Friday, 22 January 2010

Budget Deficit Reducing?

According to Liberal Twitter Hound, who got his information from the very reputable Institute for Fiscal Studies, the budget deficit may not be as bad as originally anticipated. Higher-than-expected tax receipts and slightly lower-than-expected public spending look to bring the budget deficit in slightly lower than the £178billion which I discussed in a previous post.

So, to give them their dues, some of Labour's economic policies seem to be working. Of course, they've been arguing all along that cutting public spending during a recession is bonkers. However, a little perspective is required.

There is a difference between public spending and loosening fiscal policy. Undoubtedly, the best way out of a recession is to cut tax. Lower taxes stimulate growth. As Winston Churchill once said, 'trying to tax your way out of a recession is like standing in a bucket and trying to lift it up by the handle.'

Now, Labour did cut VAT last year. Which is fair enough. But their policies haven't really gone far enough, for the simple reason that they can't afford any more. Loosening fiscal policy (cutting tax) is one hell of a lot easier if you have the money to pay for it, i.e. a budget surplus.

Labour have never produced a budget surplus. And yes, there was some reduction in the national debt between 1997 and 2002, but this was primarily cyclical, not structural, i.e. a result of higher tax receipts, not political will to drive it down.

The Conservative route out of recession is to curb public spending and bring the public finances back onto an even keel. There is no doubt that this is absolutely necessary. Even if the budget deficit is reduced to £170billion, the Government would still be overspending by over £3billion a week. It is an unfortunate circumstance that such curbing is planned under a recession.

The question is not really whether to cut public spending or not. It's a matter of what to cut, and most importantly, when. The Conservatives think the sooner the better. Labour think any time after the election. Both of them have their own vested interests at heart, rather than those of the State. Surprise, surprise.

The question is very complicated. But they'd better come up with an answer fairly soon.

Thursday, 21 January 2010

David Cameron


Tesco

I have found out that Tesco currently have a planning application to build a supermarket about 200 yards from my office. This will compliment the other two within a 3 mile radius, one of which is within walking distance of my house.

Personally, I would have thought that 2 gargantuan supermarkets owned by the same company within 6 miles of each other was quite enough. But obviously not for Tesco. Whatever happened to competition?



I'm sick of Tesco. Their store layouts are like something off the Krypton Factor - they're designed to coerce you into wandering around the whole bloody shop, determined to squeeze even more £s out of you in impulse buys. I'm sick of seeing their hideous red neon lights glowering out into the night. I'm sick of their 'self-service' tills, which I have an innate desire to smash with a chair, and I can't help but swear at every time I'm forced to use one. I'm sick of their 'half price special offers', which try to flog shit you don't need at the same price as everywhere else. How can it be half price if it's the same as everywhere else?!

No more, please. If people desperately want to go to Tesco, then driving (at most) 3 miles is no hardship. And it's not as if I live in London, or some place equally urban. I'm talking about the uttermost outskirts of Nottingham. 5 mins' walk and you're in the countryside. Not exactly rural, but certainly not a bastion of population density. Is it really necessary to have a 3rd supermarket?

Self Defence

So, Munir Hussain has been freed by the Court of Appeal. Can't say that I'm disappointed.

The details of the case throw the current law on self defence back into the limelight. The best discussion I've found on the current state of this law is here.

The key test is that of 'reasonable force' - you can use reasonable force to:

  1. Defend yourself;
  2. Defend your property;
  3. Defend others;
  4. Prevent crime;
  5. Effect or assist a lawful arrest.

The question of what actually constitutes 'reasonable force' is ultimately up to the jury.

