Tuesday, 18 March 2014

2014 Budget preview: It’s all gone a bit Mitt

Some budget predictions – in the last budget George Osborne rightly slagged off Gordon Brown for selling off wodges off UK gold reserves at pretty much exactly the wrong time. Given the Post Office sell-off fiasco he’s unlikely to make this joke again.

There will be very little, if anything, said about any concrete let alone meaningful changes to corporation tax that will address the fact multinationals, particularly US multinationals hoover money out of Britain whilst paying no and/or piddly amounts of tax. That some of these companies – notably Amazon – are utterly ghastly as employers and claim more in subsidies than they pay in tax will definitely get ignored as will the fact they need access to British markets more than Britain needs them. That their tax dodging gives them a competitive advantage over local businesses that do pay tax will similarly be ignored.

There will be some twaddle about some new allowances for businesses that invest in new toasters/rate relief for businesses setting up 16.8 miles outside of Swansea or what not with this trumpeted as being some kind of economic development strategy. In due course various accountancy firms will work out how to use these new arrangements as tax shelters for wealthy clients probably including Gary Barlow.

Right now though the biggie appears to be raising the tax allowance to 10 grand; this is a very bad thing to do. Paying tax is a necessary - but also socially and politically important-  “evil”. Taxes are how we contribute to the state and the greater good; they’re a marker of citizenship and probably the single largest entry ticket to British society we have. So deliberately raising the tax threshold is also deliberately excluding people from these things.

This matters. If you want an example as to why think of Mitt Romney’s 47% gaffe. Yes he was factually incorrect and yes his moralising was disgusting, and yet his bile still had some purchase with a reasonably big chunk of the American electorate. Now think of Britain where we have our very own Taxpayers Alliance and are routinely told how the top X% of earners pay Y% of all income tax i.e. paying (income) tax confers both moral authority and a political voice. Excluding people from income tax excludes them from both these things, which I reckon is a dangerous thing to do right now.

Rather, to help lower earners, keep the allowance as it is whilst increasing work related benefits and/or raise the minimum wage, basically anything else really because in an era of ongoing public spending cuts and benefit reforms,  any opposition to future cuts are likely to be responded to in a Mitt Romney style, just in an upper class English rather than a Middle-American accent*.

* And yes everyone also pays VAT, its just indirect taxation doesn’t have the same purchase or “feel” (hence the pies who make the top X% pay Y% of all taxes argument tend to ignore the fact average earners pay a higher % of their incomes in direct and indirect taxes than the highest earners).

P.S. Woo hoo the actual budget is out. So if I was on a poverty wage (60% of average) of £15,900 p.a. I'd be £11 better off a month. £12 if I was on £26,500 p.a. i.e. average and £15 if I was on £50,000. Now in % terms the lower earner is better off, except we don't live in a world of percentages (can I have  42% of that t-shirt please etc.,). Plus the lower your income the bigger the difference even a small gain makes to your well-being and living standards. This is not news, what is is that the changes to the income tax bands make clear who the priority is of the current government - more for the well off, less for the poor.

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