The last thing I expected when I wrote the previous post condemning the cutting, indeed abandonment, of USAid by the amoral/immoral President Trump, was that i would have to follow it with a similar article on a similar decision by what I had supposed was a relatively moral and upright British Labour Government.
A previous post, written five months ago . . .
https://keynesianliberal.blogspot.com/2024/10/
. . .details the fifty year struggle for the British government to fulfil its promised, made by a Conservative government under Ted heath, to devote 1% of our relatively massive GDP to aid the development of the world's poorest countries. The goal (now interpreted as 0.7% of GDP for official aid and the rest made up by private aid and charities) was not reached until 2013, again under a Conservative Government, with David Cameron as Prime Minister, probably on the insistence of the Liberal Democrats in the Coalition.
Mr Cameron's words are worth quoting again:
"The UK will not balance its books on the backs of the poorest.” (27th may, 2011)
And a year later resolved:
“The argument of the heart is even when things are difficult at home we should fulfil our moral obligations to the poorest of the world. There are still more than a billion people living on a dollar a day,”
Sadly his successor, Boris Johnson, was not so high minded, and under him the aid was cut to 0.5%
The previous post referenced above, calls upon the Labour government to demonstrate its moral compass by restoring the 0.7% level.
I find it incredible that the government has done the reverse, and cut the level further to 0.3%. Since half of this is now used in the UK to house asylum seekers, the effective amount to aid overseas development is a mere 0.15%.
And our national income is now about four times what it was when the promise of 0.7% was originally made.
Of course, there is a credible case for the UK and other European counties to increase our defence expenditure now that the US's military commitment has become less reliable. And in the UK there are few if any, other areas of public expenditure that can be cut - indeed the reverse.
So why not higher taxes?
Even died-in-the-wool Tories can hardly object to paying a fair whack for our defence, And given that the government has a manifesto pledge not to further tax current economic activities (incomes, VAT and NICs) there are plenty of taxes (on inheritance, capital gains, other forms of unearned income, pension contritions, land, wealth. . .) available which the largely comfortably-off can well afford.
Rather than ask the worlds poorest to foot the bill.
Shame on you, Labour.
Post Script, (added Friday 28th April.) Three cheers for Anneliese Dodds, whose resignation as Aid Minister was announced today. At least there's one Labour minister with backbone. Now it's up[to the back-benchers.
And in the UK there are few if any , other areas of public expenditure that can be cut - indeed the reverse.
ReplyDeleteOf course there are. There’s the massive welfare bill, for a start. Getting a lot stricter on out-of-work benefits — making it clear that anyone who physically can work, must, or starve — would be a good step towards balancing the books.
So why not higher taxes?
Because higher taxes are a false economy. They make us poorer in the long run (actually more like the medium run, in general, and in a situation like where we find ourselves now where we are constantly on the brink of recession, more like the short run) and therefore would mean that we had to spend an even bigger proportion of GDP on defence to maintain the same real-terms effect, and therefore require even higher taxes, making us even poorer, leading to a vicious circle of decline.
Still, given this government has accelerated decline more quickly than even I feared, it seems inevitable we will have a recession if not this year then then next, meaning Rachael from Accounts will be forced to increase taxes further to stay within her fiscal rules, at least we can be sure they will be kicked out at the next election — albeit having done a lot of damage to the country in the meantime.
I deliberately specified taxes on "unearned income." These are largely "economic rent " (payments above the supply price) and do not affect current economic activity.
ReplyDelete
DeleteI deliberately specified taxes on "unearned income."
Which won’t bring in nearly enough. A few million here out there. The armed forces need tens of billions. The only way to get that sort of money with tax rises is with the Big Taxes: income tax, National insurance (which basically is just income tax by another name) or VAT.
do not affect current economic activity.
Yes, they do. They make the country which imposes them a less attractive place to reside and invest relating to other places, with negatively affects economic activity in that country as investment is diverted to more attractive places.
And specific ones have even more negative effects than in general. You mention:
capital gains,
Directly hits economic activity; why invest in a new company if the return you make as a capital gain will just be taxed away?
other forms of unearned income
Returns on capital investment are hardly ‘unearned’!
pension contritions
Tax pension contributions and you make it not worth it for high earners to keep earning, so they retire early, hitting economic activity. A problem particularly acute with your beloved doctors: a recent attempt to cap tax-free pension pots had to be abandoned after it was realised that huge numbers of consultants and GPs, who already had pots above the proposed limit, would then instantly retire as it made no financial sense for them to keep working, collapsing the NHS.
land
This is the only one that’s slightly sensible, though it’s probably politically inviable
wealth
The problem with this is that a lot of wealth is in the form of assets, not cash; so to pay the tax would mean forced sales of assets at fire-sale prices (if a buyer knows that a seller has to sell to pay a tax bill then they can hold out for a very low price), crashing asset values and reducing the tax take.
