Tag Archive | "taxes"

David Cameron needs to up his game

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David Cameron needs to up his game


It is clear that David Cameron need to up his game. In an interview with Jeff Randall, he was unable to explain a £72 billion spending commitment contained in last year’s pre-Budget report. For a man who seeks to become the CEO of UK Plc, this is an appalling situation. £72 billion accounts for more than 10% of the budget and this implies either a lack of understanding by Cameron or an inability or even an unwillingness to get involved in the detail. To put this £72 billion into perspective, it is 20 times the losses reported by RBS, the bank that is 84% owned by the UK taxpayer.

For those that believe that Cameron need not have a grasp on this detail, it is worth noting this £72 billion of taxpayers money was listed simply as “other”. I suspect that most, if not all us would have investigated or queried such a massive sum of money described as “other”…which is the equivalent of miscellaneous!

I have to say that I was embarrassed for Cameron and the people of this country that the ‘heir apparent’, did not seem to have a grasp of the financial for this country. Little wonder that the people of this country are starting to have doubts about whether the Conservative Party has the depth and the skills to take this country forward. I virtually guarantee, that is Cameron had been the CEO of a large company and was unable to answer such a fundamental question, that he would have been quickly ousted.

Granted, Gordon Brown has completely screwed this country with his so called fiscal and monetary policies, but what hope do we have if Cameron cannot demonstrate a clear understanding of this country’s finances. A good leader, CEO of Prime Minister, would have a clear and detail knowledge of the finances of the organisation that he heads.

If Cameron wants the people of this country to entrust him with our futures, then he must demonstrate that he has the capacity, ability, the knowledge and the skills to take us forward. He cannot, as he has done so many times in the past, simply rely on the failures of the existing Government. We all know that New Labour have failed us…what we want to know is that he and his team have the answers. If Cameron cannot grasp the fundamentals of finance, then he does not deserve to lead this country.

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Business rates, a tax on enterprise

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Business rates, a tax on enterprise


Even when times are not as tough as they are now, most business people, when asked which tax they resent most, will list ’employers national insurance’ and business rates (National Non Domestic Rates). I will deal with the former in another post, but business rates is seen as a tax on enterprise, because whether the organisation is making a profit or not, it must pay this “unfair” tax.

Business premises are given a rateable value. The amount of business rates payable is calculated using the rateable value and the multiplier, which is set by the government. Different multipliers are used for England, Wales, Scotland and Northern Ireland. The rateable value is based on the likely annual open market rent for the premises at a particular date. Currently the multiplier for England is set at 46.2%. There is small business rate relief available, but this does not benefit the vast number of businesses because the rateable (market) value has to be below £21,500 in London and £15,000 elsewhere. Even those that do qualify will receive a relatively small amount of relief, if they are lucky, a 25% reduction on the amount payable.

What many people do not realise, although the clue is in the ‘real’ name of the tax, National Non Domestic Rates, is that all this money is collected for central government coffers, by local authorities. The money collected is then pooled together by Central Government before being distributed to local authorities on a pro rata basis to help pay for the local services. In other words it is a Central, Government tax, which is subsequently used to subsidise local services, not based on the amount collected, but some arbitrary percentage of the total determined by Central Government.

The reason so many business people object to this tax is, that it is not a tax based on profit, number of employees or a service provided directly to the business. Instead, it is a tax that must be paid simply for the company operating out of what is termed ‘business premises’. It is not even applied equally. For example, a business that has to invest in large capital equipment will need larger premises, therefore they must pay more tax. Similarly, a business that has larger premises to house a larger workforce will also be penalised at a higher rate. No cognisance is taken of whether the company is profitable, how many local people are employed or its indirect contribution to the village, town or city. The tax payable is determined only on a multiplier of the market rate for the premises, the size of the premises is normally determined by the amount that the entepreneurs’ have to invest in capital equipment or people.

Ask any employer and, after their workforce costs, the highest other overhead is the building and they are then ‘taxed’ on this cost at a rate of nearly 50%. Most will tell you that they receive very little in return, they even have to pay extra to have their rubbish collected! Worst still, even though business rates are supposed to include an element of investment in the emergency services, I can provide countless examples where crime against business is considered a very low priority for the police, even if it involves criminal damage, theft or fraud. Crime against business does not figure on the police radar because it is rarely of public concern. Instead it is treated almost as a victimless crime and therefore, most crime against business is not included in government statistics and as a consequence police targets, unless there is a crossover, for example an employer is threatened with a knife.

Many businesses are trapped when it comes to reducing or trimming the costs associated with their premises. For example, they may be on a fixed term lease, or they cannot downsize because the cost of relocation would exceed any financial gain from a reduced rent and business rate cost. Even if they no longer need such large premises because they have downsized, they are trapped into retaining the existing premises and paying a penal ‘business’  or enterprise tax simply for surviving.

There is simply no logic in penalising businesses based on the size of their premises, having no regard as to the profitability of that company. For example, a reasonable sized business paying a rent of £35,000 per annum would be expected to pay a further £16,170 in business rates, this would be equivalent to corporation tax on profits of nearly £100,000. How can any government consider that a fair tax? Because the tax bears no relation to income or profitability, it can only be described as an enterprise tax and at a time like this, it is completely unacceptable.

