Laffing all the way to bankruptcy.
Laffing all the way to bankruptcy.
I have spoken before about the Laffer curve. In case you don’t know, basically the idea is that there is a finite amount of tax you can extract without creating a situation where people rebel and take avoiding action. Up to that point you gather MORE tax by increasing the rate. Once that point is passed, you can only collect more tax by decreasing the rate – counterintuitive perhaps but demonstrably true.
So I was - as a firm believer in less taxes – delighted to see that our present Chancellor’s complete ignorance of economics and the Laffer curve is already coming back to bite her on the bum. I’m afraid I recently compared her knowledge of Economics to that of a sheep. MoneyWeek had a very good article about how stupid present policies are. HMRC has produced figures which prove, for example, that the increase in capital gains tax have resulted in a drop of more than 8% in taxes taken in by Capital Gains tax. This is hardly surprising, as both the free amount (which has been reduced) and the rate (which has been increased) mean people have started taking avoiding action. On present trends, this figure will be repeated in the next period. So at a stroke, some £200 million will have been foregone and that figure will rise and rise.
I could go on and on but the recitation of abysmal, disastrous figures is boring. So I’ll just mention the taxes and changes made to the so called Non-Dom sector. Supposedly, the new regime was to bring in an EXTRA £33 billion. There have been no specific figures mentioned so far (hardly surprising) but it looks as if in fact this year it will bring in less than before. Attacking rich people is extremely stupid as apart from anything else every other country wants them to come to live there. They can easily relocate.
When I was a mere Economics student, one of the first things that I remember being told was that Economics was the science of doing as much as possible with as little as possible. I regret to say this government operates on the diametrically opposed system of doing as little as possible with as much of possible. The waste of resources is truly staggering. If the Civil Service even got back to a) the size it was in 2018 and b) the same productivity then Rachel wouldn’t need to raise any taxes at all. Consultants have run riot through - for example – Local Authorities, almost all of which are bankrupt.
No one seems to be aware that it has to be paid for. Realistically it is impossible for Authorities to borrow any more as they have no way of paying the interest, never mind the Principal. That’s another thing people seem to have forgotten – the Principal does have to be paid back, though in today’s climate increasing indebtedness forever is the default action. The money being raised from people in local areas is also reaching a level that is unsustainable. It is not impossible that our lack of housing may soon be solved by homeowners going bankrupt, the councils taking over the properties and then putting people in them and getting no income. True Socialism.
And just in case you think the totally anaemic 0.1% growth last month was all right, have you checked the GDP per person rate in the UK? I very much doubt it. In case you don’t know, this has fallen for the last two quarters with no end in sight. On each and every measure that delineates the health or otherwise of the economy in the UK, we are continuing to lag behind on all counts. Oh and unemployment is up yet again – just to reiterate that is MORE people not paying any tax and in fact who have become a weight on the economy.
What is so annoying is that to turn this around would be incredibly easy. Stop the net zero madness. Stop increasing sums being paid out by inflation. As Jim Ratcliffe has said, it’s not just ONE measure you have to get right. It’s a whole raft of them. But collectively it works and reduces the burden on the long-suffering “hard working people.”
As we know, Labour have been unable to define exactly who these people are. I do know it is a collective soundbite, dreamed up as a catch-all to everyone that Labour conned into voting for them. I am by no means saying any other party would be any better but I repeat for the Nth time that the happiest nation in Europe which bumbled along quite happily was Belgium. Why? Because for very long periods they function without a government – in one period for over 13 months. What that meant was there was no tinkering. People could get on with stuff without looking over their shoulders every five minutes for the next new law that was only going to lay more paperwork and registration on them.
We have completely lost our way in this regard. Everything requires more and more bits of paper. Even Starmer, when trying to get elected, said he would ditch swathes of planning blocks, which, of course, everyone thought was great and plumped for it. Sadly, none of that has happened. In fact it has got worse. In the next couple of weeks I’ll give you a resume of how bad things have got. But for today, think of all the massive sums spent on U-Turns and for no discernible benefit. One that is going to have to happen sometime quite soon is the final phase of the work at Dawlish to secure the rail lines to Cornwall. £165million in, Labour stopped the final phase. Result? The rail-line – the only link for the whole South West – had to be closed again after the most recent storms. The one thing money should be being spent on is infrastructure.
It isn’t by nearly enough.
