Tackle Tax and let the UK Prosper

Tackle Tax and let the UK Prosper

In the 2019 General Election, Jeremy Corbyn’s taxation policy was radical. He wanted to raise an extra £82.9bn by increasing Income Tax for those earning above £80,000 to 45% and 50% for those with incomes above £125,000. Corporation Tax was set to rise from 19% to 26%, and the introduction of a second homes tax was planned at some 200% of the Council Tax bill. The list goes on.

Keir Starmer is likely to be more reserved, especially as his popularity is on the up. In his leadership campaign the new Labour Leader was deliberately ambiguous about his ideological position and took care to distance himself from the radical Left, whilst simultaneously doing the same from the Blair years and the right of the Party.

Starmer has shown that he is ostensibly a left of centre Liberal, and we can speculate that his fiscal policy will certainly be less radical than that of his predecessor.

The general view on taxation amongst centrist Liberals is that a percentile or two extra on tax rates will provide more funds for our public service, whilst having little effect on commerce and the economy. But does this idea really hold true?

The Government and a vast majority within the Tory right would disagree.

Indeed, the alternative view would be that If you want to provide longevity to the prosperity of an economy a tax increase is not the solution, no matter how miniscule the percentage rise might be.

Taxation, no matter how small, will have a contractionary effect on the economy. The level of that contraction will not always be directly proportional to the percentage of the change. But the fact remains that the economy will still be constricted either way.

Tax Increases may provide short term revenue to the Government. But in the long term it will only decrease the amount of tax procured to the State.

Across the Pond in the United States, The National Bureau of Economic Research state how “an exogenous tax increase of 1pc of GDP lowers real GDP roughly 2 to 3 percent.” This is a fitting illustration of the effect of Taxation on an economy. More tax leads to a lower GDP, leading to less tax receipts, less Government revenue and therefore it leads to less money being available to spend on vital services for our communities.

An increase in tax today will lead to a loss of future tax receipts and Government revenue. We have been here before and the figures speak for themselves:

In 2010, Alastair Darling raised the top rate of tax to 50% of income after it was predicted that such a move would raise £3bn. In the short run it only raised £1bn towards address the debt accumulated due to the 2008 Bank Bailouts. In George Osbourne’s 2012 budget the top rate of Tax was lowered to 45% and a later HMRC report indicated the cut raised an additional £8bn.

The figures speak for themselves. Tax increases will provide short-term revenue, but that revenue will ultimately fall as the economy continues to be constricted.

With indications that the Chancellor is considering Tax rises as a step to offset the Lockdown debt, the Government may not be giving adequate consideration to the real financial issues the Country faces. An increase in tax today will not help our prosperity in the long run.

Government must avoid seeking yet another quick fix. They must take the difficult decisions that will be beneficial in the long run.

It should be a no-brainer. Let’s reduce Tax and let Great Britain prosper.

Which way will Boris turn the UK Economy in the post-Coronavirus World?

There is no doubt that the Coronavirus pandemic has put huge strain on public finances. Policies ranging from the Government’s furlough scheme to the construction of the Nightingale Hospitals have incurred huge financial costs to the Government.

Public debt has sky-rocketed, and the Government Debt Management Office  are working flat out to provide Government with the funds it requires.

The economic impact is likely to push the deficit as high as £260bn (BBC) but the question remains; which way will Boris turn? Will he pursue a policy of austerity; will he try to manage Government debt or will he have to resort to higher taxation to balance the books?

Throughout the General Election Mr. Johnson proclaimed his disdain for the term ‘Austerity’. He was attempting to distance himself from the policy pursued by the Tories in 2010. Regardless of its practicality, its popularity was of paramount concern for the Prime Minister. It is particularly unpopular in the cannonball constituencies that brought down the Red Wall in December, the areas where the constriction of public services was most felt.

For Johnson to pursue such a policy would be politically very damaging. There is also no indication that the Government wishes to pursue such a route.

Transport Secretary, Grant Shapps, has already pledged £2bn to be spent on British Transport to create ‘smoother and safer journeys’. This type of spending would simply be scrapped if austerity was being pursued by the Government.

Another option Mr Johnson holds is that of managing the national debt and ‘riding out the storm’.

If the Government wishes to avoid the policy of the oh-so dreaded Austerity and pursue its objectives, it will have to slowly deal and work with the accumulated debt. In 2019 the Tory manifesto pledged huge spending; 20,000 police officers, net zero carbon emissions by 2050, £14bn for schools, the list goes on…

The Government may wish to achieve these objectives and perhaps simultaneously avoid cutting spending that  may have a contractionary effect on the economy, which is imminently facing recession.

