Abolishing National Insurance would be a tremendous gamble

 

Robert Henderson

George Osborne is thinking about abolishing National Insurance (NI)  as a separate tax and incorporating it into income tax.  The implications of such a move would be very  far reaching    because  the basic  NI  rules are complex  and effect far more than just NI deductions and the practical IT  difficulties it would create for both the government and employers, both public and private, are immense.

The most obvious and pressing reason why the idea should not go ahead is the fact that NI is one of the big earners for government. In the 2014/15 financial year it brought in £108 billion – see page 15.  Only  VAT  (£113.9 billion) and income tax (£163 billion) provided more tax revenue to the Treasury. To make up for the loss of the NI contributions income tax would have to be increased  massively if  income tax has to raise the £108 billion currently raised by NI  in addition to the £163 billion it currently collects.  That could only be achieved  by getting most of the extra money by  raising the basic rate (currently 20%)  massively, probably doubling  it,  because those paying the  40% and 45% income tax rate are not sufficient in number  to be able to bear the brunt of the increase. Moreover, once tax rates go beyond 50%  they become psychologically  difficult and increase the likelihood of evasion. In addition, the present government is deeply unsympathetic  to raising the higher income tax rates. The situation is further complicated by the government’s stated intention to keep on raising the personal allowance which at least in the short term is likely to reduce the income tax take.

The options  for raising some of the £108 billion by raising other taxes are limited.  VAT could be raised,  but that would be regressive because it  falls on everyone and would almost certainly suppress demand.  The next  two most productive sources of tax revenue in 2014/15 were  corporation tax  (£41.4 billion) and excise duties (£47.2 billion).  The fact that both  bring in so  small an amount in relation to what needs  to be raised means neither could  supply more than a small part of the lost  £108 billion even if their rates were raised substantially.  Moreover, raising corporation tax would go directly against Tory policy of having a low tax burden on business and increased excise duties would again be regressive.

The next  obstacle is the incompatibility of  the income tax and NI systems.    NI operates on a radically  different basis to income tax. Income tax is simple in principle, the complications which arise come not from  calculating the tax due but in deciding what is liable to income tax. There is the personal tax  allowance which exempts a certain amount of earnings  from tax and   three rates of tax (20%,40%,45%)  for three bands of earnings. The operation of NI is much more complex, involving  both employees and employers,  with a  link to benefit entitlements  and  NI rates which do the exact opposite to income tax rates, namely, the NI rate decreases as income  rises.

The NI system is too complex to give exhaustive detail here  but I shall outline  a few of the basic  NI facts to give a flavour of its complexity.  Currently NI  is not paid by anyone earning less than  £155 per week, although someone earning £112 per week  (the Lower Earnings Limit)  gets credit for benefits such as the state pension as if they were paying NI.  Those earning  £155 per week (the Primary Threshold) begin paying NI. When they reach £156 per week (the Secondary Threshold) the employer also begins paying NI.   This employer’s contribution is in addition to the employees and is a payroll tax.  When  the employee earns £815 per week (the upper earnings limit) or above they pay a reduced rate of NI.

People who are employees  pay 12% of their pay between £155 and £814 per week and 2% on their pay above £814 per week.  The employer will pay 13.8% on all earnings above £156 per week.   Benefits in kind, for example use of company car, attract  employers  but not employees’ NI at the rate of 13.8%.  This is a big saving  to an employee  enjoying substantial benefits in kind. There are separate rules for the self-employed which the government has pledged to alter during the course of this Parliament.   As can be seen the NI situation is very administratively messy.

If income tax  and NI are amalgamated a problem arises with pensioners over the state retirement age.    NI is not paid by those over retirement age, but income tax is. Hence, if NI is abolished and income tax is raised to compensate for  the ta x revenue  loss, many pensioners would be left paying far more tax unless the government exempted all or part of their income. But to do that would be incredibly messy, not least because large numbers of pensioners pay income tax.  It is also worth noting that more and more pensioners are working past retirement age.  If the income tax rise to compensate for the loss of NI revenue means a rate of income tax which makes those over the retirement age more expensive to employ, this will probably mean fewer OAPs working or having less income, either of which would create greater eligibility of benefits.