If the government is serious about helping business, then the first step must be to look at any enterprise taxes, the priority has to be business rates, followed by the tax on employment, known as employers national insurance. A failure to look at these taxes at a time of recession will ensure that there are few businesses left to pull us out of the recession. The problem business people have, is virtually every government ‘business or enterprise department’ is staffed by civil servants, mostly career civil servants, who have never worked in, much less run a business. Worst still, even though the civil service brag that they want to encourage people from the private sector to join, the job descriptions and applicant profiles are written in such a way as to exclude those with private sector experience…another classic case of smoke and mirrors.

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How to condition taxpayers into Billion pound mania

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How to condition taxpayers into Billion pound mania


Is it just me or are we are all becoming a little blasé about money, or to be more accurate, the number of noughts that follow the £ sign? Let me explain. Ever since Gordon Brown announced a massive £500bn plus bailout of the banking sector, commentators and politicians have been talking about £billions in the same way as they used to talk about £millions. In other words, everyone seems a little punch drunk. In the sales arena, the constant mentioning of large amounts of money was known as conditioning, if you keep talking about £65k BMW’s, then when the salesman mentions ‘just’ £15k for a new Vauxhall, it sounds like a bargain. However, in my little world, a £million is still a lot of money, especially when you consider how long it takes us to hand that amount of money to successive governments.

At a time when everyone is having to tighten their belt, this government has announced that they will increase spending from £620bn to £650bn, the conservatives tell us that they will “only” increase it by £25bn. Forgive me, but this sounds like an awful lot of money! In my personal life and indeed my business life, I have always understood and accepted that there are excesses, in other words, there have always been things that I want, rather than need. Therefore, when times are hard, I am obliged to deal with my excesses, to reduce my outgoings and I suspect, that this will be going on in the majority of homes and business up and down the land. This is a painful but necessary evil when times are hard. Not so for the government. No, instead, they tell us how they are going to spend more money, not how they are going to provide better value. The conservative are no better, because they say that they will just spend less (£5bn), but their proposals still amounts to an increase of £25bn!

By spending our money more wisely, buying what we need, rather than what we would like and curbing our wasteful habits, I suspect that most of us could, conservatively, reduce our outgoings by around 10%, possible considerably more. I didn’t say it would be easy, nor did I say all of us, so please accept that I am referring to most, not all of us. If this is a reasoned argument, why is it that the government cannot reduce their own waste, surely they are not going to argue that they are lean and mean or that all of our money is spent both wisely and without excess? Not a cat in hells chance. Surely, it would be better to reduce government waste and excess to channel the savings into more relevant or deserving causes, rather than just borrowing more money. The government is effectively condoning living on the never, never. Failing to practice what they preach. What angers me most, is that the conservative party, petrified of being accused of being the party of cuts, has failed to talk convincingly about value for money, getting the most of each taxpayer pound collected or borrowed.

With an election likely to be just around the corner, now is the time for the other parties to get tough. I am not talking about an austerity speech, nor a doom and gloom scenario, as has become the conservative party mantle. No, I am referring to a party, any party, that offers realistic hope, leadership and direction. One that refers to government money as taxpayers money, borrowings as future liabilities and above all, the use of taxpayers money in terms of value, not numbers to be bandied about. The people of this country do not need to see doom and gloom whenever they turn on the TV or read a newspaper, the majority of us know that times are tough and that they will be for the foreseeable future. What we need to witness, are politicians that appear to know what they are talking about (a very rare bread) and political parties that truly demonstrate that they know how to run a country and a good start would be how to spend taxpayers money wisely in order that we, the taxpayers, receive maximum bang for our buck.

Politicians and government must stop ‘conditioning’ the British people by constantly bombarding us with numbers most of us simply can’t envisage or picture. Instead, they must do what most normal people managing household budgets do when times get tough. Ensure that we are getting value for money. It is, after all, possible to spend more money on a holiday if someone gives up smoking, or to buy a better car if we shop at Aldi’s instead of Sainsbury’s, buy tea instead of coffee, drink tap water instead of bottled or even to survive the recession if we cut our cloth to suit our circumstances. It is a question of priorities. Government, whoever they are, have a responsibility, in fact a duty, to ensure that they spend or invest taxpayers money wisely. They must not be allowed to pour more money into a bucket which is already leaking taxpayers money.

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Gordon Brown, tax cuts for Labour Party supporters

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Gordon Brown, tax cuts for Labour Party supporters


Gordon Brown has been thrusting himself about the world stage as he tries, unsuccessfully in my opinion, to appear like a sort of financial guru. I honestly believe that many world leaders are laughing at him behind his back. Only someone as naive and self-obsessed as Gordon could run around having virtually single-handedly destroyed the UK economy and think he is King Economy. The man is a fool, but then most objective British citizens already know that. Anyway, let me get to my point.

As we all know, the Labour government spin machine always leaks its own announcements early so that they can guage ‘public opinion’, normally expressed by what the newspapers say (rather than the public), before making any final tweaks to their policy announcements. However, if the leaks are to be believed it looks, once again, that Gordon Brown is going to continue with his social engineering project, otherwise known as Robin Hood from Kirkcaldy and Cowdenbeath.

It would appear that Gordon Brown does not believe that everyone is suffering as a consequence of his handling of the economy for the past 11 years and the subsequent recession. Oh, no, Gordon Brown from his taxpayer funded home in Downing Street, believes that it is only those on “low incomes” that are in need of tax breaks. What world is he living in? He has spent 11 years long years targeting so called middle income earners with his tax increases, using this section of the community to fund his extravagant, cost-loaded experiment to re-distribute wealth. Now having squeezed the middle income earners until they are bordering on relative poverty, he has now abandoned them, by saying that any tax breaks will be targeted at “low income earners”.