A possible solution may be to seek the promotion of economic growth in the long term, then pay off the deficit slowly without compromising on the objectives set out in the General Election. However, the Government must tread very carefully here. 

Maintaining, or even increasing such a high level of debt could have dire consequences for the country. We only  have to look at Greece to understand  the damaging effect that high levels of public debt  can have on the health of a country.

Some, particularly on the Left, suggest we should increase taxation to provide funds to bring down the debt levels. This could do more damage on the public finances than good.

A comparison that illustrates  this difference perfectly comes from the Labour Callaghan Government in 1976 when the tax rate for the top 1% of earners reached 83% on income. The richest 1% provided  11% of total Government income from tax revenue.

By comparison, in 2019 the top 1% of earners paid a tax rate of 45%. This led to the richest 1% providing 27% of income tax receipts .

Higher taxation has a contractionary effect on the economy as it leads to less revenue for the Government to address the financial issues. It can also  be hugely damaging, especially for the most disadvantaged in our society.

Higher taxation, or a tax on the rich is not the solution to balance the books.

The Left’s referral to the nostalgic, ‘Tax the rich’ slogan shows how they are blind to the complexities of economic policy.

Reopening Businesses Need Their Support Industries Reopened Too

The business events, delegate accommodation and meetings sector is worth £31.2 billion to the UK economy and employs over 700,000 people.

In the latest series of the Government’s opening-up announcements, the sector has been completely overlooked, with the term “conference centres” used to categorise a range of different businesses as being the same for the purposes of keeping them all closed beyond the 4th of July.

Could anyone really define what a conference is when asked?

It’s a broad term that gives little value to a UK-wide industry offering support services to business that range from accommodating training sessions for 10 people to 5000-delegate international conventions.

So many parts of the hospitality industry like pubs, restaurants and hotels have been given the green light to open. Yet meeting and training venues cannot be used to deliver a key service to the many businesses that need all the help they can get.

Right now there is demand to accommodate statutory legal training, exams, development courses, key team meetings, board meetings, strategy days, recruitment days and interviews. That’s before considering the requirement that businesses of all sizes have for buying in extra space day-to-day.

People at work want to interact face-to-face. Businesses have functioned for months with the various forms of online platforms for meeting that we have all had to adapt to. There will be a continued place for the “who’s zooming who” approach as many businesses rationalise and change post-Lockdown. But we know for sure there’s nothing quite as productive as a live, in the flesh performance being involved!

The impact of the Lockdown will lead to a greater need for meeting venues, when teams that have moved from the office space to working permanently from home need the face to face to interaction. For the trying times ahead, allowing us to play our part right now really could create a win-win in the longer term.

How is it any different to sit in a socially distanced meeting room for an exam, training or team meeting than to go to a restaurant or a wedding reception for 30 people?

People are more likely to get close at a large social gathering when spirits are high than at a meeting. Ask yourself, when did you last feel the need to hug or touch a colleague or fellow delegate when you meet up to discuss business?

There are obvious double standards that are adding to the sense of injustice too. For instance how can hotels be open and actively marketing meeting spaces on the basis of providing accommodation which puts them an immediate advantage over the dedicated sectors whilst the specialists are themselves ordered to stay closed?

None of us want to see any business disadvantaged further. We are pleased that hotels and restaurants will reopen. But when they are clearly seen to be aligned to what we do, it seems arbitrarily unfair and nonsensical that the wider range of support businesses cannot reopen too.

More often than not meeting venues are very large and able to offer safe and robust re-opening plans that can adhere above and beyond to social distancing guidelines. As it is industry standard to register delegates and visitors individually, we are well equipped to support the NHS Test and Trace service without the controversy that may arise when punters are asked to register for a visit to the local pub!

Like the many other businesses overlooked and forgotten, the Events & Meetings industry is right at the brink and now being pushed to limits. For us it feels like it will be impossible to survive.

An optimistic estimate is it will take at least 12-18 months to recover if we could reopen now. Whilst “conference centres” remain closed, we can only wonder at the message the Government is really giving to the many sectors and industries that desperately need support services like ours.

British business need us open and available to help give them confidence that they really can return to business as usual.

We are ready and willing to do whatever it would take to open on 4th July. Instead are being left behind.

Read The Backbencher Opinion on this HERE

Emma Jennings is Co-Founder and Director of The Studio Venue Company and a guest writer with The Backbencher

The False Floor Economy: When will it fall through?

