tax e petition

Regular readers will know I have a bee in my bonnet about tax avoidance and evasion. You can now view my e petititon and sign if you agree. You'll find it on the Downing Street e petition site. Just key my full name into the search box and you'll find it. Go on, you know it makes sense......

Eton Mess

The increasingly popular calorie-fest known as Eton Mess can seriously damage your health. The current mess confonting the Eton-dominated Cabinet, however, is more likely to damage the health of the coalition. The verging-on-farcical hoo hah over House of Lords reforn is certainly a right mess. First, let us dispense with one nonesensical argument by the reform dissidents.This is that Parliament, the Commons in particular, has 'more important things such as deficit reduction to concern itself with'. This is nonsense, of course. The House of Commons has no effective role to play in economic policy. MPs may bark and shout at minsiters as much as they like, but they have not one jot of influence over the country's financial arrangements. Similarly, now that welfare and health service reform have passed through Westminster, the key legislative priorities of this government have long since passed. The fox has gone to ground; the hunt is over and the hounds might as well return to their kennels. Lords reform is exactly what the impotent-yet-garrulous backbenchers should be concerning themselves with, leaving the running of the country to the government. A second nonsense is the so-called need for a 'good debate' on the issue. It has been debated for a century and more. Little purpose could be served by another protracted and ultimately frustrating run of debates on endless amendments. Oh for an American style Rules Committee that could present a bill with consensus support at this stage. Next we have the strange mongrel bill the coalition has come up with. This notion that peers elected for fisteen years with no re-election can possibly be accountable is plainly ridiculous. What self respecting liberal could possibly support such an idea? The plan would simply create a second chamber of party placemen totally unaccountable to anybody. What is wrong with five years terms ? Come to think of it what is wrong with an all appointed chamber, supervised by an independent appointments commission which will accept only small numbers of political appointees and will eleminate the practice of giving honours to political time servers. A chamber of about 300 professional legislators, with minimal political interference over apointments looks by far the best option. They could be made accountable by regular Ofsted-style inspections resulting in the removal of peers who have poor absence, speaking and voting records. But at the moment is remains as big a mess as the last time this dessert was served up to me in an East Finchley gatro pub. And I ate too much and naturally felt rather ill for the next twenty-four hours !

The Laffer Illusion

An interesting discussion about the Laffer Curve on Radio 4 this morning ((June 27th). If you don't know the Laffer Curve, it relates to a theory that the amount of total tax collected by the government will vary according to the tax rates. It is based on the idea that, if the tax rate is zero no tax will be collected (obviously), and if it is 100% no tax will also be collected because nobody will do any work (also obviously). Between the two extremes, as tax rates rise, more TOTAL tax will be raised, but then the tax revenue will reach a maximum (the top of the curve) and will then start to fall, even though tax rates are still rising. This is because, when higher rates of tax are charged, people will increasingly have an incentive to find ways of evading or avoiding tax. In pure economic terms, therefore, it is futile for a government to continually raise tax rates in the hope of collecting more tax. This was the centre of the discussion when the highest rate of income tax in the UK was reduced from 50% to 45%. Osborne claimed he would raise more total tax. We shall see. Laffer is undoubtedly accurate in essence, but it ignores a number of considerations. First, it underestimates greed. There are many people who would try to get out of paying tax whatever the tax rate. Second, and similarly, it is naive to think that by reducing the highest rates of tax people will abandon their tax avoidance or evasion schemes. Think about it. A person earning, say, £500,000 per annum reduces their tax bill to, say, £100,000 through one of these schemes. Such a person should be paying close to £250,000. If we reduce the top rate to 40%, as result of which the well paid individual abandons his or her scheme and starts to pay tax, they will be paying something like £180,000. They will, therefore, be £80,000 worse off after tax. The Laffer theory therefore won't work. People are greedy. Third, it implies that we should reward people who illegally evade or legally avoid tax. We are saying, if you give up your illegal or antisocial tax schemes, we will give you money; we will give you a tax incentive. This is like approaching a burglar and offering him or her, say, £50,000 to stop burgling houses. This may make very good ECONOMIC sense in terms of reducing our insurance, policing, law enforcement and prison bills (not to mention eliminating the distress caused by burglaries), but it is rewarding criminal behaviour. Incidentally, as burglars have a criminal state of mind, they may well take the money and still commit burglaries (the same as wealthy tax avoiders getting the tax break but still using the illegal or immoral schemes). Finally it ignores the possibility that we might, with sufficient intelligence, determination and clever law making, be able to change the dynamics of Laffer by successfully hunting down tax evaders and closing down tax avoidance schemes. Then, raising the tax rates WOULD result in substantial increases in total tax revenue.