The payment of benefits generally would also create difficulty. At present NI contributions count towards  entitlement for:

Basic State Pension

Additional State Pension

New State Pension

Contribution-based Jobseeker’s Allowance

Contribution-based Employment and Support Allowance

Maternity Allowance

Bereavement benefits

The position with the new  state pension is complicated because , contrary to government suggestions that it would provide everyone with an enhanced pension,  this appears not to be true  with perhaps two thirds of pensioners not receiving the full pension.

Any consolidated system for tax and NI would have to either take into account the entitlement to benefits or the benefits would have to cease to have any connection with what the individual pays in  tax.  There would also be the complication of how to treat the entitlements built up prior to the abolition of NI.   The present  system of National Insurance numbers would have to be retained because they are tied in so firmly to the access to the British welfare state.

Creating an entirely new computer system  to accommodate both the new amalgamated regime  and the present stand-alone system  for income tax and NI  would be daunting at best and probably impossible. ( In this context it is  worth bearing in mind the lamentable record of British governments of all colours with massive computer systems.) It is likely  that both the old and new  Government computer programs would need to keep running.

Then there is the IT problems  and additional costs which would be faced by employers, the vast majority of which, together with  many of the self-employed,  use computerised accounting and payroll systems. All of those would have to be  updated or new systems bought, installed and staff instructed how to use them.  Many current systems would not be updated because they are either too old or the software company which created them has gone out of business. Public service employers are particularly vulnerable as they often  use bespoke systems, that is systems developed for them alone,  which are often very old in origin with many updates patched into them over the years.

Finally, there is the problem of ensuring that the additional income tax revenue is actually collected. There is also  a very real general  danger that a switch to a consolidated income tax/NI tax would not  produce the same revenue even if the Treasury calculates that  it would on paper.  The Treasury might simply get their sums horribly wrong because of the complexity of the integration they are managing.  Alternatively, smart   accountants may simply find ways of minimising any additional  income tax.  The beauty of NI from a tax collection point of view is that it allows much less  tax evading wriggle room compared with income tax.

National insurance is a far from perfect system, but it is difficult to see how it is radically unfair or its operation radically administratively inefficient. Its purpose is a sham in as much as there is no managed  fund created to pay for specific services and benefits,  and the link between NI and earned benefits is increasingly tenuous. But so what?  It is a major revenue source which regardless of the fact that it goes into the general Treasury pot is major part of the funding source of the Welfare State. Moreover, any government could decide to make  NI an hypothecated tax allocated to particular circumstances.

As for being administratively simpler, this  seems wildly improbable  when our past experience of large scale  government  IT systems is of consistent failure and  there will be undeniable extra costs for employers.

At best the abolition of NI  would be a tremendous gamble and at worst unreservedly reckless. Government  policy should never be about gambling.

Replacing the BBC licence fee

Robert Henderson

I have always had objections to the licence fee. It is a poll tax enforced by an extensive and expensive bureaucracy armed with extensive powers to harass the public. The practical consequences of the fee are the poor subsidising the rich and thousands of the poor, mostly women, brought before the courts each year for non-payment of the licence fee. The last is far from being a small matter because recently it has been revealed that an incredible ten per cent of court cases in the UK (http://www.telegraph.co.uk/culture/tvandradio/bbc/10256679/TV-licence-offences-account-for-one-in-ten-UK-court-cases.html).

But whether or not you think the licence fee is the best solution to funding public service broadcasting (PSB), your opinion  will become academic in the foreseeable future  because the technology is moving on rapidly. TVs as we know them will  be on the way out by the time the BBC charter comes up for renewal in 2016, as computers (and conceivably something completely new) become the means to view what we now call television. (A tax on personal computers is currently being mooted. Take it from a retired Inland Revenue Officer, this  is administratively bonkers).

The alternatives to the licence fee fill defenders of PSB with horror, and in most instances, justifiably so. Voluntary subscriptions could never provide the necessary finance and advertising would corrupt programming because of the need to draw audiences.

But there is one means of funding which could preserve the status quo – direct funding by the taxpayer. I have never understood the objection in principle to this. If direct funding could be cut off or reduced at any time by a Government, so can the licence fee. In principle, Parliament could pass a Bill tomorrow overturning the BBC’s current charter. More realistically, a future Government could simply decide to destroy or at least severely emasculate the BBC through legislative action.

