site for a new mosque at the end of Mill Road looks to be an excellent location, and could provide a fantastic regeneration of the built environment, as well as a new home for many of the City's muslims. I think it should not merely be tolerated, but welcomed, and as a result could help break down any barriers between the muslim and non-muslim community in Cambridge that come from ignorance and mistrust, which in turn would make it less likely that violent extremism could thrive.
The campaign group Unite Against Facism are planning a counter-demonstration in the City next Saturday. I would like to feel able to support them, but just can't bring myself to do it.
Their declaration, signed by many community leaders in Cambridge (almost exclusively from the political left) is also ignorant to a smaller extent - if in a somewhat more sophisticated and subtle manner.
"The EDL are deeply Islamophobic – bigoted against Muslims – which is as unacceptable as any other form of racism"
Race, religion and nationality are three different attributes that shouldn't be lazily interchanged. EDL may well be a racist group - I wouldn't be surprised - just haven't seen the evidence from what I've read, and their protest this Saturday is clearly based on religious prejudice - but being Islamophobic is not necessarily the same as being racist.
To the left, to describe someone as racist is about as serious an accusation as can be hurled - but hurled it is all too often in the direction of anyone that doesn't fit the left's worldview. If you aren't from the left, if you didn't support a single European currency, or oppose the EU, both could be seen as evidence of inherent racism. When it comes to immigration, you can be very supportive of the concept generally, but not to the extent that its scale or type causes real problems - but if you're not on the left, this is again more evidence of underlying racism. Cheapening the currency, and insinuating racism at the slightest excuse may help the left, but I don't really want to play along with that.
Finally, there is a fine line between being appalled that this group wants to march in Cambridge because you abhor what they stand for, and campaigning to stop them from being allowed (or physically able) to protest - which is arguably the position of Unite Against Facism. If protest is peaceful and complies with reasonable laws, people should be allowed the freedom to express opinions even if they do cause offence and upset people.
If the left really want all of Cambridge to unite against the EDL, the banner of the left wing 'Unite Against Facism' organisation and its history of violent confrontation in clashes with the EDL isn't the way to go about it - a protest based on the simple message that nasty bigoted people aren't welcome in tolerant Cambridge, and that Cambridge supports freedom to practise religion by supporting the Muslim community's aspiration for a new mosque is all that is required. But as things stand, I won't be protesting in Cambridge on Saturday.
In short, they don't much like Muslims. They think they are all terrorists (or rather they think all the radical ones are terrorists, with radical defined as being a muslim that wants to practice their religion in a mosque in the UK). They are bigoted, and ignorant, and not very bright - in ways that would be amusing if the consequences of their behaviour weren't so seriously negative (e.g. "In Britain women should be free to wear what they choose.... Muslim women caught wearing the Burkha should be punished to the fullest extent of the law.", or "If we were in the countries these Muslims are from we would respect their way of life. No one would build a Church in say, India and absolutely no one would practice Christianity in Saddam's Iraq.")
They are are planning a protest March in Cambridge next Saturday (9th July) to oppose plans for a new mosque in Cambridge.
For many reasons, I would like to register my protest at the EDL's planned march.
Firstly, I am a strong supporter of religious tolerance - even if I can't accept the beliefs involved in any particular religion. History has demonstrated time and time again that the world is a better place if different religions can happily co-exist in the same place. I believe this is possible, but not if even a place like Cambridge cannot permit a major world religion to build places of worship.
Cambridge is a city whose success has been built on a global economy. The knowledge based industry that supports so much of the City's economic activity is based on a University that seeks to attract the best academic talent from around the world, regardless of race, colour or creed. As a result, Cambridge is a diverse tolerant place, which are among the reasons why it is such a good place to live. Also partly as a result, the muslim community in Cambridge is very diverse, coming from many different traditions, covering many races and nationalities. It also means they have outgrown their current mosque. The proposed site for a new mosque at the end of Mill Road looks to be an excellent location, and could provide a fantastic regeneration of the built environment, as well as a new home for many of the City's muslims. I think it should not merely be tolerated, but welcomed, and as a result could help break down any barriers between the muslim and non-muslim community in Cambridge that come from ignorance and mistrust, which in turn would make it less likely that violent extremism could thrive.
The campaign group Unite Against Facism are planning a counter-demonstration in the City next Saturday. I would like to feel able to support them, but just can't bring myself to do it.