Egypt's democracy

As my last post suggests, democracy can flourish when the winners take into account the interests of the losers when in government. If the Muslim Brotherhood in Egypt can achieve this, democracy has a chance in that country. The counterpoint seems to be occurring in Mali, where a deomacratically elected government with much promise, failed to recognise minority Muslim interests and is paying the rpice in terms of internal conflict.

The Essence of Democracy

We currently view democracy in so many different contexts that it becomes difficult to establish its true essence. How can we judge it as a political system when it is claimed for such diverse polities as the USA, UK, Russia, Egypt and even Syria ? I suggest we can distil it down to two basic principles. These can apply whatever the nature of elections or the system of government or of the society in question. These are : 1. The losers of elections accept the authority of the winners to govern. 2. The winners take into account the interests of the losers when governing. All stable and successful democracies display these qualities. All 'failed democracies' do not. Just two other comments : First, this is particularly important when the winners are actually a minority. This applies to the UK (as a result of the electoral system), and also to many of the fledgling democracies we see struggling out of their chrysalises today (slightly mixed metaphor – sorry). Second, the USA actually foresaw the problem and institutionalised the solution in 1787 by introducing their system of checks and balances to esnsure that minority interests could not be trampled on. http://www.hoddereducation.co.uk/Colleges/Government---Politics.aspx?mRef=CNM01.

the ministerial gene pool

There is now a distinct impression emerging in British politics that the current collection of our political leaders - of all parties - is of very low quality. A clear reason may simply be, of course, that they are too young. They simply could not have picked up enough political experience to be able to govern soundly. The fact that they tend to listen to adisers who are even younger and have less exeprience only serves to exacerbate the problem. But I'd like to explore the problem a little more deeply. In periods when politics in Britain has been more ideological, more partisan in nature, it was logical and understandable that leaders should emerge from the parties and from parliament, for those were the places where political ideas and policies were being honed and developed. I would characterise the 1960s - 80s plus the New Labour era as appropriate examples of this. In the past ten to fifteen years, however, British politics has beceome increasingly managerial and technical in nature. How we deal with the financial crisis and the recession is a classic example of this, as is the issue of the freeing up of labour markets by dismantling employment protection legislation. Indeed the conflict over employment rights is particularly interesting. John Prescott - an ideological politician if ever there was one - sees it as a moral question, an issue of rights and personal welfare. Miliband, Balls and the coalition, on the other hand, argue about the economic merits of such a policy, ignoring the effect it might have on workers and their families. So certainly all current leaders can be described very much as 'managerial' in style. The fact that they tend to use think tanks, policy units and advisers to devlop policies is, therefore, perfectly logical. Yet, despite this, we are locked into the traditional mode of leadership selection. By limiting the potential field to MPs from the governing party who have the ambition to join the government, we find only a couple of hundred candidates, many of whom have no relevant experience. Contrast this with the US or French presidents. They have a much freer hand in selecting governments. Indeed the US President MUST look outside the Legislature as the Constitution does not allow individuals to sit in both the executive and the Congress. How much talent are we ignoring through the anachronistic notion that ONLY MPs should be considered for ministerial posts ? To be fair, it is possible to ennoble extra-parliamentarians (Andrew Adonis is a good example of the success of this device)and place them in the government. Even then, though we have the absurd practice of not allowing such ministers to appear in the House of Commons. And it is rarely used. To take a darwinian perspective on this, we have an extremely limited gene pool from which to find political leaders and any biologist will tell you that this practice will lead to too many inherited defects. To pursue the metaphor further, we also have a Conservative leadership who come LITERALLY from such a pool, as so many were brought up in families who are members of what we might call the 'petit aristocracy'.

