Monday 3 March 2008

Twats of the day

I have lined up three twats from across the political spectrum, just to show I hate them all...

1) On the left, we have NEU-Lab minister Jim Murphy, who "dismissed the results of the [poll on whether people wanted a referendum on the EU-CONstitution], insisting that it had been largely ignored in his constituency. 'Most local people realised that this was an expensive gimmick and binned the ballot'."

Er ... there was a 36% turnout and 88% voted for a referendum, that makes 32% of eligible voters. Whereas at the 2005 General Election, NEU-Lab won a large majority with the backing of only about 22% of eligible votes!

2) On the right, we have Boris Johnson (in today's Metro, I can't track down the article online), claiming that public transport in London is expensive and over-crowded. Firstly, for Oystercard users it is not expensive - a twelve mile journey costs me about £3 a go. The state controls quantity and price, but it cannot control demand - if there is insufficient quantity and the price is too low, then of course there will be 'overcrowding'. AFAICS, what glib commentators call 'overcrowding', I call 'efficient use of limited resources'.

3) And finally, The Libertarian Party. They propose to cut out wasteful government spending, which is about a quarter of total spending or £130 billion. A very good start, BTW! But instead of wanting to get rid of the most damaging taxes (VAT and Employer's National Insurance - yield about £125 bn) they say they would scrap income tax, which all things considered, is nowhere near as damaging and is much 'fairer'*, in the grander scheme of things, than VAT and Employer's National Insurance. So it's just a headline-grabbing gimmick from people who don't understand economics.

See also my comments at DK's. Me, statist? I've heard it all now.

* Especially if the personal allowance were doubled to £10,000 or so.

25 comments:

Jock Coats said...

I agree on number 3. of course. While they were discussing possible policy they were talking about exciting things like Citizen's Income and I rather hoped there were some geo-libertarians in there. But given such a fantastic opportunity of creating a new party and new policy from scratch I'm a little disappointed, frankly.

There are an awful lot of statements such as "we believe in fairness so abide by current commitments" such as on pensions that, so far as I can see, are completely unfunded.

Mark Wadsworth said...

I put in a worked example over at DK's, yer employee on services sector would be one-third better off, but yer rich landlord would be about 100% better off. So on the facts, it's a shit policy. And their 'manifesto' waffles on about taxing consumption not production *yawn* in a service economy they are two sides of the same coin. And so on.

Gregg said...

I agree Mark. As far as Boris John son is concerned he should try living outside London and use public transport. I get tired of Londoners like him whining about it when, and I know from living 6 years down there, it is actually pretty good, in fact excellent.

Mark Wadsworth said...

That's 12 miles one way, so £6 a day. £1.70 for a local bus journey is outrageous, thanks for that snippet.

Anonymous said...

'I put in a worked example over at DK's, yer employee on services sector would be one-third better off, but yer rich landlord would be about 100% better off. So on the facts, it's a shit policy.'

So both of the examples in the quote are better off - bonus! No doubt you meant to include some kind of qualifier Wadsworth, you shite-muncher.

Mark Wadsworth said...

Yup. There is a qualifier.

If you do the economically rational thing, and scrap VAT and National Insurance first, so that everybody benefits equally, in particular the productive economy relative to passive landowners.

Or are you, Cookie, also a shill from the 'rich-landowners-party'?

Neil Harding said...

Just to add, I have actually met Jim Murphy at the Labour Party Conference a couple of years ago in Manchester. I didn't particularly like him (mainly because he is a vociferous defender of first-past-the-post and used the same tired old myths to slag off PR). Saying that he does seem to be one of the better MPs - he seems very hard working and he did give straight answers to questions (even though I didn't agree with him on practically everything). He is definitely telling a few porkies to fend off this referendum, maybe the ref is funded by mainly Tories (but not exclusively) - but his claims on the £100m cost and that '81% binned the ref' are a bit sneaky to say the least!

Roger Thornhill said...

Jock,

Citizens Income was set aside after much thought and discussion and the reasons were given in the forums. CBI is not even a Libertarian concept at all, being a redistributive policy, but was considered as a pragmatic simplification of the welfare system.

Roger Thornhill said...

Mark,

Just because scrapping income tax benefits landowners more might just mean that landowners are being unduly taxed at the moment.

Income tax is not just about numbers, it is a philosophical and political issue: with it the State has first dibs at the fruits of your labour. It too is a tax on employment, but Sales Tax is a tax on ALL good sold*, whereas income tax and corporation tax is only levied on the output of domestic companies.

LVT is a knotty problem, not least of all how to get from here to there.

