Why Won’t they tell us the truth about the Country’s finances?


I have waited with interest to see the responses to the autumn statement. All Parties admit that there is still a massive gap between income and expenditure. None admit that their 2010 spending and saving plans have been ruptured by the partial collapse of the Euro. It would appear that what the 3 main parties is telling us is:
Tory: All is well – we can reduce the share of GDP spent on public services to 35% but do everything we need for people because we can become more efficient.
Labour: You haven’t cut enough in the right way but we will deal with the deficit by cutting different things but not increase overall spending.
Lib Dems: We will not cut as much as the Tories and will not borrow as much as Labour
In addition to the 3 main parties we have at least a couple of la-la land approaches.
UKIP: Well whatever policy they have today it will be changed tomorrow but it’s all Europe’s fault anyway.
Greens: Who cares we will spend our way out of the problem!
As you might expect I am closest to the Lib Dem viewpoint which admits you have to do something about both income raising and spending. BUT it by no means tells the whole story and none of the Parties are prepared to tell the whole story because they can only lose votes by doing so before a General Election when people see that the problem is one that needs to be shared by everyone.
So what can and cannot be done?
Well what we cannot do is pretend that the debt is not there. The debt has built up because, quite rightly, none of the Parties were prepared to adopt the ‘cold turkey’ approach applied to places like Greece and Ireland and which is still in different ways gripping places like Spain, Italy and soon France. In these countries the public sector has been ravaged; pensions have been cut by up to 20% in real terms. Debt must be repaid whether you are a person, family, city or country. In many ways the people who have learnt the debt to our Governments are us through our pension funds and insurance companies. The debt isn’t owed to international financiers and bankers, although have taken more than their fair share of it, it is owed to you and I through the long term arrangements that we have tried to make for our futures.
But in terms of what can be done there is more room for manoeuvre than most politicians would have you believe:
Firstly, taxes must be fairer in both personal and commercial taxation. Personally I am pleased that the highest rate of income has been higher for the whole of this Parliament than all but 31 days of the last Labour Government. There have also been cuts in allowances to the wealthy reducing, for example, the amount that can be claimed against tax for pension purposes. I believe that the top rate of income tax should once again rise to 50% above £150,000.
But little seems to have been done to attack the tax advantages of the Uber-rich. Yes some £2 billion extra per year has been raised by closing tax loopholes and in particular tightening up arrangements with tax havens like the Channel Islands and Switzerland. But much more can be done based on assets which they cannot move around like the homes they live in. It was right to put more on stamp duty for the most expensive houses but it does not stop the fact that proportionately rich people pay less for services from the public sector than those lower down the earning chain. A mansion tax is a must and the £2billion would be relatively easy to bring in from most of the people who would fall into it.
The big money, however, will not be saved by increasing taxes on individuals but by doing so on companies. It is an abomination that large companies can decide for themselves where they want to pay tax. Companies like Amazon and Tesco and Microsoft move money around the system by a set of internal pricing policies that remove income from one country by the imposition of service charges and fees and paying them to a country where there is little or no tax liability. This could be dealt with by making an assumption about profit levels compared to turnover. If you think it cannot be done we already do it for self-employed people where the HMRC makes some assumptions about average takings if shopkeepers and taxi drivers seem to seem to be earning too little.
Secondly, we could spend our money much better. At the moment all three of the main parties think the answer is varying degrees of the private/public ownership axis. In fact the axis is more complicated than this. For example most of our utility companies now have foreign owners. They may (or may not) be more efficient but that is of little help to UK PLC if the efficiency simply produces extra profits which are taken out of the Country.
Many of the goods and services that the Government buys would actually be better and more efficiently purchased from small local suppliers. We are already beginning to see this in the electricity supply sector for example with a load of small suppliers feeding into the national systems. They will never replace all the work of the major suppliers but they can eat into their market share. These small companies pay all their taxes in the UK and often give added benefit to local consumers and communities as well.
We should restrict the levels of foreign ownership in many essential services in the way that other countries who claim to be as free market as we are still protect their markets. We should spend far more money with local cooperatives and social enterprises who look after their staff and keep profit local.
BUT let’s not just blame governments of any colour for the problems and think that the solutions lie with them. We can all do something. For example I never buy anything from Amazon. Yet many people I know talk the talk about how dreadful Amazon are but then continue to use them because, “well they are so convenient aren’t they?” Similarly if you go in to a tax reducing coffee shop for a moan about predatory capitalism you shouldn’t. For the vast majority of services that are provided by tax avoiding companies there is a book shop or a coffee shop owned by someone local who pays their full whack of tax and whose profits circulate around our community. Last Saturday was ‘Small business Saturday’ and I made a point of spending something in 8 small locally owned businesses.
This is a blog not a thesis. The point of it is not to say what should be done to deal with the fiscal deficit but that more could be done imaginatively to deal with it than the regressive measures proposed by all Parties that will progressively cut back on services to the poorer 30%+ in our society.
My plea to all Parties and none is to be honest about the scale of the problem facing us and imaginative about ways in which that problem can be dealt with.

About richardkemp

Leader of the Liberal Democrats in Liverpool. Deputy Chair and Lib Dem Spokesperson on the LGA Community Wellbeing Board. Married to the lovely Cllr Erica Kemp CBE with three children and four grandchildren.
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