During New Labour’s reign, top earners have remained relatively neutral in terms of total tax take, low income earners have benefited dramatically through allowances, tax breaks and various forms of income support and middle income earners have been seriously and relentlessly shafted. Now, he has got away with it so far, because the golden goose did not really feel all the affects of his shafting, as a consequence of a booming economy and the relative wealth created by higher house prices. That of course is no longer the case. As the economy starts to contract, the golden goose is starting to feel the pinch and because they were the primary target for revenue raising, they are feeling it more than any other section of the community. In spite of this, Gordon brown in his cosseted environment, turns his back on the very people that have funded his social engineering experiements.

Now I know that Gordon Brown needs to guarantee his core vote, many of whom will come from the lower earners and rightly so, because lets face it, they have been the only winners over the past 11 years. But he needs to understand that it was the votes of the middle income earners that actually brought New Labour to power and that irony cannot be lost on this section of the community. Nonetheless, it is all a bit academic, because there is no way that Labour will win the next election, even if Gordon Brown went around at Christmas and gave every Labour voter a £1000, oh sorry, that is the plan isn’t it, hope I haven’t spoiled anyone’s surprise!

Now enough of my sarcasm. Gordon Brown does need to provide a fiscal stimulus and I believe that everyone is agreed on that, even David Cameron, it won’t prevent the recession, but it may create enough of an impetus to save a few jobs and keep some businesses going if correctly targeted. However, it would appear that Gordon Brown intends to offer tax breaks in the form of increased allowances for low earners only. No widespread stimulus, just a further, last ditch attempt at social engineering, except this time, he can’t take anymore money from middle income earners, instead, he has to borrow it. Worst still, one of the reasons that Gordon Brown prefers to offer increased ‘benefits’ is he can always exaggerate the numbers, but this is not the time for one of his infamous smoke and mirror exercises. The economy will only get a boost if the money is real and tangible.

Gordon Brown has repeated many times that this is a unique set of events that requires a unique set of solutions and I couldn’t agree more. But he is just promising more of the same, take from one section of the community and pass to another, except this time, he wants to store the cost, so that middle income earners can pay it later. The man is a fanatic, he quite clearly has an ingrained almost psychopathic hatred of middle income earners.

What is needed is a simple and properly funded fiscal stimulus, which benefits everyone, not one section of the community. Everyone is suffering from the downturn in terms of the increases in fuel and utility bills, council tax, caps on wages, reduced pension benefits, insurance costs, travel, shopping bills, job losses, the list is endless. They all need to be able to see the benefit of a fiscal stimulus and the best way to do this is a reduction in the basic rate of tax. Everyone knows that Gordon Brown always exaggerates the affects of any government ‘giveaways’ whilst moving swiftly over the small print that invariably takes back any benfits, with interest, so the reality is, most people have learned not to trust a word he says. Therefore, he more than anyone, needs to ensure that any stimulus is kept simple and results in people being able to keep more of their own money. This is no time for treasury tricks.

He also need to offer targeted assistance to small business, they employ 12.5m people and many, as a consequence, will not have huge cash reserves, nor can they go to the bank or shareholders. He ignores this area of business at his peril, small and medium businesses generate nearly 50% of UK Plc’s GDP, not an area to be ignored.  David Cameron’s suggestions are weak and will offer very little assistance to small business, I have already outlined what I think needs to be done for small business in a previous post.

The bottom line is many of the problems we are facing today are because Gordon Brown allowed, (inspite of warnings about the risks), this country to continue a relentless boom on the back of easy credit and rising house prices. He could and should have done something about it, but he chose not to. Our economy was booming and the relative tax take was increasing anyway, still he opted to introduce many, many stealth taxes. Often, but not necessarily, disguised as green taxes, but invariably targeted at middle income earners. This was not enough for the man Brown, on top of all that, he increased public borrowing during this period, spending like a man possessed, not saving anything for a rainy day. He was reckless in his handling of the economy and he allowed the public to become reckless, by not introducing measures to cool,things down, because it would have been unpopular and inevitably, would have required him to reign in his social engineering project.

As a consequence of this mans actions, not only has his reckless behaviour virtually bankrupted this country, it also means that Gordon Brown owes a massive personal debt to the people of this country. He can start to pay that debt by stop trying to be clever and spinning the numbers. He can help redeem himself in part by offering an apology to the people he has shafted in is quest to be the hero of the low income earners, by introducing a universal 5% reduction in direct income tax. This must be funded through capital project cuts and a good start would be all of these unpopular information technology projects that are invariably doomed to failure, always have substantial cost overruns and in most cases are not wanted by anyone and in particular the public. He must also tighten his belt on other forms of government spending, just like everyone else has to do in difficult times. Government has become a very lucrative place to do business, because many of those charged with negotiating terms are no match for the very professional, highly paid, highly skilled sales people on the other side of the desk. This has to stop!

New Labour’s social engineering project was a failure in terms of value, although I do accept that low income earners are substantially better off than they were when New Labour came to power. However, were it not for a booming economy, it could have been safely argued that Gordon Brown actually reduced the gap between low and middle income earners so much that they the differences are no longer discernable. Because as he boosted income for low earners, he took this money of middle income earners, pushing one section up and the other down. This will become self-evident as the New Labour Boom turns to Bust. Thanks Gordon!