Their declaration, signed by many community leaders in Cambridge (almost exclusively from the political left) is also ignorant to a smaller extent - if in a somewhat more sophisticated and subtle manner.
"The EDL are deeply Islamophobic – bigoted against Muslims – which is as unacceptable as any other form of racism"
Race, religion and nationality are three different attributes that shouldn't be lazily interchanged. EDL may well be a racist group - I wouldn't be surprised - just haven't seen the evidence from what I've read, and their protest this Saturday is clearly based on religious prejudice - but being Islamophobic is not necessarily the same as being racist.
To the left, to describe someone as racist is about as serious an accusation as can be hurled - but hurled it is all too often in the direction of anyone that doesn't fit the left's worldview. If you aren't from the left, if you didn't support a single European currency, or oppose the EU, both could be seen as evidence of inherent racism. When it comes to immigration, you can be very supportive of the concept generally, but not to the extent that its scale or type causes real problems - but if you're not on the left, this is again more evidence of underlying racism. Cheapening the currency, and insinuating racism at the slightest excuse may help the left, but I don't really want to play along with that.
Finally, there is a fine line between being appalled that this group wants to march in Cambridge because you abhor what they stand for, and campaigning to stop them from being allowed (or physically able) to protest - which is arguably the position of Unite Against Facism. If protest is peaceful and complies with reasonable laws, people should be allowed the freedom to express opinions even if they do cause offence and upset people.
If the left really want all of Cambridge to unite against the EDL, the banner of the left wing 'Unite Against Facism' organisation and its history of violent confrontation in clashes with the EDL isn't the way to go about it - a protest based on the simple message that nasty bigoted people aren't welcome in tolerant Cambridge, and that Cambridge supports freedom to practise religion by supporting the Muslim community's aspiration for a new mosque is all that is required. But as things stand, I won't be protesting in Cambridge on Saturday.
Sunday, June 12, 2011
The Big Society Running Event
Just in case the big government fans are still struggling with the Big Society idea, another example. After weeks of bullying from one of my more evangelical running friends, yesterday I attended Cambridge Parkrun for the first time. I had resisted for a long while, as it involved being in Milton at 9am, on Saturday morning - not a time I am used to being anywhere except under a duvet. So what is it?
Parkrun is a not for profit organisation that organises weekly 5km runs, mostly in the UK. It has some commercial sponsors - Lucozade Sport, Sweatshop, Nike and the London Marathon, and encourages donations, but all the events are organised by volunteers - regular runners who occasionally help organise to help keep the event going. Making innovative use of the internet (you don't register for each event, just register once for all of the many Parkrun events runs nationally), it also means that each event is free to enter, and you don't have to register in advance, you just turn up (with a barcode you've printed off the internet) - a model of efficiency - and after each event there are detailed results available online.
In short, the event just works, and encourages many people who wouldn't take regular exercise to get fitter, improving their quality of life and health - all organised without help from the state to make it happen, or more to the point, it doesn't worry (too much) about the things that Council's worry about that might stop it happening.
The Cambridge version is run at Milton Country Park - which itself is now run by a not-for-profit trust after South Cambs District Council found it too expensive for to run the park themselves.
Compare and contrast to the Cambridge Half Marathon. This used to be a popular running event that I understand was essentially killed by Council bureaucracy. There has been a recent attempt to reintroduce the event. I sat through several meetings on the subject before resigning as a Councillor, and it was pretty clear the prospective organisers of a new Cambridge Half Marathon were going to have a very uphill struggle to get through all the hoops the Council were going to demand before the event went anywhere near a Council controlled open space or public highway. Think clearance from a joint committee of police, ambulance service and Council for one (that even had a name, that I forget). And of course the County Council needing to give permission to close any roads, the first hurdles for which seemed to be decided on the whim of one or two highways officers.
Meanwhile, as part of their contribution to the government spending that is running at a deficit compared to tax raised of around 10% of the country's entire national income, councils up and down the land spend a fortune of taxpayers cash on tackling health inequalities, and our NHS devotes its scarce resources to reducing obesity, and treating the diseases it causes.
To my mind, Parkrun is a typical example of the Big Society in action - a big thanks to the volunteers and sponsors who help make it happen...