There are a few things that I find perverse about this law:
  1. The jury must decide whether the force was reasonable, but must consider it objectively, i.e. with the benefit of hindsight. The accused would have no such benefit. They may be forced to make a split-second decision, which could be a matter of life or death. My personal opinion is that reasonable force should be considered subjectively, based only on the information available to the accused at the time;
  2. No account is taken of the accused's characteristics. For example, if they suffer from a mental condition which means that they perceive threats where there are none, or perceive threats to be greater than what they are, this would involuntarily affect their judgement as to what could be defined as reasonable force, but such a condition would not be taken into account;
  3. The law does not recognise the concept of a defensive weapon. You can't carry or use a weapon of any kind, even if it is only to defend yourself. You can use items available to you at the time as weapons, but only if they are being kept or carried for their normal everyday purpose. My personal opinion is that defensive weapons should be recognised, but limited from firearms;
  4. Although you can submit the defence of self defence in a criminal matter, this is not an adequate defence against negligence in a civil matter. So you cannot act with total disregard to a burglar's safety. This seems ridiculous - you would think that the legal principle of ex turpi causa non oritur actio ('from a dishonourable cause an action does not arise') would apply to civil as well as criminal matters.

Of course, the Hussain case didn't fall under the claim of self defence. He chased the burglar down the street, cornered him in a neighbour's garden and then with his brother's help, beat the hell out of him with a cricket bat. You can't really disagree with the conviction, but the sentence was unfair, and I'm glad the Court of Appeal have recognised that.

I don't think there's anything particularly wrong with the statute law. But the way it's applied leaves a lot to be desired. The test of 'reasonableness' should be subjective, because that's all that's available to the accused at the time. Full account should be taken of the accused's characteristics, especially anything that could involuntarily impair their judgement. The right to keep a defensive weapon at home should be granted, within limits - no bazookas, please. And ex turpi causa non oritur actio should apply to civil as well as criminal matters - it is ridiculous that a burglar can sue one of their victims for negligence.

So, dear legislators, sort it. It's what we (over)pay you for.

Wednesday, 20 January 2010

Voting Reform

Gordon Brown has said that he will hold a referendum in the next Parliament on whether to change the voting system.

If Labour are still in Government.

So it's a manifesto commitment.

Well, good. I would personally welcome electoral reform - I think our current system, 'First Past the Post', is outdated and unfair. There's a few of reasons for this opinion:

  1. Our voting system does not extend to the House of Lords, which is effectively appointed by the Prime Minister. We're in the 21st Century - it's time this was sorted;
  2. In 'First Past the Post', a candidate only requires a simple majority, i.e. more than the others, to win. To me, democracy should operate on the basis of absolute majority, i.e. more than 50%;
  3. Our constituencies are odd. Some more densely populated areas have the same number of MPs as lower populated areas, so some votes are worth more than others. I don't like rotten boroughs.

My personal preference would be for:
  1. Alternative Vote (AV) system in the House of Commons - this maintains the constituency link, but requires a candidate to have an absolute majority to win;
  2. An immediate redrawing of the constituency boundaries to account for population shifts, and provision for them to be redrawn for every election if necessary. Every vote should be worth the same;
  3. Proportional Representation (PR) in the House of Lords, with provision to ensure that the Government does not have an overall majority in the House.

 I wonder whether the Conservatives and/or Lib Dems will match this particular commitment by Labour?

Monday, 18 January 2010

The Budget Deficit

So, it's fairly well established that the Government has some financial problems these days, in the form of a £178billion deficit. That's how much its overspending by each year. This is a large problem - large enough for Labour to feel it necessary to pass a law to halve the deficit over the next 4 years.

Herein lies the first problem.

The Government is overspending by £178billion every year. And they want to halve that, so that they're only overspending by £89billion a year. Well, that's good, isn't it?

No.

They'll still be overspending by £89billion a year!

Now, I have a reasonable grasp of economics, and I do understand that public overspending is not the same as private overspending. You have a little more flexibility when you're in control of your own currency. But still - £178billion?!

So both Labour and the Conservatives are waking up to the fact that spending cuts are going to have to happen, and some of them are going to hurt. Not all of this gaping black hole can be plugged simply by painless streamlining of back office functions.

So what should be cut?

Well, first you have to look at where the money is being spent.


This little graph is lifted from the Pre-Budget Report 2009.

The biggest lump of expenditure that strikes me is the eye-watering £190billion being spent on social protection, i.e. benefits. Ouch.