* zero rating for existing zero-rated VAT items like unprepared food and if extended to rent and fuel would not be "regressive" IMHO. It might not be "progressive" but to me that sounds like a recommendation!

Mark Wadsworth said...

Roger, you are losing me... Are you saying that VAT/Sales Tax is good because it's like an import duty? Aren't you in favour of free trade, i.e. no import duties?

National Insurance is a surcharge on employment (don't forget basic rate income tax = 22%, Employee's plus Employer's NI = 23.8%).

"Might just mean that landowners are being unduly taxed" I'm sorry but you are losing the plot here, landlords don't pay national insurance (so they pay broadly speaking half as much as employees) and agricultural landowners get £75 per acre subsidies.

If you are against any form of welfare, that is a perfectly valid philosphy, but why do you advocate exempting landlords from (income) tax while burdening the productive economy with VAT and National Insurance? Isn't that going too far the other way?

The lefties think that somehow they can ignore basic economics, you lot are just as bad, as you think that your lofty principles somehow excuse you from actually trying to understand what it is that you are trying to reform and what the knock on effects are.

Jock Coats said...

First principles are good. Many libertarians however seem to trace theirs back only as far as 1957 and not to the nineteenth century philosophical origins of the movement.

If you seek to eradicate the four great monopolies of those nineteenth century thinkers you can't go far wrong. All other coercion it seems to me derives ultimately from the uneven playing field these create.

Mark Wadsworth said...

Jack, I don't have any overriding lofty principles whatsoever. I just look at what works and what doesn't. Everything else flows from that.

Roger Thornhill said...

Jock,

Put like that, it makes more sense philosophically*, but getting from here to an LVT "there" is not resolved AFAICT. Further, a workable rational replacement to welfare version CBI has not yet been presented. I am all ears on both counts

Thus, your answer, pending solutions as yet unseen, is the unachievable funding the unworkable.

* I am aware of the "enclosures".

Mark Wadsworth said...

Roger

If we are to have a welfare system at all, then the least-worst system has to be a CBI style scheme.

We can argue about how high it should be, of course, any answer between £nil per week and £120 per week has some justification, with corresponding up and downwards adjustment to overall tax rates.

I'd go with a CBI of £60 per week (which is the current jobseekers allowance rate - half that for children, twice that for pensioners) - people would have a choice between that and a higher personal allowance of £9,000 (assuming flat rate of income tax + National Insurance).

This would, happily enough be fiscally neutral - it would cost much the same as current welfare spending.

I did the workings for the Citizen's Income Trust (OK, they assumed everybody would claim the CBI and not the tax free personal allowance - the maths is the same).

See here.

Roger Thornhill said...

Mark,

Did I mention import duties? No. So why try (and fail) to twist it into such a thing? A more equal taxation of ALL goods sold regardless of producer country? Yes. Import duties? No.

It should be clear to anyone that 'ee and 'er NI is not long for the LPUK world, so your examples are not really valid.

Would you rather income and corporation tax were hiked to make up for VAT? Has it occurred to you that this means domestic production pays high tax while importers do not? That is like a domestic production tariff!

Jock Coats said...

I accept some of that Roger. It is always a battle to present a tactical route from here to there.

However, if you are going to take the massive step of abolishing Income Tax, say, that is itself the tactical point at which to implement LVT. Why is VAT/Sales Taxes (at two? levels of government no less) any easier a "sell" or to implement than, say LVT?

At the same time on the welfare side, for example you commit to upholding existing promises, such as old age pensions...as with Lib Dem policy on pensions ("citizen's pension") that could be used to start replacing certain welfare payments with CBI payments.

I suspect, however that Mark's blog is not the place to get bogged down in detail. It just seems to me that you are proposing things just as radical as a shift from Income Taxes to LVT, except your "tax shift" is more regressive in economic terms by increasing sales type taxes.

Tony Vicker's book last year "Location Matters" is quite a good discussion of the tactical route to getting LVT in place.

As I write I see you and Mark have had another round - let me pick up on something in Mark's last post - when you talk about CI being fiscally neutral, you are then I assume only talking about "cash benefits" rather than state services. With my slightly higher CI I'd be eradicating all health and education spending and expecting people to pay for their own insurance and schooling plans!

Mark Wadsworth said...

Jock - what you all 'a higher CI to eradicate health and education spending' I call 'health and education vouchers' like they have in Sweden for example.It's the same thing! (which I have long promoted on this 'blog)

I see no ideological difference between CI and education vouchers. Only one is seen as loonie left wing and one is seen as hard-right wing. Weird! They are both just 'least-worst' solutions. They work, and that's good enough for me.

Jock Coats said...