Parkrun is a not for profit organisation that organises weekly 5km runs, mostly in the UK. It has some commercial sponsors - Lucozade Sport, Sweatshop, Nike and the London Marathon, and encourages donations, but all the events are organised by volunteers - regular runners who occasionally help organise to help keep the event going. Making innovative use of the internet (you don't register for each event, just register once for all of the many Parkrun events runs nationally), it also means that each event is free to enter, and you don't have to register in advance, you just turn up (with a barcode you've printed off the internet) - a model of efficiency - and after each event there are detailed results available online.
In short, the event just works, and encourages many people who wouldn't take regular exercise to get fitter, improving their quality of life and health - all organised without help from the state to make it happen, or more to the point, it doesn't worry (too much) about the things that Council's worry about that might stop it happening.
The Cambridge version is run at Milton Country Park - which itself is now run by a not-for-profit trust after South Cambs District Council found it too expensive for to run the park themselves.
Compare and contrast to the Cambridge Half Marathon. This used to be a popular running event that I understand was essentially killed by Council bureaucracy. There has been a recent attempt to reintroduce the event. I sat through several meetings on the subject before resigning as a Councillor, and it was pretty clear the prospective organisers of a new Cambridge Half Marathon were going to have a very uphill struggle to get through all the hoops the Council were going to demand before the event went anywhere near a Council controlled open space or public highway. Think clearance from a joint committee of police, ambulance service and Council for one (that even had a name, that I forget). And of course the County Council needing to give permission to close any roads, the first hurdles for which seemed to be decided on the whim of one or two highways officers.
Meanwhile, as part of their contribution to the government spending that is running at a deficit compared to tax raised of around 10% of the country's entire national income, councils up and down the land spend a fortune of taxpayers cash on tackling health inequalities, and our NHS devotes its scarce resources to reducing obesity, and treating the diseases it causes.
To my mind, Parkrun is a typical example of the Big Society in action - a big thanks to the volunteers and sponsors who help make it happen...
Monday, May 30, 2011
The Big Society BBQ
Being foolish enough to follow Sally Bercow on Twitter, I get to read all sorts of ridiculous nonsense. Like the following exchange:
I don't know why people have so much trouble with the Big Society concept - perhaps it is a combination of lefties being intentionally idiotic as above, or the extent to which we have allowed the state to nationalise personal responsibility - but in case it isn't obvious to Mrs Speaker, a Big Society BBQ will be one where people help each other, rather than relying on the state to do everything. Reminds me of a story...
Knewlab is a small village near where I grew up in Kent. They always used to hold an annual BBQ, organised by a couple of longstanding village residents. Residents chipped in a donation for the food, the drinks and the charcoal, and the whole village used to come along to the village green and meet their neighbours - it was part of what made Knewlab such a great place to live.
The organisers were chatting to some members of the parish council, and mentioned that organising the BBQ was quite a lot of work, and they could always do with some more help. They meant that a few more volunteers wouldn't go a miss now it had become so popular, but the parish council misunderstood this.
At the next meeting, they agreed that in order to protect this village institution, the parish council should offer to organise the annual village BBQ. Having been reassured all the familiar parts of the event would be kept in place, the organisers were only too happy to let the council take over the following year.
Things moved very quickly at the council. The Health and Safety committee met in September soon after that year's BBQ to review what had happened. This was an important first step, now the event was going to be run properly. Perhaps it was a sign of things to come, but that first meeting didn't go well. The parish clerk reported some grievous shortcomings. There was no health and safety plan for the event, so who knows what risks were being taken. The Parish Council, with their new BBQ organising responsibilities were now feeling quite time pressured, so they agreed the best thing to do would be to hire a external health and safety consultant to review the event.