These are strange times. We know that things are not the same as they used to be. Our lives are being governed by a set of rules that seem to be changeable at political whim. We see the rising numbers of redundancies reaching out from our TV screens and know from conversations that many businesses are already struggling and looking ahead hopefully whilst suspecting that they will go bust.

Yet life continues and even seems to be returning to something like normality before the Lockdown began. The drive thrus are open. We have a choice when it comes to going out to shop or buying online. To listen to the media, it is as though Covid-19 has done all the damage to the economy that it possibly can.

Underlying all of this, economically at least, there is something very deep and very dark going on. UK GDP fell by 20.4% in April alone. High-profile business restructures like that of British Airways have pre-emptively begun and the Bank of England has today announced that it will pump £100 Billion into the Economy.

The people whose job it is to watch for the distant elephants as they cross the horizon are already extremely hard at work.

Somehow however, there is a shared feeling like this is all happening to somebody somewhere else. As if any of the pointers, red flags or warning bells that are telling us that the shit is about to really hit the fan are just another media headline that has been cooked up by story tellers for the benefit of someone else.

It feels this way simply because we are walking together through the existence of false floor economy. One that was created by the Government’s Lockdown alleviation measures such as the Job Retention Scheme and the ‘Furlough Money’ that has been fire hosed at any company or business that employs staff and has qualified itself for a Scheme.

There are potentially millions of people who are today employed within jobs that no longer exist. Employers are keeping them on the books for as long as it is not costing them their own money to do so.

As the Government money dries up or is reduced to a level where continuing to live the lie no longer makes sense, this whole situation will change.

The difference between where the economy is and where it appears to be is significant. As things stand, there continues to be a common belief that things will simply return to how they had previously pre-lockdown been. The media and political commentators who should know better have made it worse by reporting the queues outside shops as non-essential retailers reopened on Monday as being illustrative of the British Economy recovering and the Country getting back to work.

At best, what we have seen this week is the effect of little more than a bubble or overhang from the pre-Covid time that will continue to exist until the impact of the massive recession that we are now sleepwalking into has impacted a critical mass of people that will be enough to push the media to begin reporting in a very different way.

The key ignition points will be when the need for employers to contribute to the existing levels of Furlough Money comes into force at the beginning of August and then when the Schemes have ended in October, when the full six months of this artificial reality that Politicians have created come to their end.

This false floor economy will soon become a trap door for everyone. Not just the people who have already been made redundant or the incredibly significant number of business owners and company directors who have not been catered for by the Chancellor’s various initiatives. Policies made by a Government in fear of everything other than the consequences of what they were doing for everyone else. They never helped in the way they should, and their only real success has been to hide the arrival of what is going to be a very painful reality for all of us in plain sight.

May’s Brexit Deal: The Pragmatic Approach

It’s becoming clear that May is playing a game with the future of the nation, our economy and business, and that is to hold the vote on her Brexit deal as late as possible. Downing Street confirmed a few days ago it would be after Christmas, likely in the New Year. What May is clearly hoping is that, by holding the vote as late as possible, she can essentially frighten MPs into backing it, many of whom are more opposed to no-deal than her agreement. Some MPs have accused May of self-interest, others of bungling. But what choice does she have? This is the only deal the EU will accept; that is clear enough. But MPs wont accept it. They are playing politics. They are the ones risking all our livelihoods. The game May is playing is not of her own making. Rather, it is the product of years of fantasy, lies and now a refusal to face reality. 

What will happen then, when May does put the deal to the Commons? It’s anyone’s guess. To my mind there are 3 main outcomes:

  • The deal, by a mixture of scaremongering, practical thinking and some pragmatism is begrudgingly accepted by the Commons
  • The deal is rejected by the opposition and unsatisfied Tory Backbenchers, May resigns and the country slips through a mixture of apathy and incapability into no-deal
  • The deal is rejected, parliament manages to organise itself and utilise Dominic Grieve’s amendment to in some way extend Article 50, and at this point a confidence vote in the Commons would probably be a reality

May, no doubt is hoping for the first of these to occur, and to be honest, for all my distain for the constitutional disgrace that is the current government, so am I. At this stage pragmatism should be paramount. Yes, May is a malignant spectre no one seems able to exorcize, but it is clear now more than ever that she is right on one count: her deal is the only deal. The EU will not give anymore, so accepting her agreement is the logical option. It is for this reason I would not advocate for my third outcome, because the problems would be identical no matter how long we extended Article 50 for. A General Election might change the arithmetic, but there is no guarantee.