(In reality of course it never gets that far as if you enact a wealth tax the rich just leave your country so you have to repeal it quick —as happened in France).
You say "they won't bring in nearly enough." True they're all small beer compared with the"big three" but see:
Deletehttps://taxjustice.uk/campaign/taxing-wealth/
NIC's on investment income: £10.2bn per year.
2% wealth tax on assets
greater than £10m £19.2bn per year.
"Every little helps" as ASDA (or is it Tesco?) claim
NIC's on investment income: £10.2bn per year.
DeleteBare minimum required increase in defence spending: £25 billion. So not nearly enough.
2% wealth tax on assets greater than £10m £19.2bn per year./i>
Of course it wouldn't bring in anything like that as most of those assets would be moved off-shore sharply. But still not enough.
Those two examples get us "nearly here." I could add a few more if I had the search skills. We could ask Richard Murphy of the Tax Justice Network. he has identified about a dozen possibilities. Land? Revision of Council Tax bands? Transactions tax?
DeleteThose two examples get us "nearly here." I could add a few more if I had the search skills. We could ask Richard Murphy of the Tax Justice Network. he has identified about a dozen possibilities.
DeleteBut why would we do that when Mr Murphy's sums are invariably wrong? For example here he is claiming that ending the VAT exemption for private schools 'might raise £1.6 billion in additional tax revenues per annum' — Labour have now done this and we know that no additional tax is going to be raised by it, once you take into account the children who have moved form the private to the state sector as a result: https://www.taxresearch.org.uk/Blog/2023/09/15/abolishing-the-vat-exemption-for-services-supplied-by-private-schools-might-raise-1-6-billion-in-tax-a-year/
And here he endorses an estimate that ending the non-dom rule might raise £3.2 billion per year; again Laboru have now done this and we know that it will raise no additional tax and might even be having a net negative effect on tax revenues: https://taxingwealth.uk/2023/11/10/taxing-wealth-report-2024-abolishing-the-domicile-rule-for-tax-purposes-might-raise-3-2-billion-of-tax-revenue-a-year/
Has Mr Murphy ever been right about the amount of tax a proposed chance would raise? Ever? I can't find an example of him ever being right, perhaps you can?
Land? Revision of Council Tax bands?
These are actually not terrible ideas, provided they were done in a revenue-neutral way to reform the tax system, not as an attempt to extract more money.
Transactions tax?
The worst idea yet. I thought you had written many articles about the need to not tax 'good things'. Well, transactions are good things. Any transaction is of a net benefit to the economy because the transaction wouldn't be made unless it was making both parties better off than they were before. Adding friction to transactions is about the worst thing you can do to an economy. It will, for example, mean people holding on to assets that could be better used by someone else, rather than selling them, to avoid paying the tax, increasing economic dead weight.
On the other hand, you know what would make a difference? In the last three years, the number of people on out-of-work benefits has gone up by a million, in which time the benfits bill has gone up an extra £20 billion. They are almost all malingerers. There's the money for the defence of the realm, without any need for new taxes.
So why are some Millionaires saying they are quite happy to be taxed?Is it cos they are more patriotic brits?
ReplyDeleteSo why are some Millionaires saying they are quite happy to be taxed?
DeleteI don’t know why they are saying they want to pay more in tax, because there is literally nothing stopping them from just doing so. The Treasury takes voluntary donations; if they really want to contribute more they should not talk about it, they should just get out their chequebooks and pay.
Higher (progressive) taxes would seem to be the obvious answer. I was slightly alarmed, but not surprised to read a few weeks ago, that the Tories seemed to be boasting that their proudest achievement over the past 14 years was to lock an incoming Labour government into a promise not to raise income tax and NI.
ReplyDeleteCameron's commitment to overseas aid was one of the very few Tory measures over the past 50 years that I fully supported, and was slightly proud of as a "patriotic Brit", who believes in his country doing the right thing - or even better than right - by international standards. (Now called, being "woke", of course.)
Cameron's commitment to overseas aid was one of the very few Tory measures over the past 50 years that I fully supported
DeleteIf you want more money to be given to overseas aid, why don’t you just give your own money to some overseas development charity?