Having come highly recommended by the County Council, they duly appointed a health and safety consultant who had a lot of experience of working with Councils to review the event. He spoke to the previous organisers, and many other stakeholders, and produced a lengthy report. It was damning. Amongst other things, the food was being cooked by people from the village who had no food safety training. There was no fire safety and evacuation plan, and no fire extinguishers. There was no safety warnings posted around the bouncy castle to protect the children of the village - and as the parish council knew, there is no risk too small to consider when it comes to protecting our children. Furthermore, there was no public liability insurance for the event. One dodgy sausage, or slightly over boisterous bouncing on the bouncy castle, leaving an injured villager, and the organisers could find themselves on the wrong end of a lawsuit before you can say 'ambulance-chasing-no-win-no-fee-lawyers-r-us'. Now the event was being run properly, the parish council had to act. Insurance was purchased. Under the County wide purchasing framework agreement with 'Very Large Services Co plc', several shiny new fire extinguishers were purchased (although there was some murmerings that shortly before it shut down last year, the village hardware store did seem to be selling some very similar extinguishers quite a lot cheaper). It was agreed that all volunteers who would be involved in cooking or preparing food would need to go on a food safety training course. And some notices were drafted to warn parents of the dangers of the bouncy castle. One parish councillor suggested that in order to protect the children, all adults helping at the event needed a full Criminal Records Bureau check. But this was felt to be way over the top, and sanity prevailed - only those adults helping at the bouncy castle and the soft drinks stall would need to be checked.
The event was being run properly now, but the costs were racking up. The Health and Safety consultant wasn't cheap, and they had to budget for printing notices and food safety courses. Some of this of course was start up costs that were taken from parish reserves, but with the new annual costs it was decided they would need to sell tickets. The price was set at £10 pounds - slightly higher than people usually donated on average, but a small price to pay for running the event properly.
That year's event was a great success - the weather was glorious, everyone had a great time, and the parish council felt sure people appreciated how much safer the event was. But in the follow up meeting, a couple of issues were noted. Mrs Miggins, who used to produce some excellent home-made pork pies, said she had been preparing food since before the war without poisoning anyone, and wasn't about to go on some course teaching grannies how to suck eggs. She had a great time attending the BBQ, but it did mean food preparation helpers were slightly down.
It was also noted numbers were down slightly. Some of the villagers on low incomes couldn't find the money for a ticket and chose not to attend. Unfortunately this had upset the finances slightly, so the event made a small loss. It was unanimously agreed to raise the parish precept slightly to pay for this - no-one would notice the tax rise, and the event was very successful.
Knewlab Village Council certainly moved with the times, and following new legislation, they had recruited a new equalities officer. Part of the new role would be to monitor diversity at the annual BBQ.
There seemed to be quite a lot of new staff at the parish council that year. Having got a low mark in a recent government inspection for environmental matters, they also recruited a Climate Change and Recycling officer, who carried out a review of the BBQ. Residents tried their best to sort out the various empty drinks bottles after the event, but often made mistakes, so it was agreed to purchase some special recycling bins to use at the event. It was also noted that although a blind eye had been turned in previous years, the recycling couldn't just be put out with normal domestic recycling, there would need to be a proper trade waste contract for the event, but it would only be a few pounds.
As this was the main event where village residents met up each year, it was also agreed to hold a small 'Doing your bit' environmental stall at the event, where residents could be told how to switch off electrical appliances at night, and how to reduce food miles. After extensive research by the Climate Change and Recycling officer, no carbon-free alternative to charcoal could be found, so to make the event carbon-neutral, it was agreed that a dozen trees would be planted in the rainforest each year to offset the emissions.
The costs were adding up, and this left the Council with a dilemma - most people in the village could easily afford the ticket price, but some couldn't, so it was agreed that there would be two different ticket prices - standard price and special price for those on benefits or low incomes. This added a bit to the administration of the ticket sales, so the Council appointed a part-time ticket administrator to process the ticket application forms, and calculate the means test. After doing the sums, the standard price tickets would now cost £15, with special tickets costing £1. Parish councillors were now putting a lot of their own time into organising the event, so it was agreed it was only right that they should receive free tickets.
That year was another great success - the weather was very kind again, and numbers held up well. It was a particular triumph that many people on low incomes attended, although parish councillors were surprised at some of those who decided not to attend due to the higher standard ticket price - knowing how large their houses were and the cars they drove.
It wasn't all plain sailing though. Food preparation volunteers who were overworked last year, and couldn't find time to go on the food safety refresher course decided not to help this year. The council had to bring in a catering company at the last minute to do all the food preparation. This meant there was again a slight loss, that was again charged to local taxpayers.