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Labour race to introduce tax cuts

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Labour race to introduce tax cuts


Well I have argued that there needs to be a combination of monetary and fiscal cuts in order that the economy can receive a well needed stimulus, although I am not naive enough to believe that it will stave off a recession. This country is already in a recession, even if the official measures used to determine a “real” recession have not yet been met, all we can do is try to lessen the impact on people, jobs and business.

Gordon Brown has indicated over the weekend that he believes fiscal policy should include tax cuts and rumours abound as to the extent of such cuts, with estimates of £480 per person through to an annual estimate of £15bn in tax cuts. Whatever the case, there are two things which I am wary of. The first, that Gordon Brown has a habit of double counting and this is no time for a sales pitch. The economy needs a real injection of cash and the people of this country need to know that they have a little more money in their pockets, no sales pitch is going to change that, so Gordon Brown, beware of New Labour spin. The second is the form that tax cuts will take.

Some “experts”  have suggested a temporary cut in VAT. What are they smoking? Lets take a look at that proposal shall we? There is no VAT on food, council rates, children’s clothes etc., what many will call essential items. Where VAT is charged, how can we be certain that retailers, keen to impress their shareholders and hold onto their bonuses, will not take the opportunity to increase their margins? Thereby minimising the affect of any price reduction which ought to be brought about by a fall in VAT to the proposed 12.5%. Also, there is the cost to business, especially small business, they are the organisations and people that will have to deal with the major changes to their business that would be brought about as a consequence of a short-term change in VAT. Are these people really advising the government? I hope Gordon Brown is not listening, fortunately, not one of his strong points.

What we need is a simple, clear cut, obvious reduction is direct taxation. It must be one that is both tangible and visible, no messing around withallowances, tax credits and bandings. Instead, there should be a significant reduction in direct taxation and I have suggested this should be a reduction in the bottom rate of tax from 20% to 15 %, with all other banding’s remaining static, so the full effect benefits everyone, in a way that cannot be fiddled. Fiddling, with one or 2% will make little or no difference to the man on the street. There is no point in targeting cuts to the poorest sections of the community, because,put simply, everyone is affected, especially so called “middle England”, that has funded virtually every one of New Labour’s ‘feel good’ initiatives over the past 11 years, through proportionately higher taxes.

I doubt that it will be possible to fully-fund such tax cuts, which I think, at least for the time being, should be limited for a period of 3 years, to provide the personal reassurance that most people seek in their lives. However, in these uncertain times, I go against my instincts in terms of government borrowing if required to as a result of a ‘funding gap.  I would insist, however, that some funding is gained through cuts in non-essential government and believe me there is a great deal of that. For example, the Big Brother Britain database estimated at a cost of £12bn, should be cancelled altogether, the NHS database, estimated to cost in the region of £32bn, should be shelved in the short-term and re-considered in the medium term, based on a genuine cost versus return basis. Other database systems, that this government has so badly commissioned, budgeted for and managed should also be shelved until such time as the economy recovers, this would include everything related to ID cards. The cost of being part of the European Union is rising year on year, our ministers need to ensure that the European Parliament also looks at their costs in these difficult times, so that member countries can see a reduction in their ‘dues’. A good start would be to stop the European Parliament introducing draconian, liberty busting, politically correct rules and legislation, which costs money as well as stripping everyone of their national identities.

At this difficult economic time, we must also consider revising the $5bn overseas aid budget, this amounts to 1.5% of all tax receipts and cannot, therefore be ignored. Similarly, the public sector now employs some 1 in 5 of all those employed in this country, it has bloated and is arguably out of control. Equally, the cost of public sector, final salary pension schemes is paid for out of tax revenues, not a pension fund, therefore, the costs are enormous. This needs to be curtailed, the economy cannot afford such generous pension schemes, particularly when the private sector, who were hammered 11 years ago by Gordon Brown, have ‘pensions’ on average, worth just 1/15th of the public sector schemes.

Mere mortals like me, do not get provided witha detailed set of fiancial accounts for UK Plc, therefore I am unable to go through each and every expenditure line, but one thing is certain, you can guarantee that there is waste and excess in a public sector the size of ours and it needs to be dealt with. The way any businesses would do at a time of crisis. The adult population are better positioned than the government to determine where any additional money is spent, which is why any tax cuts must be via direct taxation, not indirect taxes, lets face it, it is our money in the first place. But whatever happens, it will never cost as much as the headline figure the government use to sell the cuts. Because, if people buy, companies prosper, business tax revenues are preserved or rise, VAT is paid, more people are employed, therefore less benefits are paid out, even if people save, many of them will be taxed on the interest. The government never loses.

For the record, I do not believe that bringing forward public sector infrastructure projects is the right way to go. The impact would be very limited, and the benefits disproportionate to the costs. Most of these projects would be PFI initiatives and, mark my word, history will look back at these PFI contracts and wonder why it was, that a government was awash with tax receipts, would enter into contracts which are akin to a consumer buying their houses at credit card rates, rather than on a traditional mortgage.