What possible moral excuse can you have for the government taking someone else’s, eg, my, money and giving it to overseas aid if I don’t want it to go there?
Remember we’re not talking about ‘the country’s’ money. We’re talking about money belonging to individual taxpayers, like me.
I don't actually know "Severnboar" but it's perfectly possible that, like me, he "taxes himself" by giving regularly to overseas aid charities such as OXFAM, Christian Aid, SCF etc. However what they are able to do is on a much smaller scale than what governments can do, so I and I suspect Severnboar, are anxious for both to do more. Politicians of all stripes (sadly even Liberal Democrats) are stressing that the cuts are reducing our "soft power" and leaving space that China might fill. My priority is helping people. If our country gets extra credit that's a bonus
ReplyDeleteI don't actually know "Severnboar" but it's perfectly possible that, like me, he "taxes himself" by giving regularly to overseas aid charities such as OXFAM, Christian Aid, SCF etc.
DeleteAnd good for you. It's your money and you are entitled to spend it however you wish. But what do you think gives you the right to demand other people spend their money on the things that you want to spend yours on?
However what they are able to do is on a much smaller scale than what governments can do, so I and I suspect Severnboar, are anxious for both to do more.
But you don't mean 'governments', do you? You mean 'other taxpayers', like me. What you are advocating for is for my money to be taken from me and spent on things that you want to spend your money on, and that's just unreasonable. Just like I don't object to the way you spend your money, you don't have the right to tell me how to spend my money.
We have governments and taxes to solve free-rider problems: I benefit from there being an army to defend my country, but if the army exists then I am protected whether I pay or not; so given the option I won't pay, and then neither will everybody else, and as a result there will be no army. So in order to provide such things that benefit everybody we have to have a system where if you benefit you have to pay: hence, taxes. You force people to pay for things that benefit them, and thus we all benefit from good things like SSBNs watching over us in the depths while we sleep.
But there is no case for forcing people to pay for tings that they do not benefit from. If you want to spend your money that way then that's great but all such contributions should be voluntary.
Politicians of all stripes (sadly even Liberal Democrats) are stressing that the cuts are reducing our "soft power" and leaving space that China might fill.
Surely the events of the last few years have proven that 'soft power' doesn't exist? It's a fantasy. no amount of soft power will stop a Putin from invading a Ukraine or a Xi from invading a Taiwan. the only power that counts is hard power.
Indeed the very reason China is supplanting us in much of the world is that we have tried to rely on 'soft power' and China has come in with hard power. As a Kenyan official famously said: 'Every time China visits we get a hospital, every time Britain visits we get a lecture'. China comes with money and leaves troops and debts. That's real power.
My priority is helping people. If our country gets extra credit that's a bonus
And that's very good but your priorities are not everybody's priorities, and you have no right to take other people's money and spend it on your priorities. People should spend their money on their own priorities. It is, after all, their money.
My predominant motive for supporting aid is to help people obtain a decent quality of life. Yours could be that they become viable customers for the UK's products and thus help sustain our economy. Either way, governments have the power to do more than charities can, and so should take the opportunity. That is why our government supported the 0.7% target , and we should keep our promise.
ReplyDeleteMy predominant motive for supporting aid is to help people obtain a decent quality of life. Yours could be that they become viable customers for the UK's products and thus help sustain our economy.
DeleteAnd somebody else's view could be that there are better ways to spend money than on aid.
Either way, governments have the power to do more than charities can, and so should take the opportunity.
Again you don't mean 'governments'. Governments don't have any income of their own (well, maybe a big, but it's insignificant). You mean taxpayers. You mean people like me. You want the government to take my money and spend it on aid. Well, what if I don't want my money spent on aid?
That is why our government supported the 0.7% target , and we should keep our promise.
Your opinion is that we should keep our promise. Other people might be of the opinion that that promise should never have been made, and it is one of the most fundamental parts of our constitution that no Parliament can bind is successors, so no promise made by one Parliament can ever be binding on the Parliaments that come after it.
But. given there are these differences of opinion, surely the only correct thing to do is that those who think we should keep our promise should put their money where their mouth is and voluntarily send enough money to the Treasury, in addition to their taxes, to cover the target, and let those who don't think that the promise should have been made spend their money how they want?
What is wrong with that idea? That way if enough people really do agree with you the target will easily be covered (perhaps even with a bit extra!). And people who don't agree can spend their money how they wish.
Would that not be the best solution? To meet the target, but to do it through voluntary contributions, rather than taxes?