Now, obviously, social protection also includes old age pensions, winter fuel allowances, etc. - some of it is certainly well-justified expenditure. But the thing the PBR2009 doesn't do is go into more detail.

Well, it took a little poking around on the HM Treasury website, but I found it. Breakdown of social protection spending. This doesn't exactly correlate with PBR2009 - it's a forecast from 6 months before. But it's close enough to give you a good idea.

Now, the one that leaps out to me is 'Sickness and Disability', which costs £38.3billion per year. Closely followed by 'Family and Children' at £28.1billion, 'Housing' at £20billion and 'Social Exclusion' at £20.8billion.

These, to me, seem extortionately high. Especially when compared to the graph of total expenditure above. The benefits I've just listed cost nearly three times the entire defence budget and nearly the cost of the entire NHS. That seems like a hell of a lot of money being spent on benefits.

Now, I believe in the welfare state. I believe that the State should be there to provide at the point of need, to help people get back on their feet. I do not believe that the State should be in the business of handing out meal tickets.

Surely, this needs looking at?

Thursday, 14 January 2010

Snow and Ice

We've been having to put up with the snow and ice since before Christmas now. Anyone else think it's a pain in the arse? I do, having fallen over in the damn stuff twice!

One thing that astonishes me about snow in this country is that it seems to result in the declaration of a national holiday. Schools close, people don't turn up for work, and the entire country seems to grind to a frozen halt.

Of course, there have been some genuinely severe weather conditions, and I don't mean to trivialise the difficulties that some people have endured. But in a lot of cases, the snow has been measured in centimetres, or inches, not feet!

The continued length of the cold snap has caused a depletion of salt reserves, which has made the roads that much icier than usual, as the reserves are rationed. However, it strikes me that the salt reserves are actually completely insufficient - pavements are not gritted.

The Queen's Medical Centre in Nottingham (my local hospital) has said that it is dealing with 'unprecedented' numbers of ice-related injuries. So, I ask: why are the pavements not being gritted? Are they not part of the road network? Are the local councils not obliged to grit them?

Technically, yes. But they don't have enough salt to do it.

So why don't we do it ourselves?

Enter the Litigation Nation. This is part of the reason why the schools have been closing as well.

If you grit the pavement outside your house, or your own land, and someone falls over, you could be sued. The legal basis for this is that, by gritting the area, people should be able to proceed on the legal assumption that it is safe. This, to me, is absolutely crazy. People slip over on the pavements all the time when it's not icy! Why does a handful of grit suddenly render the pavement completely safe?!

'This pavement is now completely safe, rendering optimum friction between the sole of your shoe and the pavement surface. If, in the highly unlikely event that you do slip over, magic robots will descend from the sky and catch you in their forcefields before you hit the ground!'

Total bollocks.

So the schools close because they dare not grit their own premises. From a litigation point of view, it's less risky to simply close the school.

In several states in the US, you're required to grit the pavement outside your house - it's regarded as a civic duty. And until 1891, Section 63 of the Metropolitan Pavings Act 1817 required Londoners to do the same.

So, HM Government, please do something about it. Either get the councils to grit the pavement, or if they can't be bothered, I'll be quite happy to scatter some cat litter outside my house, provided you guarantee that no dozy bastard who's not looking where they're going will sue me. Up to you.

Or is that too much like common sense?

Wednesday, 13 January 2010

Taxation

Labour's approach to taxation stinks.

Taxation generally has 3 purposes:

  • Revenue - to raise money to fund public services;
  • Repricing - to discourage or limit use of goods or services, e.g. tobacco;
  • Redistribution - to redistribute wealth from the rich to the poor.

There is no doubt that Labour have succeeded in accomplishing the first of these aims. They do spend money on public services. Like it's going out of fashion, in fact. Whether such expenditure is efficient or necessary is another matter.

They certainly go for that second aim. Duties on tobacco, alcohol and fuel are very high. Higher, I suspect, than they've ever been. Although, has it actually resulted in less consumption? Perhaps not.