Hmm - okay. I'm taking a very hardcore Herbert Spencer interpretation that we should not be forcing people into education but that ensuring they have the means to do so, if that can be achieved with "publicly created value" like LVT would be sufficient.

Though I recognize a libertarian position that says we have the right to coerce children into school since the state has a measure of responsibility (and vested interest) for ensuring they turn out to be good potential citizens.

Roger Thornhill said...

Mark,

"If we are to have a welfare system at all, then the least-worst system has to be a CBI style scheme. "

I see no compelling evidence to suggest CBI is least worst. We went round the houses with this a few times. Most welfare recipients get housing benefit. You CANNOT make that a flat rate nationally. Even with regional variations (and even postcode variations?) fold it into CBI discarding means testing and you get a massive bill. Leave it out and you achieve little in the way of admin savings.

Jock Coats said...

However, if funded by collecting the full economic rent on land then "marginal" housing land falls in value to practically nil. My formula for first stage LVT actually removes all housing land in the bottom quintile by value in any district (roughly equivalent to the amount of social housing) from the tax anyway, deeming it "marginal". So those who can afford nothing more than their CBI would still be able to rent a modest home on such land as the rent would then only be for the bricks and mortar. Working completely from memory here - the housing budget, which includes HB, is "only" around £27bn - ie about 10% of the cost of my suggested CBI of £100 per week for adults falling to £20 a week for 0-2 year old children.

Mark Wadsworth said...

Agreed. As you may have noticed, the Citizen's Income Trust shied away from Housing/Council Tax Benefit. For claimant households these average out at £90 a week.

There are two least-worst solutions to this:

1) Instead of having means-tested HB/CTB and reducing them at 85% of a household's net income after tax plus tax credits, just make HB/CTB claimants pay an additional 20% of their gross income as rent/council tax. Under the CI scheme, the total marginal withdrawal/tax rate is still only 53%, a lot better than 85% or 95%as under current system.

This seems particularly appropriate to council tenants - the council is the freeholder, so whether it collects rent and council tax and pays out means-tested benefits, or whether it collects a single payment as 'local income tax/land value tax' is neither here not there, in economic terms, but administratively simpler.

2) Scrap HB/CTB and spend the money on workfare jobs instead, paying £90 per week tax free. This seems appropriate to private tenants claiming HB/CTB, bearing in mind that HB is just a subsidy for private landlords.

You choose!

Mark Wadsworth said...

Rog, re 'administrative cost savings' do you have any idea of how many welfare benefits there are (clue - over 70). Do you know which are contributory? Which are income or asset means tested? Which are taxable? How they interact? No, I guess you don't. Read up Tolley's book on the topic. Plough through the DWP's tax credit or pensions credit forms. Gaze in wonder at the DWP's Tax Benefit Model Tables and see if you can reconcile any of the figures. And ask yourself, is this helping people out of poverty? (clue - no). Are there cost savings to be made by moving to a CBI? (clue - yes).

Roger Thornhill said...

Mark,

You have put forward two solutions, but I am not one for accepting false dichotomies. The second option, workfare, is dubious at best, Statist and I have no confidence that it could scale sensibly in the public or private sectors.

Yes, I do know the tax and benefit system is a maze and 70? So low? Even if there are 70, how many apply to the same person in parallel? Each person needs their case reviewed, checked and assessed even if they only have ONE means tested benefit.

As for the cost, we did a costing to see how it would work to create a revenue neutral CBI - Income tax at 60+% from the first penny you earn* was one of the better models.

* considering that CBI is in fact your "tax allowance".

Jock Coats said...

Full LVT (on residential land only - you could use commercial and other land to pay for other things if wanted) would cover it. The £100 per week proposal for adults would cost about £250bn. If that was effectively the entireity of the state it would halve the current overall tax take.

Mark Wadsworth said...

Rog, like I said, these are the two least-worst suggestions that I have ever heard (nicked from other people over the years). Maybe there's something even less worse? I look forward to nicking it if you come up with something better!

As to revenue neutral CBI/income tax system (ignoring LVT for the time being), don't forget that two-thirds of welfare spending is age-related stuff! Working age adult benefits is scarcely 1% or 2$ of GDP - it's the knock on social costs that worry me - all the non-working families and the single mums milking the system - that's the real cost!!

The CI Trust model (have you looked at this yet) says that CBI of £30 (kids), £45 (young adults), £60 (working age adults) and £120 (pensioners) can be paid for out of flat 33% tax (to replace 22% income tax and 11% Employees' NI). And that does not factor in dynamic effects of getting rid of poverty trap and so on.

Jock, you know where you want to be, I am just telling you how to get there!