The report from the equalities officer also made uncomfortable reading. Equalities monitoring (now thankfully included on the ticket application form) had revealed that despite a small traveller community living at the far end of the village, none had attended the BBQ. A outreach project was setup to understand what had gone wrong, and make sure the next year's event was more representative. It was also noted the difficulty Mr Smith had getting on to the village green in his wheelchair - it needed two volunteers (who won't have been on a safe lifting course) to negotiate the kerb, so new dropped kerbs would need to be put in place. Fortunately the County Council issued grants for just this purpose, so once the 10 page application form was filled in, this work could be done without any cost to the parish council.
The equalities officer and the climate change and recycling officer both noted how much time they had been spending on the BBQ project, and it was agreed a significant part of their costs should be recharged to the BBQ cost centre.
Adding this to the increase in catering costs, the standard ticket prices for the following year would have needed to be significantly increased again. After much debate, it was decided that the fairest approach would be to introduce a super ticket that would need to be purchased by the 10% of villagers living in the largest houses. These would cost £100 each, but that was easily affordable, these people were very wealthy indeed - and many used to subsidise the event in previous years to the same extent when they just had a whip round. But above all, this approach was fair.
There were also attempts to make economies. It was initially agreed to reduce the size of the burgers by 5%, and only serve 3 sausages per person instead of 4. This news passed most people in the village by, but did cause a bit of a rumpus when Mr Spart in the workers cottages read the parish council minutes. A blog posting and a few tweets later, and trade unionists from miles around picketed the next parish council meeting, with placards ranging from 'Wheres the beef' and 'Not a sausage less' to 'Village life will collapse completely'. This plan was soon reversed, and everything was in place for another successful BBQ the following year.
Except the next BBQ was a disaster. It poured with rain, so ticket sales on the day were non-existent. But many people had already decided not to attend. Only 2 super-tickets were sold. Many of those who used to help with the catering didn't enjoy themselves as much now they weren't contributing their catering skills - and Catering Co food just wasn't as good as home cooked. And some people just thought the whole thing had become too bureaucratic, and wasn't fun any more. The result was a huge loss.
Recriminations were bitter. The leader of the parish council launched a savage attack in the Village Newsletter on the wealthy in the village - who could well afford to pay, but chose to avoid the event - for ruining the BBQ for everyone. The parish council was picketed for months by Mr Spart and his friends when they tried to make the equalities officer and climate change and recycling officer redundant. And with the parish council reserves drained completely, the parish precept was doubled. The BBQ didn't happen again - residents who became used to the parish council doing everything for them didn't want to volunteer again, and village life suffered. The children of Knewlab will be paying for the great BBQ fiasco for years to come...
Saturday, April 2, 2011
Debt, Deficit, and the Catastrophic mess Labour left us
There was a literally incredible letter from Paul Holmes in yesterday's CEN. It starts:
"Edward Turnham in recent letters continues to try to blame the last Labour administration for the UK's economic situation"
You don't say... He continues: "Labour wasn't to blame for the deficit" - and then finishes questioning Mr Turnham's credibility! You couldn't make this stuff up.
My understanding is that Paul Holmes is the brains behind the brawn in the Cherry Hinton Labour party, so CEN letter spats between Paul Holmes and Conservative Cherry Hinton candidate Ed Turnham are the initial skirmishes of the local election campaign.
I have watched with increasing incredulity Labour's position on public spending - I even got invited to Labour's 'new politics, fresh ideas' event in Cambridge with shadow chancellor Ed Balls MP. Would have loved to have gone to give him a piece of my mind, but unfortunately I was tied up at work all day...
Labour should apologise for the state they left the country, and stop treating people like fools with their suggestion that we can just carry on spending and borrowing without risk. So for Paul Holmes, and all those struggling to see through Labour's plans, a primer on Labour's economic mess.
First, don't confuse the debt and the deficit.
The debt - that is governments total accumulated outstanding borrowings - is now over £900,000,000,000 and in 2010 cost taxpayers £42,900,000,000 a year in interest costs - over £2,000 for every household in the country. If we followed Labour's plans, then that interest cost would rocket, as there would be even more debt to service, and the money markets that lend to government would demand higher rates, to reflect the increased risk of a Labour economy following the path of Ireland, Greece or Portugal into fiscal oblivion.