Can anyone honestly say that the World Service (WS), which is (and always has been) directly funded by the taxpayer, has been the creature of any government? Has any government seriously reduced WS funding because it did not do what the government wanted? I think most people would give a pretty firm no to both questions. The BBC domestic service is in fact already receiving substantial direct payments from the taxpayer in the shape of  payments of around œ400 pa to compensate the BBC for the licence fee exemptions made for the over-75s. Has that made any noticeable difference in the relationship between the BBC and the Government?

Direct funding could be guaranteed on the same basis as the licence fee, a ten-year charter with a guarantee that direct funding would last for the period of the charter. Ideally, the funding would be linked to some objective criteria such as a proportion of the total UK broadcasting spend and adjusted annually according to whatever the total UK spend was for the past year. This would both guard against politicians interfering during the period of the charter and  provide less opportunity for the private side of the industry to complain about unfair competition because the proportion of the overall UK spend would remain static. That would remove the private sector fear that the BBC’s seemingly remorseless expansion will have limits. The BBC could strengthen their position further in that respect if they eschewed any active commercial activity beyond selling programmes which they have made in-house or funded directly from an independent production company.

Direct funding would also improve the relationship between the BBC and the public. All experience shows that direct payment by the individual is what causes friction. Hence, the Council Tax causes more friction than paying income tax, VAT etc from which central government pays the majority of local council spending. Hide the expenditure in general taxation and complaints usually die. Even the most  belligerent member of the “Why should I pay the licence fee when I don’t watch the BBC” brigade would find it difficult to rally under a “Why should I pay my taxes to directly fund the BBC” banner.

In the end PSB is reliant on what politicians do. But  there are several good reasons why they would not willingly damage the BBC. To begin with politicians are human beings (just)  and many have an affection for the Corporation. A substantial hard-core are committed to PSB in principle. Others see it as a prestigious British institution which deserves to be preserved for that reason. There are also the base political reasons. The first is obvious: dismantling or seriously damaging an organisation as large and influential as the BBC would be a risky business for any government, which would risk being caught in pincer movement of journalistic wrath and public resentment at the loss of a unique service (the BBC is one of those institutions which will not be truly appreciated until it ism not there).

The second base reason is wonderfully self-serving and simple. The continued existence of the BBC is convenient for politicians, because it provides them with political coverage and opportunities which no private broadcaster can offer. This advantage may grow as privately financed  broadcasting becomes increasingly fragmented in the future. Politicians need large audiences. Broadcasts with small and diminishing audiences is not what they want. If the BBC  continues to exist in something like its present size and importance, a large audience can be guaranteed.

In an ideal world, the public would have such elevated tastes that PSB would not be necessary because only the best programmes would be broadcast as the market acted to select them. However, the world being far from perfect, PSB funded by the taxpayer offers the best hope for broadcasting which is not driven solely or largely by the meretricious hand of demand.



Inflation is theft on the grandest of scales

As the Retail Price Index remains over 5% and the Consumer Price Index reaches 4%, it is reasonable to ask why the Band of England’s Monetary Policy  Committee  (MPC) is not raising interest rates.

The MPC’s  sole remit is to keep inflation at around 2 per cent. This remit they have ignored since Lehman Bros failed in 2008. It is clear they are following not their ostensible remit but government policy, which increasing looks like inflating public and private debt out of existence. 

Anyone who still believes the government guff about the MPC being independent of government  needs to be sectioned for their own good.   The committee is recruited as follows:

‘Monetary Policy Committee  

Interest rates are set by the Bank’s Monetary Policy Committee. The MPC sets an interest rate it judges will enable the inflation target to be met. The Bank’s Monetary Policy Committee (MPC) is made up of nine members – the Governor, the two Deputy Governors, the Bank’s Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor. The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England…..

Each member of the MPC has expertise in the field of economics and monetary policy. Members do not represent individual groups or areas. They are independent. Each member of the Committee has a vote to set interest rates at the level they believe is consistent with meeting the inflation target. The MPC’s decision is made on the basis of one-person, one vote. It is not based on a consensus of opinion. It reflects the votes of each individual member of the Committee.