David “the cupboard is bare” Cameron, with his austerity speech, which I am sure he thought would make him look clever and responsible is in a tight corner. Traditionally the Conservative party has been the party of tax cuts and enterprise, he has fallen into a trap and it was one of his own making. David Cameron thought we needed to be told how bad things were, we didn’t, because we can feel it! A good leader must never, never back himself into a corner, now he must either eat a bit of humble pie, or, more likely for a British politician, he will come out with a fudge. Either way, he made a mistake and he will pay dearly for it. He will not be forgiven for allowing Gordon Brown, one of the most despised men in this country, get away with using former tory policies, at a time when people want them most.

Let me provide David Cameron with one piece of advice, something that he will not appreciate from his privileged upbringing. There is no point in having a balanced budget if you die of starvation in the process. Government takes our money at will, then they spend it on their favourite pet project or group, without consultation, in the process, they keep as much as 35% of our money on ‘administration costs’. If government were an investment fund, it would need a bailout every year, in fact that is what they get, it is just government take our money when they get a bit short, forever dipping into our pockets when we are not looking, a kind of distraction theft. I have always voted conservative in the past, but this lightweight, ill-considered leadership provided by David Cameron frustrates the hell out of me, he just doesn’t seem to have a clue.

Now come on guys, whatever your party colours, pull your finger out. Do what is necessary to help the people of this country, interest rate cuts were the first part, the second is a reduction in direct taxation and the third to reduce wasteful public expenditure. To have a short term impact, the second was contingent of the first, but the second should not be contingent on the third, because the third must always be part of responsible government. Stop whining about losing your seats or creaming yourselves over the thought of winning the next election by default, not one of you has earned your pay yet, so you are all, still very much on trial. If you don’t grow up, we could see quite a few members of the Monster Raging Loony Party, as people register their protest. Still, from what I can see from the current crop of MP’s, it couldn’t be much worse.

Rant over, but have left in typo’s, poor grammar and other errors so you can see just how much I have smashed into this keyboard, off to PC World now to see if they have any cheap keyboards.

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Big Brother Database or Tax Cuts?

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Big Brother Database or Tax Cuts?


Yesterday, I wrote an article suggesting how this government could reduce taxes to help stimulate growth in the economy. This was partly a Keynesian approach, given I argued that it was possible that these tax cuts could be self-funding, if my proposals worked. The reason for this was, if we do nothing, there is likely to be a significant surge of people claiming benefits, rather than generating income for government coffers. My proposal was, if the government was going to borrow to invest, they would be better off doing so, with a natural stimulus, rather than bringing forward capital building projects which would only benefit a small section of the economy.

My proposal, amongst other things, was that government should reduce the basic rate of personal tax by 5%. Over a period of 3 years, this would cost around £45bn, less than 10% of the cost of the banking bailout. However, by allowing us to retain more of our own money, we could decide how and where we would spend the extra money we were ‘permitted’ to retain. If we were to spend it in much the same was as we did before the crash, my argument was and is, that more small and medium sized business would survive and therefore more people would remain in employment. I noted that some 13.5m people were employed by small businesses and these same companies accounted for, just shy of 50% of UK Plc’s output. However, I also noted, that the Keynesian approach was that government should adopt a balanced budget, that is to say, they should cut back government spending in certain areas, to allow them to invest in other areas. Having read my post this morning, addressing the usual, inexcusable typos, I decided that I should expand on my own theory.

For example, my pet hate is the government’s proposed Big Brother Database, which I think is a massive attack on the civil liberties of every person in this country and an unforgivable intrusion into our right to privacy. That said, this government, if it goes ahead with this initiative, is expected to spend some £12bn on this massive Big Brother Database. Now quite apart from the fact that we know this government has never yet managed to bring an IT project in on budget, the figure that needs to be allocated is huge.

Therefore, the question I wanted to ask was:
Which would you prefer a Big Brother Database that infringes our civil liberties and intrudes on our privacy at a cost of £12bn or an immediate 4% cut in the basic rate of income tax for at least 1 year? From 20% to 16%? – I know what my answer will be.

Then I went on to look at other large government capital expenditure projects, this time I focused in on the much criticised NHS Database Project. It is worth noting that the original cost was estimated to be £2.3bn, by 2006 that had rocketed to £12bn, with some independent estimates suggesting it could cost as much as £32 billion. Most medical professionals question the viability of this project, the public have barely been consulted on such a massive project and even though some £2bn has already been spent, there is little to show for it. So, lets be generous, and take a middle figure between the governments estimate of £12bn and the independent estimates of £32. This leaves us with a likely cost of £22bn.

Therefore, my question is:
Which would you prefer, to shelve or cancel the NHS Database or receive an immediate cut in the basic rate of income tax of 5% for at least 18 months? The reason I have said ‘at least’ is because if this additional money prevents people losing their jobs and claiming benefits, then it would be possible to extend the period of the tax cut, perhaps indefinitely.

So what of the ID Database Project. Yes, I know, this government is completely obsessed with databases, it is a pity, they do not also consider the massive security risks associated with having all of this information on computers. However, I digress, this particular project, is simply aimed at having all of our personal ID information in one place. The cost, an eye-watering £5.4bn.

So, once again, my question is, which would you prefer, an ID database where only the government and its agents see the benefit, or an immediate cut in the basic rate of income tax of 2%, for a least one year, from 20% to 18%?