A point worth mentioning about this national debt, including in 2007, when Paul Holmes claims everything was fine and dandy with Labour's management of the economy, was the actual debt was far worse than his 'official' figure suggests. With dodgy Enron style accounting, a lot of government debt is now hidden from the official figures in expensive private finance initiative (PFI) deals (the main purpose of which seems to be to hide some of Labour's massive borrowing, with taxpayers picking up higher bills for hospitals, schools and the like for years to come), and in the hidden but ballooning liabilities involved in pension promises made to public sector workers - promises made on the never never, and unlike in private sector pension schemes, promises that have not been significantly changed even though people are now living a lot longer.
But the key point about the debt in 2007 is which direction it was going - this being the much talked about [annual] deficit (or in more sensible times, the deficit was sometimes actually a suplus). The deficit is the difference between what government spends and the amount it collects in tax over a fiscal year - each year this deficit adds to the total debt.
Total debt as a proportion of the economy may have been higher in the past than it was in 2007 - but only after temporary events like a major war, or whilst recovering from a recession and the relative debt level returned to normal over a period of time afterwards. What was incredible about the national debt in 2007 was not necessarily its relative size, or even is large absolute size, but the fact that even after years of uninterrupted economic growth, Government was still running a deficit, so the debt was still growing. What that means is that when the boom turns to bust, a modest deficit immediately turns into a large and unmanageable deficit. If you can't run a surplus after years of economic growth, (which is what people mean when they say there is a large structural deficit) you are in real trouble in a downturn - such was the frankly moronic way in which Gordon Brown destroyed the UK Government finances, who governed as if he really believed his delusional claim to have 'abolished boom and bust'.
Here is the predicted graph of the predicted national debt (from OECD predictions via here) :
Yes, despite the cuts, the total debt will keep rising rapidly, because we are still running a huge annual deficit, and under coalition plans we will have a deficit in every year of this parliament. Under Labour's plan for the economy, such as they have a plan, all cuts are opposed, and the debt would be allowed to grow at an ever faster rate, until the money markets call time and we join the ranks of basket case countries like Ireland, Greece and Portugal, being bailed out, and forced to slash spending. How anyone can march through the streets of London demanding government goes down this path is beyond me.
How did Labour get us into this mess?
The economy had been doing well and growing since the Conservatives left the exchange rate mechanism in 1992, through into Labour's boom in the mid-2000s, until it ended spectacularly in the inevitable debt-fuelled crash in 2008. Labour kept to Conservative spending plans for the first couple of years when it came into power in 1997, but then under Gordon Brown, prudence went out the window, and government spending increased massively. Unreformed public services were showered with cash. Much of this extra cash did not result in commensurate improvements in performance - often, for example in schools - our performance on the international stage actually got worse, despite the extra cash.
Labour increased taxes massively, with dozens of new stealth taxes. But between 2000 and 2008, whilst the economy grew, government spending grew even more rapidly - with government spending as a % of the Countrys entire production increasing from 34.75% in 2000 to 39.75% in 2008. This meant that when the bust came, and the economy fell back, government spending rocketed to 45% of the country's income. This level is totally unsustainable - it either requires massive borrowing, or taxation on people working in the private sector to rocket. Neither of these scenarios will work, as we are already at the point where we are borrowing at the limits of what the money markets will lend without charging large risk premiums, and beyond the point, particularly for high earners and companies, where increasing tax rates will start to lower revenues as people rearrange their lives to avoid the high tax burden. Already many working people, in one cycle between their employers paying them, and them spending the money will see the vast majority of their income being confiscated by the government to pay for its reckless spending, when you consider employers and employees national insurance, income tax, council tax, VAT, fuel duty and all the other taxes used by government to part working people from the money they have earned. We can't go on like this.
One of Labour's more ludicrous suggestions is that if government keeps spending and borrowing ever greater amounts, the economy will grow and the deficit will mysteriously disappear in the rush of new tax revenue. That such an obviously absurd argument has such a lot of support amongst Labour supporters in the unions has more to do with their own self interest than any grounding in economic reality on planet earth. If there was any truth in this suggestion, then by 2008, when public spending had rocketed for several years, Government should have been running the largest budget surpluses in history. But as noted above, it wasn't running a surplus at all. The lesson from these times is that growth built on public sector expansion, funded by borrowing is illusory - and can only end in very painful collapse that would make current cutbacks in public spending look trivial.
Another ludicrous suggestion from Labour is that the cuts are all the Coalitions fault, nothing to do with them, and they wouldn't have had to make them. I have to question whether the likes of Paul Holmes and Ed Balls even slightly believe their own propaganda on this, or whether this is just shameless and cynical dishonesty on Labour's part.
