It’s Barack Obama’s last budget before next November’s elections and contains ambitious spending plans and a dollop of tax increases aimed at the rich. The stated aim is to ensure that everyone making more than $1m a year would have to pay at least 30% in tax.
He does this against a background of an economy that is growing and showing real signs of recovery. But the US strategy has been to invest in the economy, some public expenditure cuts and of course an increase in taxation so that the burden is really shared amongst all.
Contrast this with what has happened in the UK. Here the only weapon in the economic armoury used has been cuts, cuts and more cuts. And the results, a growing deficit and now a threat to Britain’s AAA credit rating.
The Chancellor’s response more of the same. Austerity, austerity and even more austerity.
But Moody’s, the ratings agency, threat to our triple ‘A’ rating is partly based on fears over weaker growth prospects for the UK economy. This is the clearest indication yet that Mr Osborne’s strategy is just not working. A new approach is needed.
An approach that more closely mirror’s that of Obama.
The government has been successful in one respect it has deflected the anger over cuts on to the bankers. Dealing with the bankers bonus is headline grabbing. But it’s actually completely the wrong target.
The target should be the inequality of income and wealth in the UK. Let the bankers earn their bonuses, but let’s make certain that wealth and income are taxed properly. By scrapping the bonuses there is no gain to the Treasury, by taxing them the Treasury gains.
Let us have a real sharing of the burden.
There are two ways of reducing the deficit, reducing the governments expenditure and/or increasing the government’s income.
This government has done much about the former but done nothing about the latter. And neither did the last Labour government. Inequality in society grew in their period of office too.
So Obama’s medicine should equally be applied to the economic patient this side of the pond.
The underlining message is that a more complex and sophisticated approach to the UK economy is required, and soon. If The Chancellor’s not for changing then Cameron ought to replace him with someone that understands how to run a modern economy.
bonuses are taxed at the marginal rate of the taxpayer.
ReplyDeleteSuccessive governments have ignored fairer income and wealth taxes in favour of more stealth taxes. Inequalities have increased and there is no sense of a shared burden.
ReplyDeleteExcellent article Gareth. We are in the middle of a Social Engineering experiment from this ConDem government based on a fundamentally flawed belief that taking from the poor to subsidise the lifestyle of the rich is the correct course to take. As you pointed out it is a sad indictment of the Labour party that they provided the foundations for these morally corrupt policies.
ReplyDeleteI dont think Cameron will change his Chancellor because he endorses these destabilising policies. The only good thing is that even the most ardent of Unionists will eventually admit the harm this approach is inflicting,not just on the economy, but on Society in general. At that point anyone with a modicum of knowledge about Political or Economic matters will realise the Labour party offer nothing more than a slightly watered down version of the same. Hopefully at that point they will take a more open minded view of the great potential offered by Independence!
Anon
There are so many tax loopholes that with a good accountant very few "rich" people ever pay the full taxes due. Time to categorise Tax Avoidance in the same way as Tax Aversion, after all the only difference between the two are prison bars!
Gareth, you really do write such rubbish sometimes.
ReplyDeleteWhy tax the rich more? The rich have little use for government or local council provided services. They do not send their kids to state schools, they don't need public leisure centres or libraries, they can afford to pay for private dental and healthcare and they don't cause trouble on the streets at night.
Why should they pay more just so that others can derive benefit without having to contribute? Do you pay for your neighbour to get a new car every time you get a new one. Do you even think of offering? Of course not.
It isn't an illness to be rich. It is a lifestyle choice.
KP
ReplyDeleteTypical of you to try and defend the very people that caused the current economic malaise. Given that the toxic mix of greed and self interest caused this, as well as the great depression of the 20s and 30s it does not take a brain of Britain to work out that we need to reduce the gap between rich and poor.
No one doubts that there should be differentials based on ability and skills. However some of the most successful Countries also have much lower gaps between the earnings of rich and poor as well as progressive tax systems. Lets be honest the so called captains of Industry didn't cover themselves in glory by dealing in toxic packages of debt. Hardly a sign that paying exorbitant wages naturally gives you the best people! This was the equivalent of a second hand car dealer buying cars without engines!
You carry on with the "creed of greed", the rest of us, including Obama, have had enough of being ripped off and want the parasites at the top reined in! Keep up the good work Gareth, sounds as if some of the parasites are getting worried!
Britnot, your argument is confused.
ReplyDeleteI talk about wealth and the wealthy. You talk about captains of industry, bankers, the overpaid, the greedy and parasitic. We need more of the types I talk about and none of the types you talk about. On this we can agree.
Now, tell me why you think someone who has accumulated or inherited wealth should be forced to spend it on you and yours?
I think in your case it is a matter of "none so Blind" KP. I talked about the toxic effect of inequality and the need to realise why unfettered greed was the cause of the crash. As a society we need to take lessons from the Nordic Countries among others and rebalance our economy to rid ourselves of boom and bust and develop a more sustainable model.
DeleteTo do so we need a progressive tax system with no loopholes and the gap between rich and poor needs to be bridged to sustainable levels. What these Countries show in graphic detail is that there is no place for inequality and unfettered greed in a successful economy. We would do well to learn that lesson!
Britnot, comparisons with the Nordic bloc are about as useful as Scottish comparisons to that arc of prosperity Ireland to Iceland. Useful for a moment but useless for any more than a moment.
ReplyDeleteYes, we need to rid ourselves of boom and bust. And, yes, our economy needs rebalancing (by simple market forces not government intervention).
But no, inequality is not toxic. It's a plain fact of life and occurs throughout all stages of life (I take it you were never a middle child or a spoilt youngest born). And no, inequality does not lead to abject poverty.
Now please return to my original question. Why you think someone who has accumulated or inherited wealth should be forced to spend it on the likes of you and yours?
As I said KP none so blind. Inequality is not a natural state and comparisons with Nordic Countries are entirely justified on the basis of an example of best practice. The Thatcherite doctrine that the market will suffice has proven to be inadequate at best and the cause of financial collapse at worse. Not even you with your closed mind can fail to have notices international comparisons showing the UK to be hopelessly unequal in terms of Wealth and Income inequality.
ReplyDeleteThankfully the general population are waking up to the facts that there is indeed only one cake and if you have people at the top creaming off far more than they either produce or deserve others will suffer. The difference in the Nordic approach and ours is that their approach is sustainable and the UK "Greed is Good" approach most certainly is not. Inequality is the greatest threat to a sustainable stable society and there is ample evidence to prove that.