My basic premis is that this government has an obsession for massive information technology projects, most of which have been so poorly considered, specified and planned that they are either doomed to failure or massive cost overruns. This governments track record of waste is well documented and appalling. Most of these pet projects are not wanted by the public and it has to be said, the vast majority will allow government to know everything their is to know about every single legal citizen in this country. Because this government is obsessed with using IT to spy and control its subjects. At this time, the biggest threat to our security (apart from the government itself) and our well being, is the state of our economy, not terrorism. Yet no-one from government has suggested shelving, postponing or cancelling any of these Big Brother databases. Even though, combined, these 3 projects alone, will cost a staggering £40bn. If the government were to add an extra £5bn, we could all benefit from a reduction in the basic rate of income tax of 5%. From 20% to 15%, for a period of 3 years, if we are lucky, this would be able to see us through this period of recession. In addition, as I have argued earlier, if this money is invested into the economy by us, then jobs could be saved, government would benefit from the revenues brought about by indirect taxes, business taxes and fewer unemployed claiming benefits.

So, my final question, is which would you prefer? Government to spend £40bn on 3 highly questionable information technology projects at a time of this massive economic downturn, or more money in your pocket. £40bn on IT projects, or a 5% cut in the basic rate of tax for 5 years. QED!

Footnote:
I have also argued strongly for a significant, simultaneous cut in the Bank of England bases rates from 4.5%, to 2%, with all taxpayer funded banks being ‘required’ to pass on this cut to their customers. This will reduce the number of repossessions and/or increase the amount of money available to us, to reinvest into the economy. I am sure there will be economists out there that can or will pick holes in my arguments, well go ahead, someone needs to come up with some ideas, because it is pretty clear to me, this government hasn’t got a clue, the Conservative Party has backed themselves into a corner with their negative, one size fits all ‘austerity’ assessment of our economic future and none of the other parties have any influence. Sad, but true!

Posted in Big Brother, Civil Liberties, Conservatives, General, Labour, Lib Dems | Comments (7)

Gordon Brown, its time to introduce tax cuts

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Gordon Brown, its time to introduce tax cuts


At prime ministers questions time, Gordon Brown, once again, decided to take all the credit for “creating 3 million new jobs” and none of the responsibility for the ‘bust’ brought about by the credit funded boom that was his creation. Instead, he avoided all of the questions he was asked and once again, came out with the same old mantra, that the problem was the fault of the Americans and the bankers. Nothing new there then.

He did imply, however, that he believed that the government should invest in times of recession, a sort of embracing of the Keynesian approach. However, John Maynard Keynes did not suggest that government should simply spend, but that there should be a balance. He also argued, that it was possible that if government used borrowed money wisely, it could be self-financing. For example, most people want to work, which means that given the opportunity, they will not be a burden on the state, but an asset. In addition, companies want to sell their goods, at a fair price, employ people, succeed and therefore, be an asset to the state.

To achieve this, people need to have money to spend, yet the state takes nearly 50% of what we all earn. That is way, way too much. A reduction in direct taxation, would be much less expensive than building new schools and hospitals earlier than was originally intended. Moreover, a construction boom will be very limited in terms of assisting the wider economy. What we need is more money in peoples pockets, which they can invest in buying goods and services offered by retailers, service providers and manufacturers. In other words, a natural stimulus, not a false one.

If people feel poorer, then they will push their employers to pay them more, this adds a further burden to struggling businesses and places inflationary pressures on the wider economy. In addition, public sector workers, who account for some 20% of all employees in the UK are starting to get increasingly vocal about higher wage increases and they are backing this up with threats of industrial action. This is no good to anyone. Furthermore, if they succeed in getting higher wages, this will be a cost borne directly by the taxpayer and will inevitably result in a cut in services as the public sector attempts to balance the books.

We know that a boom based on easy credit is not the answer, nor does the equity in a property really amount to tangible wealth. The Keynesian approach advocated, amongst other things that borrowing to provide tax cuts can provide an aggregate increase in demand and, that properly targeted, it could be self-financing, because demand will create or save jobs and people that are employed, are not a burden on the state. In addition, companies that are selling goods, will be pay tax and sell goods that, for the most part, attract VAT.

A cut in direct taxation would have an immediate and tangible affect on the publics ability (not necessarily willingness) to spend. If this would was coupled with a substantial, perhaps 2 or 2.5% cut in bank base rates, then the benefits would multiply as would the potential speed of recovery. The government has indicated that they want to spend £12bn to create a database to spy on the public, apart from the fact that this is both unnecessary and a massive attack on our civil liberties, it is also something that is a nice to have, rather than a need to have. That notwithstanding, even if they proceeded with this database, the chances are, the contract would be awarded to an American company! Yet this £12bn, could ‘fund’ a 5% cut is direct taxation for nearly 3 years, if you were to ask the public what they would sooner have, there are no prizes for guessing their likely preference.

In addition, the government is intending to proceed with the £13bn NHS computer system. There is no proof that the system will work, nor has their been a sensible cost/benefit analysis. This project should be shelved and the money used to invest into small and medium sized businesses. I wrote an article yesterday, outlining some of my own ideas to assist small businesses. These companies employ 50% of our workers, some 13.5m people and provide nearly half of our output. An investment in this area, could secure jobs, companies and tax revenues.

It is true, governments cannot prevent a recession, but they can, through careful management of their (our) finances, targeted initiatives and the shelving of non-essential investment programmes, reduce the length and severity. Had the conservative party not nailed their colours to the mast, with an austerity assessment of the UK economy, claiming that “the cupboard was bare”, then they could have proposed this type of solution. Instead, they must either say that they got it wrong, or the Labour government, if they are bright enough to steal the initiative, will be able to come out of this smelling of roses.