The Conservatives could have done more in opposition to stop the current mess. At the time, I didn't think it was wise for the Conservatives view on spending to be 'share the proceeds of growth' - make no mistake, this was a plan to reduce government spending as a % of gdp, but this approach failed to argue strongly enough at the time that government spending was unsustainably high, and failed if there was no growth proceeds to share. We needed more people arguing that unless public spending was kept within reasonable levels, the long term tax burden on private enterprise would bring down the economy.
Now, I would query whether the coallition is always cutting the right areas - for example, I would support cutting our contribution to the EU to zero, rather than asking local governments, who run key local services like libraries and local transport to make a lot of the cuts. But getting the public finances back in order is vital, and that means cutting back on government spending - there is no other way.
Current savings planned by the Coalition will mean the Government is still adding to its mountain of debt each and every year of this parliament, and will take spending only back to the levels seen in 2007. If anything, the cuts don't go far enough to avoid the worst of the terrible legacy the next generation will face in repaying debt for years to come. Labour had a golden economic inheritance in 1997 - a sustainably growing economy, and public finances rapidly improving. They left a catastrophic mess, built on years of overspending - their only solution now being even more of the same failed policy.
"Edward Turnham in recent letters continues to try to blame the last Labour administration for the UK's economic situation"
You don't say... He continues: "Labour wasn't to blame for the deficit" - and then finishes questioning Mr Turnham's credibility! You couldn't make this stuff up.
My understanding is that Paul Holmes is the brains behind the brawn in the Cherry Hinton Labour party, so CEN letter spats between Paul Holmes and Conservative Cherry Hinton candidate Ed Turnham are the initial skirmishes of the local election campaign.
I have watched with increasing incredulity Labour's position on public spending - I even got invited to Labour's 'new politics, fresh ideas' event in Cambridge with shadow chancellor Ed Balls MP. Would have loved to have gone to give him a piece of my mind, but unfortunately I was tied up at work all day...
Labour should apologise for the state they left the country, and stop treating people like fools with their suggestion that we can just carry on spending and borrowing without risk. So for Paul Holmes, and all those struggling to see through Labour's plans, a primer on Labour's economic mess.
First, don't confuse the debt and the deficit.
The debt - that is governments total accumulated outstanding borrowings - is now over £900,000,000,000 and in 2010 cost taxpayers £42,900,000,000 a year in interest costs - over £2,000 for every household in the country. If we followed Labour's plans, then that interest cost would rocket, as there would be even more debt to service, and the money markets that lend to government would demand higher rates, to reflect the increased risk of a Labour economy following the path of Ireland, Greece or Portugal into fiscal oblivion.
A point worth mentioning about this national debt, including in 2007, when Paul Holmes claims everything was fine and dandy with Labour's management of the economy, was the actual debt was far worse than his 'official' figure suggests. With dodgy Enron style accounting, a lot of government debt is now hidden from the official figures in expensive private finance initiative (PFI) deals (the main purpose of which seems to be to hide some of Labour's massive borrowing, with taxpayers picking up higher bills for hospitals, schools and the like for years to come), and in the hidden but ballooning liabilities involved in pension promises made to public sector workers - promises made on the never never, and unlike in private sector pension schemes, promises that have not been significantly changed even though people are now living a lot longer.
But the key point about the debt in 2007 is which direction it was going - this being the much talked about [annual] deficit (or in more sensible times, the deficit was sometimes actually a suplus). The deficit is the difference between what government spends and the amount it collects in tax over a fiscal year - each year this deficit adds to the total debt.
Total debt as a proportion of the economy may have been higher in the past than it was in 2007 - but only after temporary events like a major war, or whilst recovering from a recession and the relative debt level returned to normal over a period of time afterwards. What was incredible about the national debt in 2007 was not necessarily its relative size, or even is large absolute size, but the fact that even after years of uninterrupted economic growth, Government was still running a deficit, so the debt was still growing. What that means is that when the boom turns to bust, a modest deficit immediately turns into a large and unmanageable deficit. If you can't run a surplus after years of economic growth, (which is what people mean when they say there is a large structural deficit) you are in real trouble in a downturn - such was the frankly moronic way in which Gordon Brown destroyed the UK Government finances, who governed as if he really believed his delusional claim to have 'abolished boom and bust'.