A representative from the Treasury also sits with the Committee at its meetings. The Treasury representative can discuss policy issues but is not allowed to vote. The purpose is to ensure that the MPC is fully briefed on fiscal policy developments and other aspects of the Government’s economic policies, and that the Chancellor is kept fully informed about monetary policy.’

http://www.bankofengland.co.uk/monetarypolicy/overview.htm

The heavy hand of the chancellor can be seen. He appoints  four out of the nine members, and can easily influence the selection of the others with a nod and a wink.  Powerful  men do not have to directly command for things to happen. They merely express a wish and leave the underlings to make it happen. The most famous instance in English history is Henry II’s  “Who will rid me of this turbulent priest”  which sealed the fate of Thomas A’Beckett.

The Henry II ploy also operates when senior politicians express a wish for interest rates to be left unaltered or raised or lowered.  This Vince Cable the Business Secretary was at it yesterday when he ‘used an interview with Bloomberg Television to suggest the Bank of England retain its loose monetary policy.

“As an outsider looking in, I take the view of the doves,” he said. “Although you have inflation, it’s almost entirely imported. There’s not very much evidence of British inflation taking place. It’s virtually deflation.”

Mr Cable said that with the Coalition’s fiscal squeeze in full throw, tightening monetary policy was “potentially very difficult”.

Mr Cable’s views follow comments from David Cameron last month when the prime minister described inflation as “worrying”. While Mr Cameron was careful to point out that he supported the independence of the Bank of England, he faced criticism from some quarters for involving himself in the debate.’  http://www.telegraph.co.uk/finance/economics/8324233/Vince-Cable-says-interest-rate-rise-would-be-very-difficult.html

It is dishonest to say that because British inflation is being caused by the cost of imported goods and materials there is no point in clamping down on it.  To do so would reduce the general  inflation level because the money supply will tighten.  Of course that would potentially reduce growth, but that  is the choice before the government: inflation or slower growth.   Ironically, at present it looks as though they are managing to achieve both as stagflation takes hold.

Deliberately inducing or tolerating inflation to devalue debt, especially public debt, is a well practised  strategy by irresponsible governments. It eventually comes back to bite the countries who practise it because it destroys confidence at home and abroad amongst those who would  invest  or loan money to the governments or people of such a  country.   Inflation is theft on the grandest of scales.

The logical end of a free market is monopoly

The logical end of a truly  free market, that is, a market without any state interference,  is monopoly .The reason is obvious:  competition tends to reduce the number of competitors through the natural process of success and failure and the takeover of one firm by another.  In some trades this does not create an obvious  serious anti-competitive difficulty because the initial capital investment is small and entry to the trade within the reach of many. But entry to a considerable and growing number of areas of manufacturing and service provision is too expensive for all but a few. 

In a significant minority of trades starting a business from scratch is practically impossible for any one individual or even a group of private investors.  The car industry is a first rate example, the number of companies now being small (and becoming smaller) compared with the number of even 40 years ago. Moreover, many of the car companies which do still exist do so only because of state subsidy and protection.

Because the natural end of a truly free market is monopoly the self-proclaimed laissez faire believers have introduced the most potent of state interferences into the market, namely, anti-monopoly laws. However,  anti-monopoly laws operate within the constraints of other laissez faire sanctioned interferences with the market such as patent rights and limited liability and widely differing national taxation and social welfare schemes.  In addition, anti-monopoly legislation generally  only effectively attacks the problem from one end. A company can  be prevented from growing its market share by taking over other companies but there is normally no meaningful restriction on a company growing its market share simply by expanding the existing company.  Microsoft and the domination of Windows is a classic example.  Those limitations  alone means anti-monopoly laws  are  limited in what they can achieve  and situations of oligopoly if not monopoly commonly arise.

But even where expansion is by takeover or merger,   experience shows that those charged with applying the legislation allow very large parts of a market – 25% or more – to be held by a single company. The consequence is that a market which would seem to be an obvious candidate for competition, for example, food and domestic supplies retailing, can easily  come to be dominated by three or four  major players (as is the case in Britain).

 There are also those products which are either natural monopolies because of the physical location of their infrastructure – railways, roads, the utilities such as gas – or which are inevitably going to have few entrants in the field because of reasons of cost, for example, aerospace, motor cars, ship building. Finally, there are those rare markets which are dominated by one company simply because of the nature of their business. The classic example of this is Microsoft and their Windows operating system.

The upshot of anti-monopoly laws,  state-granted privileges such as patents and the failure of anti-monopoly laws in practice is an economic ideology which is incoherent and a practical situation of markets which are neither free in the sense of being without state control or free in the sense that there is meaningful competition.  