For what it is worth, I am not convinced that this government, or the other political parties will want to endorse my suggestions, because they seem more interested in telling us what won’t work, rather than what might. It is this dithering and indecision that will damage this economy. Whatever action is taken it needs to be bold, decisive and meaningful. Therefore, in summary, my suggestions are as follows:

  1. Shelve the £13bn investment in the NHS computer system
  2. Cancel the proposed £12bn Big Brother Britain database
  3. Reduce direct taxation by 5% for a minimum period of 3 years
  4. Implement a package of incentives and tax reductions for small business
  5. Instruct the independent Bank of England to slash rates from 4.5% to 2%
  6. Ensure that all taxpayer funded banks pass on the full cut immediately, which should encourage the others to follow or lose

My suggestion will cost a tiny fraction of what the government has already invested into the banking system and provide a tangible stimulus to the economic activity of this country. Above all, it may just ensure that we can watch the news and receive some good news. If the government introduced, or the other parties proposed such an initiative, I do not believe anyone, other than a few discredited bankers and economists (who already got it wrong), would criticise the move. The bottom line is it is our money and we should be allowed to keep more of it and decide where we will invest it.

Posted in Conservatives, General, Labour, Lib Dems | Comments (3)

Government bailout, take a breather and reflect

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Government bailout, take a breather and reflect


Now that Gordon Brown and Alistair Darling have committed some £500bn to the banks in loans, guarantees and shares, it is time to reflect, to allow the city, time to digest the level of this intervention before going any further. There is now a real risk that the government could become its own worst enemy, by saying they “will do whatever is necessary to stablise the UK economy”, they are sending the wrong message to the city. Yes, I mean the wrong message, city investors are not uninterested parties here. Whilst the taxpayer is shoring up balance sheets, buying up shares, rescuing companies and intervening in the money markets, the ‘city types’ have their own investment portfolios protected. The government is continuing to speculate at our expense, with limited or no risk to the investors.

As I have said before, I am no economist, I am no expert, but I have been blessed with some commonsense. This tells me that if you are constantly running at full pelt, you don’t have time to see what you have passed, what you have left behind and whether you are still in the race. The government must stop NOW, before they bankrupt this country. They have oiled the wheels and reduced much of the investor risk through these interventions and the substantial injections of cash underwritten by the UK taxpayer. No more open-ended promises.

Government must also look at which stocks are falling. For example, most people accept that we are about to face a world recession, therefore, you can expect organisations that are involved in commodities to see their share prices fall. And, of course, these are some of the largest companies, in terms of value, on the stock exchange. Add this to banking and financial stocks and of course we will see a massive fall in the value of the FTSE. On top of the so called banking crisis, a recession means that city experts will be looking at companies that will do well out of a downturn and those that won’t, this will then be reflected in their share price. So, given there is a recession looming, it is fair to assume that stock prices would have fallen anyway.

Virtually from day one, this government has used taxpayers money as if they had been given their very first credit card. They have gone on a spending spree, thinking they are rich and there is an endless money supply. Then, once they realised they had overspent or reached their credit limit, they simply came after the taxpayer for more money. As a consequence, this Labour government has set a poor example to everyone else, now we must all pay for our excesses…but that includes government who must haul back on their investment commitments, they must learn to live within their means, just like everyone else must do.

My concern, is that the current banking crisis has them on that road again, they think they can spend more and more of our future tax revenues in the name of saving us all from some type of doomsday scenario. Now I accept, some form of intervention was necessary, but this must have limits and I am worried that this government has exceeded those limits with an intervention that is worth at least as much as that provided by the American’s, who’s economy is 3 times the size of our own. It is also worth noting, that £500bn is more than double all tax receipts, based on the 2007 figure. Given we are likely to have much reduced tax revenues because of company losses (they can carry these forward to offset against future profits), falling employment and lower sales, this £500bn might end up being the equivalent of 3 years worth of tax receipts.

Now the government have told us there may be some upside for the taxpayer. I don’t like the word ‘may’, nor do I really trust this government to negotiate a good deal for the taxpayer. It has been suggested that this government has lost close to £110bn in poorly negotiated contracts, mistakes and failed projects. This record does not bode well for the taxpayer, when the same people are negotiating with experts. Lets hope, this time they have learned some lessons, though I will not hold my breath. But in the meantime, I would like to advice Alistair Darling and Gordon Brown to STOP, pause for thought, look at whether what you have done has had any positive affect and stop offering the city a blank cheque, no-one could blame them for taking advantage.

Posted in General | Comments (5)

MPs, are they fit for purpose?

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MPs, are they fit for purpose?


If you have ever wondered why so many government departments are in a mess, then you probably don’t have to look much further than the man or woman in charge. Ask yourself whether they are fit for purpose. If you visit MP’s websites, you will note that many are bereft of any detail regarding their past experience, in other words, before they entered parliament. Some may have had experience in senior management and others run a business, but by and large, my straw pole indicates that few have experience either.

My question is, should members of parliament, with little or no experience, be placed in charge of huge departments and labour forces? One minute they are trundling the street begging you for votes and the next they are running some of the biggest organisations in the country (in terms of budget, headcount etc). One or two may even be running departments which determine our civil liberties, even though the MP’s have little business, or for that matter, life experience. Little wonder that our civil liberties have been steadily eroded.