Here is the predicted graph of the predicted national debt (from OECD predictions via here) :
Yes, despite the cuts, the total debt will keep rising rapidly, because we are still running a huge annual deficit, and under coalition plans we will have a deficit in every year of this parliament. Under Labour's plan for the economy, such as they have a plan, all cuts are opposed, and the debt would be allowed to grow at an ever faster rate, until the money markets call time and we join the ranks of basket case countries like Ireland, Greece and Portugal, being bailed out, and forced to slash spending. How anyone can march through the streets of London demanding government goes down this path is beyond me.
How did Labour get us into this mess?
The economy had been doing well and growing since the Conservatives left the exchange rate mechanism in 1992, through into Labour's boom in the mid-2000s, until it ended spectacularly in the inevitable debt-fuelled crash in 2008. Labour kept to Conservative spending plans for the first couple of years when it came into power in 1997, but then under Gordon Brown, prudence went out the window, and government spending increased massively. Unreformed public services were showered with cash. Much of this extra cash did not result in commensurate improvements in performance - often, for example in schools - our performance on the international stage actually got worse, despite the extra cash.
Labour increased taxes massively, with dozens of new stealth taxes. But between 2000 and 2008, whilst the economy grew, government spending grew even more rapidly - with government spending as a % of the Countrys entire production increasing from 34.75% in 2000 to 39.75% in 2008. This meant that when the bust came, and the economy fell back, government spending rocketed to 45% of the country's income. This level is totally unsustainable - it either requires massive borrowing, or taxation on people working in the private sector to rocket. Neither of these scenarios will work, as we are already at the point where we are borrowing at the limits of what the money markets will lend without charging large risk premiums, and beyond the point, particularly for high earners and companies, where increasing tax rates will start to lower revenues as people rearrange their lives to avoid the high tax burden. Already many working people, in one cycle between their employers paying them, and them spending the money will see the vast majority of their income being confiscated by the government to pay for its reckless spending, when you consider employers and employees national insurance, income tax, council tax, VAT, fuel duty and all the other taxes used by government to part working people from the money they have earned. We can't go on like this.
One of Labour's more ludicrous suggestions is that if government keeps spending and borrowing ever greater amounts, the economy will grow and the deficit will mysteriously disappear in the rush of new tax revenue. That such an obviously absurd argument has such a lot of support amongst Labour supporters in the unions has more to do with their own self interest than any grounding in economic reality on planet earth. If there was any truth in this suggestion, then by 2008, when public spending had rocketed for several years, Government should have been running the largest budget surpluses in history. But as noted above, it wasn't running a surplus at all. The lesson from these times is that growth built on public sector expansion, funded by borrowing is illusory - and can only end in very painful collapse that would make current cutbacks in public spending look trivial.
Another ludicrous suggestion from Labour is that the cuts are all the Coalitions fault, nothing to do with them, and they wouldn't have had to make them. I have to question whether the likes of Paul Holmes and Ed Balls even slightly believe their own propaganda on this, or whether this is just shameless and cynical dishonesty on Labour's part.
The Conservatives could have done more in opposition to stop the current mess. At the time, I didn't think it was wise for the Conservatives view on spending to be 'share the proceeds of growth' - make no mistake, this was a plan to reduce government spending as a % of gdp, but this approach failed to argue strongly enough at the time that government spending was unsustainably high, and failed if there was no growth proceeds to share. We needed more people arguing that unless public spending was kept within reasonable levels, the long term tax burden on private enterprise would bring down the economy.
Now, I would query whether the coallition is always cutting the right areas - for example, I would support cutting our contribution to the EU to zero, rather than asking local governments, who run key local services like libraries and local transport to make a lot of the cuts. But getting the public finances back in order is vital, and that means cutting back on government spending - there is no other way.
Current savings planned by the Coalition will mean the Government is still adding to its mountain of debt each and every year of this parliament, and will take spending only back to the levels seen in 2007. If anything, the cuts don't go far enough to avoid the worst of the terrible legacy the next generation will face in repaying debt for years to come. Labour had a golden economic inheritance in 1997 - a sustainably growing economy, and public finances rapidly improving. They left a catastrophic mess, built on years of overspending - their only solution now being even more of the same failed policy.
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