Given No Choice

While the Liberal Democrats are highly unlikely to win the next General Election or win more seats than either Labour or the Conservatives, if there is a hung Parliament then they will most likely play a role in helping to form a coalition Government.

The BBC is reporting that the Liberal Democrats are going to drop their pledge to cut the overall level of tax at the next election. This, I think, is significant because it now means that none of three major political parties in Britain will be promising to reduce the increasingly crushing burden of taxation placed upon the British electorate at the election next year.

Our political class from all parties have conspired to remove any semblance of electoral choice over this highly important issue. If you believe that the tax burden should be cut, as millions of British voters do, then you are now left completely unrepresented by any political party that has a chance of forming a Government.

Furthermore, the usual excuses that party spokesman predictably parrot about how cuts in taxation are somehow ‘implausible’ or ‘irrational’ during the current economic climate are left completely uncontested. They never explain why such high levels of taxation are ‘rational’ or why it is right that the Government and state should waste so much of our income on frivolous pursuits and egotistical political projects.

The real reason why none of our political class will advocate any other alternative to what already appears to be the status quo is that they either genuinely support ever higher levels of stifling taxation, or that they have become so intellectually lazy that they have chosen not to make the case for a less expensive state.

When politics has been reduced by the political and media class to being about personalities rather than policies, should we really expect any different? Once again we have been given no choice.

Taxing Our Patience

It is not all that surprising that David Cameron’s Conservatives are now decidedly unenthusiastic about their pledge to raise the threshold for inheritance tax which they made two years ago.

This obvious reluctance is why so much ambiguity surrounds the issue and why the party leadership will not, if they can help it, be pinned down on the matter.

In late 2007 it became clear that Gordon Brown was readying the Labour party for a snap election. At the Conservative conference in Bournemouth there was an atmosphere of worriment and discontent. Opinion polls were consistently showing that the Conservatives were many points behind Labour when they needed to be quite a few points in front, and that as a result they were likely to lose any coming General Election.

Defeat would have condemned the Conservatives to another five years on the opposition benches and made it an unprecedented fourth election defeat in a row for a political party who were once considered the ‘natural party of government’ in Britain.

At that time the Cameron project was still very much a work in progress. In many ways it still is. However, before the party conference in 2007, David Cameron had seen little success in actually attracting the wider electorate to vote Tory. Despite all the hoodie-hugging speeches (okay, so he never actually said that) and pledges that marriage could, in his view, be between a man and a woman, a man and man, and a woman and a woman – the electorate were still not all that interested.

Click here to continue reading the article…

A Taxing Problem

David Cameron has called on the Government to allow small and medium-sized businesses to defer their VAT bills for up to six months due to the pressure they are coming under in the current banking credit crisis.

Despite the fact that our Westminster Labour Administration would not be particularly favourable to such a plan – at face value it sounds like a good idea, doesn’t it? Well sadly it’s not – and here’s why, as Dr Richard North kindly explains:

There are, however, just one or two tiny little problems with this idea. VAT is, of course, an EU tax, implemented via the VAT 6th Directive. A payment holiday on VAT would amount to a de facto reduction in the rate of tax, which is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

That, though, might be the least of Mr Cameron’s tiny little problems. Member states are required under EU law to collect VAT, a proportion of which goes to the EU coffers – known as the ‘own resource’. Collection procedures are also defined by EU law, requiring the imposition of penalties on late payment – typically one percent per month. Changing these procedures unilaterally, guess what, is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

Under certain circumstances, member states are entitled to adopt a simplified procedure for charging VAT, under Directive 2006/69/EC, but that does not include any provision for delaying tax payments. To the contrary, the Directive allows special provisions to enable member states to “prevent distortion of competition,” which rather shows where EU priorities lie.

If these hurdles were somehow to be overcome, however, unilateral action by the UK in offering a tax holiday would certainly be considered a ‘distortion of competition’ under Single Market rules. At the very least, Commission permission would have to be given, which will not necessarily be forthcoming.

And, since Mr Cameron’s proposals affect only small and medium-sized businesses, larger firms might be moved to complain. A company like McDonalds, for instance, would have a just complaint. It regards itself as a ‘group of small businesses’ under one banner. Fighting as it does for market share in competition with other high street outlets, it could argue that different rules on payment would most certainly distort competition.

There is also the matter of state aid. Broad-brush aid – which includes tax-breaks of any form, directed at one sector rather than applied uniformly – would most likely be considered illegal. At the very least, Commission approval would be required, which might not be forthcoming.

Then there is one other tiny little detail. Numerous studies – not least this one – have drawn attention to the danger of deferred VAT payments, making the system even more vulnerable to fraud. This is already a massive problem. Would Mr Cameron want to add to that problem?

David Cameron is calling for something which is practically unachievable. I’m just passing on this important message in case anyone is reading…

Failing Labour Economics

On Friday there was a very interesting and rather revealing interview with the Chancellor Alistair Darling on the BBC.

The discussion related to the Conservatives’ economic competitiveness policy review headed by John Redwood, and the fact that, unsurprisingly, the Chancellor didn’t agree with the proposals.

In the interview, Alistair Darling suggested to listeners that if George Osborne was going to be a ‘responsible’ Shadow Chancellor, then ‘What you can’t do is sign up to a program which John Redwood has come up with today, which talks about over £21bn worth of cuts without actually saying how you’re going to pay for that’.

As the Chancellor well knows, neither George Osborne nor David Cameron have endorsed the proposals found in the Redwood report (I wish the party had, but the fact remains that they have not).

The Chancellor then went on to add, ‘Because, the only way you can pay for that sort of money coming out the system is by quite savage reductions on things like transport’. Again, as Alistair Darling knows, this is not the case – but to admit so would not suit his and the Labour party’s argument.

Click here to continue reading the article…