But for god’s sake we must avoid no-deal at all costs. Business cannot afford it; people cannot afford in and nor can the nation. The total dismissal of the reports produced by The Treasury, Bank of England, IMF and countless other independent economic experts which forecast potentially devastating ‘short-term’ impacts of a no-deal, both “chaotic and severe” is frightening. The dismissal of such predictions, by people devoted to these subjects, by experts in the field, by Mark Carney whose duty it is to defend the economy is beyond naïve; its utter recklessness. All have predicted major economic strife should Britain leave the EU with no-deal, the loss of jobs, further wage squeezes and less funding for public services. And yet so many accuse them of scaremongering, of launching ‘project hysteria’. The leading Brexiteers are always first to rubbish the views of the experts: John Wittingdale called one report which forecast dangers for the economy “unduly negative… rushed, skewed and partisan”. These people are not interested in facts unless they support their position. A good analogy would be going to the doctor and being told your drinking habit was bad for your health, and then dismissing your doctor as “partisan” or “negative”, demanding a second opinion, and when that come back the same, dismissing all the opinions as “negative”; running a “fear campaign”… promptly drinking yourself to oblivion.

The reality of the situation is simple. The British economy, as the experts rightly point out is not prepared or strong enough to sustain a no-deal Brexit without significant damage. We lack the infrastructure, for instance, to make or supply the parts required by manufacturers in the auto or aerospace industries without imports, free of tariffs and checks, from the EU. Now, in the ‘long term’ this might become less of an issue, but how long before companies find it no longer economically viable to operate from the UK? Small business who rely on EU trade wont even have that long. Most work in the short term. So while one might argue the larger companies might ‘hang-on’ until a deal can be arranged, small businesses wont. Even those who don’t rely on EU trade will feel the pinch. Any recession will squeeze incomes and raise prices, and as people become more conscious of the money they don’t have, so the small and medium sized companies, whether they rely on the EU or not will suffer falling profits, with job losses the inevitable result. The argument of many on the hard-Brexit side, that a hit, however severe, to the economy would be a ‘short-term’ event and that Britain would pull through ‘in a couple of years’ may be true, but unfortunately, most businesses wont have that long in the event of no deal, and I suspect larger companies wont stomach higher costs and a weaker economy for as long as the Brexiteers hope.

The Brexiteers would ‘get our country back’, but what sort of country would they have? And at what cost? That is why I say, whatever your views on May and her infamous behaviour, realise that the ‘game’ she is playing is one she has been forced to take part in. The current impasse is the product of deep-seated ideological stances and intransigence by MPs. Back her deal. Principles are all well and good, but now is not the time for fine words. In 100 years time, our grandchildren will not remember the impassioned speeches against or for this agreement, only the result, because that is all that matters. Let us do the pragmatic thing, so that they may not look back at us with distain and regret; so that we may gift to them something more than hollow words, broken promises and a national disaster. Let us not leap into the dark.

‘A Leap in the Dark’ (Punch, 1867)

 

 

Britain Getting Back on Track? It’s the Economy, Stupid.

Ah yes, it’s the economy stupid.

While I am not a massive fan of the former US President – Bill Clinton – it’s for a good reason. His ‘three strikes’ policy and his sordid relationship with Monica Lewinsky did little to endear him to me. But there are lessons we can salvage from his two terms.

To his credit, he was right about one thing when he grasped at the national mood around the economy.

This was highlighted in the campaign when he effectively took down Bush (’41) on how he himself was not affected by the economic decline in the early 90s, but he was.

The Clinton Administration, while divisive, led to the creation of a budget surplus of $128bn, 18.6m new jobs but increased income taxes.

Boris Johnson could take a lesson from Bill’s book. In the 60-page booklet, published by 10 Downing Street, the Government demonstrates a firm understanding of the kind of tactile approach necessary to emerge from the crisis.

The Clinton Administration, while divisive, led to the creation of a budget surplus of $128bn, 18.6m new jobs but increased income taxes.

“COVID-19 is a new and invisible threat. It has spread to almost every country in the world… The Government’s aim has been to save lives. This continues to be the overriding priority at the heart of this plan. The Government must also seek to minimise the other harms it knows the current restrictive measures are causing – to people’s wellbeing, livelihoods, and wider health.”

Transparency and the safeguarding of lives and livelihoods aside, the impact of COVID-19 on all accounts is demonstrable.

For example, the Government has since reported that 1.8 million households made a claim for Universal Credit between 16th of March and 28th of April. This is shockingly high and to make things worse GDP will fall by 35 % later in the year, according to OBS.

