Tax cuts?

 

To cut or not to cut. . . .?

 

For some time now the government has been dangling the prospects of (income?) tax cuts in the coming budget and its supportive press has been salivating over the prospect.

 

However, a few days ago the IMF warned that in the UK’s present circumstances this was not a good idea. On Wednesday 31^st January the Guardian’s Economics Editor, Larry Elliott (a Brexiteer, ouch) reported the IMF spokesperson’s summary of their reasoning as follows:

“Preserving high quality public services and undertaking critical public investments to boost growth and achieve the net-zero targets will imply higher spending needs over the medium term  than are currently reflected  in the government’s budget plans.  Accommodating these needs, while assuredly stabilising the debt/GDP ratio, will already require generating additional high quality fiscal savings, including on the tax side.”

Those of us who live here (I believe the chief economist of the IMF, to the delight of the tabloids, is French, and in any case the IMF is based in the US) might think it is a bit late in the day  to “preserve” the high quality of our public services.  “Restore “ would be a more appropriate verb.

 Taking the “profound decline of the Royal Mail” as an example,  Aditya Chakrabortty (Guardian 1^st February) describes how “many aspects of British life  have been devalued  and degraded – even while those at the top have made a killing.”

Chakrabortty argues that ”[f]rom Thatcher onwards the Tories have justified privatisation as bringing in essential investment”* In the case of the Royal Mail, “whatever investment has been made in [it] over the past decade , it has been dwarfed by the amount paid out to shareholders.  About £2bn has been paid out to [them} since 2013, equivalent to 60% of its profits after tax.

 Chakrabortty concludes his article: “How does a great  institution die?  The same way  as a country sinks into complacent underachievement : with false promises  from its politicians, with poor management from its corporate leaders, with a lazy regulator – and moneymen who rake off  as much as they can before running for the exit.”

And to the Royal Mail we can add the water industry, the railways, care or the elderly, hospitals loaded with PFI debt, crumbling schools,  PPE. . . . .

There is much to repair.  Tax cuts are about as appropriate as blood letting in 18^th century medicine.

*I would add private sector (ruthless, and very highly “compensated”) management skills and modern (precarious) working practises.