The separation of powers

On the subject, again, of the malaise of British politics, I think we should be looking at some fundamentals, rather than short term, superficial problems. I met Speaker Bercow recently and he suggested that ignorance lay behind the typical alienation from politics that people are feeling. I rather agree, but suggest that citizenship education - one of bercow's interests - is just a sticking plaster answer. Why is there so much ignorance ? It does not seem like rocket science and it is certainly not short of drama, as PMQ demonstrates every week. Nor are the issues difficult to comprehend - social equality and mobility, educational opportunity, health provision, whether the economy needs austerity or growth, how to combat crime etc. are not hard to comprehend. The solutions may be far from simple and beyond most people's compass, but there is little excuse for not understanding the nature of the problems themselves. Furthermore, many of these issues lend themselves to a relatively simple choice between two alternatives. Obviously they are more complex than that, but they certainly can be reduced to such choices for general public consumption. Having taught politics for many years I have found that the most difficult thing about British politics for young people (and indeed adults)is understanding the relationships between government and parliament, the differences between the two, and the distinctions between MPs and ministers. And when you analyse it, we have developed a rather bizarre system of government formation in the UK. Think about it. We are asked, on the whole, to vote every few years for our local MP. Most of us then hear nothing about them until the next election. OK, some people are represented by ministers and opposition front benchers, or by flamboyant characters like Denis Skinner, Louise Mensch or Tom Watson, but most of us are represented by anonymous lobby fodder. Now of course we know we are electing a government in reality, but that merely begs the question, why should elections not be more explicit on the subject ? In other words, if we are being asked to elect a government, that is exactly what we should do. But no, we take part in a charade of electing MPs. MPs have virtually no power or influence. This is one of the reasons why they tend to behave so loutishly in the Chamber. Virtually all votes in plenary session or in legislative committees are ritualistically determined by the party whips. The public are, on the whole, not stupid and understand this reality. What they have difficulty with is the relationship between voting and the nature of government formation, the selection of ministewrs and the reason why some individuals rise to the top. Why, for example, has David Cameron become prime minister when he is not supported by the majority in the House of Commons, or in the House of Lords and whose party attracted the votes of about one quarter of the electorate ? Furthermore, it remains baffling why the prime minister should also be a constituency MP. In short, there is a complete disconnect between the act of voting and the nature of government we get after an election. The culprit is our lack of separation of powers, in other words, government remains IN parliament, not separate from it. This means that government is accountable to the body - the House of Commons - even though it leads and dominates that body. It is as if the defendant in a criminal trial were also foreman of the jury ! Were government to be separate from parliament, as is the case in the USA, there might be far a greater understanding of the separate and distinct roles of government and parliament. Better still, we might achieve a more coherent outcome of elections if the voters were able to identify the leaders, specifically, by whom they wish to be governed. Freed from its slavish attachment to patronage, parliament could then do its job of scrutiny and making government accountable in an independent and meaningful way. The doctrine of the electoral mandate is a further absurdity. Politicians ritualistically argue that the elected government (elected by a minority of the electorate) has a mandate to implement every one of its manifesto policies. Not some. Every one. How confusing is that to those who do not follow politics closely ? Of course governments do not have a democratic mandate. Voters certainly do not know what manifesto they are told they are voting for, most of them do not vote for the government and even those who do clearly will not support EVERY ONE of its manifesto commitments. To be truly democratic government need to be forced to earn a mandate for each of its policies separately. In broad terms this is, again, how things are done in the USA. The business of earning such a mandate has to be acrried out either by referendum, a practice used in a handful of countries such as Switzerland, but more likely through a genuinely independent parliament, not the supine institution which we unwittingly elect every few years. The degraded nature of parliament and the political parties also devalues the process of leadership selection. It is through parties and parliament that leaders emerge. The poor quality of our current collection of political leaders, of all parties, must be partly the result of such degradation. But that, as they say, is another story.