Could anyone imagine Barclays Bank appointing a postman and telling him to start running the business with little or no relevant experience? You know, “don’t worry mate, you can learn on the job”. Ridiculous isn’t it? But what is the difference? Would Unilever appoint a new CEO, who has a total of 7 years ‘commercial’ experience as the deputy head of the Inflation Report Division at the Bank of England and an economic writer on The Guardian Newspaper? Yet this person now runs a department with 20,000 staff and a budget of £14bn.

The problem must start when the local constituencies select their prospective member of parliament. What criteria do they use to determine who to select, is it because their face fits, they are mates with the constituency chairman, a determined party ‘activist’ or some other banal reason? Once elected, they could end up in a junior government post, or even in the cabinet. So how does the prime minister decide who is going to get which post? Experience suggests, that more often than not, the ‘plum’ posts are offered as a reward, rather than based on experience.

Yes I accept, that ministers heading government departments will receive advice and guidance from experienced civil servants, but surely that is not the point? Members of Parliament, if they are being paid to run a department, need to add value. Lets face it, when they talk at the public, they do so as if they are experts in their field and how many of us actually question their qualifications and ability to judge the issues they are covering?

No system is perfect, but surely we can do better than this? Surely the public have a right to know what level and type of experience our members of parliament have? Why do so many MP’s rarely publish their pre-politics careers, are they worried that the public may be concerned at their relative lack of experience? None of us would be able to secure a job without a CV. Why shouldn’t MP’s, that work for the public, be compelled to publish a detailed account of their past experience, which is then open to the public. Then, perhaps, when they make a statement, we can make a judgement as to whether they are properly qualified to make such a statement or if they are just acting as a mouthpiece for some faceless civil servants.

Yes, I am questioning the very basis on which our MP’s are selected and our government is run, but just because that is the way it has always been, does not mean that it should continue to be so. Progress requires and top to bottom review of systems, processes and protocols, if we determine that the current system is better than the alternatives, then so be it, if not, then we should seek to make changes. 

Perhaps if our members of parliament had not screwed us for more and more tax, then squandered so much of this income, or they had not attempted to turn this country into a police state by eroding our civil liberties, we would be less inclined to ask such impertinent questions, such as are they qualified for the job? But they do, they have and they are.

John Demitriou, on his excellent blog Boatang & Demitriou offers a noteworthy and thought provoking series of suggestions to the problems that we are facing, specifically Politic’s isn’t working and I couldn’t agree more.

Posted in Conservatives, General, Labour, Lib Dems | Comments (2)

Windfall tax on energy companies is not the answer

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Windfall tax on energy companies is not the answer


Once again, labour party MP’s are looking to raid the coffers of big business. This time, it is to counteract the economic and social impact of the increase in fuel prices, through the imposition of a so-called “windfall tax”. This is so typical of new labour, if they can’t employ a stealth tax or borrow it, they simply steal it. Yes, how else can you describe a direct raid on the profits of the energy companies?

Now don’t get me wrong, I am not advocating that we take no action, but simply applying a one-off windfall tax is not the answer. This would act as a massive dis-incentive for other international companies considering a move to the UK, assuming there are any left. That notwithstanding, this country faces another potential energy crisis in the next 10 years, or more accurately, an energy shortage and that is because many of our existing power stations are due to be replaced. With a build process of 10 years or so and the delay in the decision to utilise nuclear stations, if the existing companies refuse to invest, we could be in a lot of trouble.

It is possible to make the energy companies pay their fair share, by reducing the substantial windfall they received, as a consequence of the free carbon credits. Energy companies would find it more difficult to argue against this particular aspect of their business that a blatant raid on their profits. It may amount to the same thing, but arguably it is all in the presentation.

Using any money gained simply to reduce people’s bills is also not the answer; it is a short-term fix and would have to be repeated year on year, most likely rising year on year to take account of further rises. This is a massive burden on the taxpayer that would have to fund future shortfalls; after all, the government couldn’t simply turn to the energy company’s year on year.

What is needed is a joined up approach to the problem. Existing government and energy company initiatives need to be extended to put in place a programme designed to reduce the energy usage of those in fuel poverty, rather than simply subsidising energy costs. The introduction of low energy bulbs would make a significant difference to energy costs and if purchased in bulk, would cost the government pennies. This could be completed as a project, much the same as smoke alarms were some years ago. Similarly, looking at more efficient energy use, for example, a modern boiler will often use 35% or more, less fuel than an old one. I know the government already has a programme in place, but why not expand it, put more money into this initiative, rather than subsidise bills every year.

We all know of the various, well publicised methods of reducing home energy usage, most experts have suggested that there could be a saving of as much as 35% on annual bills, with a the adoption of commonsense approach to usage and a relatively small, targeted investment. Given the exponential savings in so called greenhouse gases, perhaps the government could consider transferring some of the revenues’ gained from ‘green taxes’ directly into this project.

I don’t have all the answers and I am neither an expert on energy nor the carbon trading scheme, but I know this, we cannot afford to introduce an ongoing form of fuel subsidy for those in fuel poverty and not expect it to hurt the majority. Surely it is better to invest a larger amount of money now, in fuel saving measures, rather than fuel subsidies? The government does not need to employ expensive consultants to come up with a commonsense approach to this problem. I don’t have all the answers and my suggestions may be over simplistic, but then I won’t cost the government hundreds of millions of pounds of taxpayer’s money in consulting fees either.

Posted in General | Comments (2)

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