In April alone, unemployment rose from 850,000 to 2.1 million. A staggering rise not seen since records began. Photo by Emiko K from Pexels

The situation is bad for everybody as more and more jobs will be lost as businesses fail, look for example at British Airways who announced layoffs of 12,000 people last week, despite the Government’s furlough scheme.

I’m unsure which industry will seek to purge costs through staff wages in an attempt to stay alive next, but I know there is more to come.

These measures are hitting working people hard. Simon Dolan, the man, taking the Government to court over human rights violations due to this lockdown, shared a message from a supporter called Robin Hunter.

Robin states that his 20-year career in hospitality was eradicated, with little chance of getting back on his feet due to his age. To make matters worse, he was laid off before the furlough scheme was introduced, and now lives on a sofa in his mums flat, while receiving £74 a week from the government.

This could happen to anyone, as thousands of small business have not been trading over the last three months and possibly even longer. What’s worse is this could happen to you next.

Boris needs to do something quick; he needs to reopen the economy and get Britain back to work. This isn’t a matter of money over lives: I grasp that people are dying, but poverty kills too.

In the previously mentioned report, the government openly admits that the country needs to get back to work and produce. The report made clear that the longer the sustained lockdown and the reduction in economic activity, the harder to maintain public finances, including services like the NHS.

It’s simple: the longer we’re in lockdown, the harder it’ll be for the economy to recover. This will lead to a significant reduction to our current living standards as compared to the past as we will have to accept a crumbling public purse and even smaller private one.

This will lead to thousands more avoidable deaths through things like suicide and poverty. When it does not kill, it mentally scares and scars the lands around it, in the words of Lord Sumption. Therefore, we must end the lockdown as soon as possible to save the economy, save the people and save the future.

While the Clinton presidency is a divisive one, a pedal-to-the-metal approach is one that the British Government needs to have at the forefront if it is to emerge from the present crisis.

China: The war we must win without ever fighting

If speculators could bet on future world events like they play stocks and shares, there is little doubt there would be more focus on the dick swinging and pumping rhetoric against China that has been underway since before the Covid-19 Pandemic began.

That the origins of Coronavirus has given the likes of Donald Trump an excuse to point the finger at the Chinese and use it as a call to action for all the usual suspects is clear.

Trump’s callouts to the US domestic marketplace over trade restrictions were, after all, never going to reach quite as far – given the reality that the worldwide consumer culture pays humble deference to the Country where most cheap goods are made.

Regrettably, that deference isn’t really to China. It is to the god which is money.

Governments have become beholden to the Chinese State, whilst China continues to spread its tentacles across the world using Western capitalism and economic thinking against the very people who invented and became dependent upon it.

China is playing the game so well, they are surreptitiously reinventing the rules.

Activity in the South China Sea region strongly suggests that should hostilities between the West and China break into the open, this will be the theatre where a military campaign would be fought, lost or won.

Yet this would only ever be a proxy war.

Our cultural mindset revolving around money should shout loudly to anyone with ears to hear that we are already engaged in an economic war with China. One that can only be turned around if we completely change the way that we think.

Sadly for Trump, the aim of this battle is not as simple as freezing China out so that US  dominance of all markets can be resumed.

Meanwhile, ongoing negotiations have provided the opportunity for us to observe the true nature of the EU.

We would do well to remember that we had genuine, democratic reasons for Brexit.

Now that we are extricating ourselves from the EU monolith, we really do not want to knowingly throw ourselves straight into the lap of the US or be subjugated via the back door by China – both of whom want to exert monetary and therefore political influence over us – simply wrapped up in alternative forms.

Six months ago, it was near impossible to see where the opportunity would come from to address the disease of corporate greed. Its symptom is the golden age of internet consumerism, underpinned by farming of the masses for interest that can be earned from lending money created from nothing whilst shackling us all to a life burdened by debt.

Coronavirus, or rather the Government response to it – implementing a Lockdown that is going to inflict pain on many millions more than it will ever help – does have a positive flip-side.

The opportunity will come to use the significant financial depression is creating to our advantage by rewriting the rules, the role of money and how money drives so much of what as a society we do.

When our politicians can see beyond a life that can only be written in terms of cost, saving or spending, then morality, ethics and doing what is right can be the priority in public policy once more.

We will then be able to close the trap door that China has set us and reject all other unwanted influences that have, are and continue to wreak havoc in our day to day lives whilst they square up for a war where we will have a lot more than the lives of military personnel to lose.