 Microsoft and Windows – a natural monopoly

 In South Park: The Movie, there is a glorious scene where, under martial law, Bill Gates is executed for falsely promising that Windows 98 would be “faster,  easier to use and more reliable”.  Many long-suffering Windows users doubtless wish that life had imitated art in that instance.  Yet despite widespread dissatisfaction  Windows remains the overwhelming dominant operating system.

 At first glance it might seem that operating systems should be just the type of product which is open to fierce competition because software is a market which potentially has low entry costs. It is true that most areas of programming are competitive – within the constraint of the dominant operating system (OS) –  but operating systems are the odd man out. The reason is simple. Once a single OS gained dominance, the chances of any other system effectively competing were very small.  This is because the weight of programs available to run under the dominant OS soon became much greater than those which could be run under any other OS.  Thus, it becomes inefficient to choose any other OS.  That in turn means most of the software is written in a way to make in “friendly” to the dominant OS systems’ users. This further excludes OS competitors and the software to run under them because users, especially employers, do not want to spend the time training their employees on completely new systems, converting data etc.

The consequence is that Microsoft still has a stranglehold on the pc market.  Moreover, if anyone wants to write any other software, they are constrained by the practical need for it to run under the Microsoft OS if they wish to reach the mass computer user market.

 The near monopoly has lasted a long time.  It has done this despite considerable attempts by both rivals and the US government to diminish their market position. Windows’ dominance  looks secure for the foreseeable future.

“…since records began in 1659”

The year 1659 appears with remarkable frequency in the media in 
connection with the English climate, often in the form “since records 
began in 1659”. It is a statement  rarely if every questioned by 
anyone with access to the mainstream media. 

Just pause and think about that claim. Does it seem probable that 
official weather records have been meticulously kept for three and a 
half centuries, kept before the scientific and industrial revolutions, 
kept before the English or British state became a bureaucratic monster? 
The answer of course is that it is extremely improbable  and did not 
happen. What did happen in the third quarter of the last century is that 
a British meteorologist by the name of  Gordon Manley attempted to 
produce an historical series  for temperature in England which he 
eventually extended to 1659. His work over a quarter of a century is 
summarised in two papers published by the Royal Meteorological Society: 
The mean temperature of central England 1698-1952 (1953) and Central 
England temperatures – monthly means 1959-1973 (1974) The two papers 
can be found at  http://www.rmets.org/publication/classics/cp1.php Other 
academics have built on his work since. 

Manley, like a good academic, was scrupulous in admitting the 
difficulties in constructing such an historical series: “Methods of 
approximation must be resorted to [when constructing any historical 
series],  most notably in England where, despite our very long 
scientific tradition, almost all observation before 1841  was dependant 
on amateur effort so that widely scattered records of diverse length and 
accuracy provide endless problems… The English records offer a 
formidable problem”. The opening paragraph of  his 1953 paper. 

“Formidable problem” is understating matters. Even readings of 
temperature today using highly sophisticated equipment  cause 
considerable dispute because where the measurement is taken is all 
important, for example,  readings taken in or close to urban  areas will 
produce a higher temperature than ones taken in areas with little or no 
human habitation. Trying to get a consistent environment to take 
temperature over a long period of time is obviously difficult and 
comparisons with the past questionable because we can never know what 
the conditions were exactly at any point in the past.  Hence, even with 
the advent of official records early in Victoria’s reign it is not 
simply a question of comparing data from one time with another. For 
example, has can temperatures in London today be meaningfully compared 
with those of 150 years ago when there were no motorised vehicles and 
coal was the main energy source? 

Once Manley enters the period before the official records (pre 1841) his 
caveats  become ever more severe, whether it be the paucity of the data, 
breaks in the data, the widely different means used to collect data, the 
absence of any information about how data was collected and even the 
switch between the Julian to the Gregorian calendar in 1752 which means 
every record prior to the change has to be recalibrated to the 
Gregorian. 

Manley’s research and analysis was honest but the most rational thing 
to conclude from it is that it proved no meaningful  historical 
temperature series  for England could be constructed over the period. 
Yet his research is trotted out as having the status of certain fact by 
the mainstream media, politicians and, to their shame, often  by 
scientists when they enter the realm of public debate.