My beef is with Aim No. 3 - redistribution, which to me epitomises the entire point of taxation. To limit the effect of the rich getting richer and the poor getting poorer. The whole principle of taxation is that it is based on ability to pay. Those who can afford to pay more, do so, because they will miss the money less than others.

Therefore, it is reasonable to say that the fairest method of taxation is direct taxation, like Income Tax and National Insurance, which, to use a ghastly phrase, are means-tested. Forms of indirect taxation, such as VAT, Council Tax and Road Tax, are not based on your ability to pay, and as such, are inherently unfair.

People on lower incomes pay less Income Tax & National Insurance. But do they pay less in indirect taxation?

The short answer is no.

So we have a ridiculous and contemptible situation where the poorest in society actually pay a higher proportion of their income in tax than the richest.

Labour have actually done something about this, probably out of desperation rather than any sense of social responsibility, by adding a super tax band of 50% to Income Tax. However, this doesn't really address the fact that poor people are paying too much, it just makes the rich pay more.

The most intelligent policy thus far has come from the Lib Dems - who suggest raising the Income Tax personal allowance to £10,000, lifting the lowest earners out of the tax system altogether. This would be funded by an increase in the rate of Capital Gains Tax from 18% to 20%, and a reduction in the Capital Gains Tax personal allowance from £10,200 to £2,000.

This is the best plan so far, unmatched by either Labour or the Conservatives.

Labour's plan to address this problem is Gordo's great invention, the tax credits system, where people on low incomes have that income supplemented by benefits payments. Personally, I question the logic of this system: if someone's income is so low that it needs to be subsidised by State benefits, why tax them in the first place?!

The tax credits system is complicated, expensive, and an administrative nightmare.

The Conservatives? They plan to cut tax credits to those being paid over £50,000, abolish Child Trust Funds, and freeze Council Tax. They also plan to raise the Inheritance Tax threshold, bring back the married couple's allowance for Income Tax, abolish Stamp Duty for first time buyers, and cut Corporation Tax.

Now, I am all for cutting tax. For any reason, and wherever possible. However, the Conservative plans strike me as muddled and confused. Raising the Inheritance Tax threshold, whilst admirable in principle, will only benefit people with estates worth between £325,000 and £1m. Not exactly addressing the redistribution problem, is it?

Bringing back the married couples allowance, to honour marriage in the tax system, is also an admirable goal. Until you look at who it would affect. Married people tend to earn more. Not exactly addressing the redistribution problem, is it?

It astonishes me that it hasn't occurred to any of the mainstream political parties to adopt a more radical approach, like:
  1. Merging Income Tax and National Insurance. They're both levied on the same people, so the collection of both might as well be streamlined. A large proportion of the National Insurance Contributions Office at HMRC could be closed, making significant administrative savings;
  2. Adopting the Lib Dem policy. Cutting Income Tax for the lowest paid by increasing Capital Gains Tax strikes me as inherently fair - low earners don't tend to use their Capital Gains Tax allowance. They could even adjust the higher rate Income Tax threshold to ensure that the cut doesn't benefit higher rate taxpayers;
  3. Consolidate all taxes on purchases into VAT, e.g. duties on fuel, tobacco and alcohol. Again, this would simplify the administration and collection of these taxes - we already administer different rates of VAT. This would lead to further administrative savings at HMRC;
  4. Abolish Road Tax and increase VAT on fuel. Road Tax is unfair - someone who has low mileage has to pay a comparable amount towards road maintenance and environmental protection as someone with high mileage. Having it all on fuel means that people who use the roads, pay for them;
  5. Abolish Council Tax and increase Income Tax. Council Tax is unfair - the size of someone's house doesn't necessarily have anything to do with their ability to pay. In addition, most of local government funding still comes from Whitehall anyway, so what's the point in it?
Under my suggestions, people who earn more would pay more, which is fairer. However, the caveat to this is - when taxes are cut, the highest taxes should be cut first. If you're going to expect the rich to pay more, they should be the first to benefit when taxes are cut.