How the market fails to provide what the customer wants

 There is no better modern example of the market failing to provide what the customer both needs and wants than the computer industry. If it was driven by the customer, the computer industry would produce hardware and software which was easy to install,  had continuity of use, was simple to use and was supported by adequate help lines and manuals. The industry signally fails to do any of these things.

Hardware and software are of course purchased in ever greater volume and computer services, including maintenance, continue to swell.  But that is not an indication of customer satisfaction. Rather, it is simply a reflection of how computers have become an inescapable part of our lives, not only as obvious computers but also in the guise of so many of the other machines we use – everything from phones to intelligent clothes. Business and public administration have become so dependent on their use that they cannot do without them. That being so, whatever is on offer, however unsatisfactory, is bought out of sheer necessity.  The computer companies have the modern world over a barrel.

It might be objected that although most people cannot completely escape computers at their work, they do not have to bring them into their private lives. Yet increasing numbers buy computers for private use.

Why do they do that if the machines are so unreliable and demanding? Simple: once a significant minority have private computers and business uses them very widely, it becomes very difficult for the rest to resist, not least because businesses and government increasingly require those dealing with them to do so by computer.  But there are other pressures as well.

We have long passed the point where a handwritten document is  likely to be read by most people in business unless it involves an order or payment. Now, except between social contacts, everything must be wordprocessed to be acceptable.  A word processor or access to one has become a sine qua non  for anyone who wishes to be taken seriously.  Even amongst private individuals a letter is increasingly seen as unusual or even quaint.

With emails, we have not come to the stage that telephone ownership reached  a quarter of a century ago when not to have a phone became considered eccentric, but we are rapidly moving towards it.

Employers increasingly wish to contact employees by email wherever they are and this means the choice is often between having a computer and email at home or not having a job.

Those with school age children, whatever they think of computers, find it next to impossible to deny their children not only a computer but access to the internet, both because the children want it to match their peers and because they have been brainwashed into believing that a computer is a necessary educational tool.

In short, people are increasingly being driven to become computer owners  and users  not because they actively want to,  but because they feel isolated and excluded if they remain computerless. Again, aswith the analogy between telephones and emails, within the foreseeable future,  someone without a computer is in danger of becoming in the eyes of the majority as much as an oddity as someone without a TV is now considered.

Is society materially enriched by “free markets” and “free trade?

This is an impossible question to answer categorically because there is no way knowing what would have happened if protectionism had remained full blooded throughout the last century and a half. One can compare growth rates under stronger or looser protection regimes,  but they really  say little  because the other determining factors such as public expenditure have varied so greatly.  These variables also blur judgement about the comparative merits of controlled and “free” domestic markets.

 The most certain thing one can say from the economic experience of the developed world is that governments running commercial industries such as coal and steel directly is generally a mistake. (Governments are the natural suppliers of universal services such as healthcare only because private provision of such things is never adequate.)

What is certain is the fact that the material effects of “free trade” are far from uniform. It is no consolation to those who suffer along the way that others may benefit from their disadvantage. The next generation or the generation after that may be richer but why should their benefit be brought at the cost of disadvantaging  a prior generation?  Certainly no politician or political party standing at an election would dare to do so on a platform of “we shall make many of you poorer to make future generations richer.” Those living at anypoint in time have their own moral context and needs.

The constant economic turmoil caused by “free trade” and its inevitable concomitant,  the supranational corporation,  undeniably leads to circumstances  which greatly disadvantage large swathes  of  the opulation in the First World through the removal of First World jobs to the rest of the world. At worst, these people become the perpetual victims of structural unemployment (try getting a job in an area where the main employer closes and you have no scarce or easily transferable skills or you are middle-aged or, indeed, try opening a new business or becoming self-employed in a depressed economy): at best they are diven into ill-paid and uncertain employment.

 What is meant by material enrichment? Britain as a case study 

The assumption is that the material conditions for most have improved considerably over the past two hundred years. Any economics textbook will plot economic improvement in terms of rising real  wages. But those supposedly  rising real wages are based on measures which are often  questionable, incomplete or derived from very narrow  data such as corn prices.  Even modern measures such as the Retail Price Index (RPI) are not static,  their content and weighting being regularly revised. Nor do such measures fully represent the true costs of necessities, the most notable distortion in Britain being the failure of the Retail Price Index (and its successor index the Consumer Price Index) to reflect housing costs fully.  Any comparison between different times based on such measures needs to be treated with caution.

Of course no one in their right sense would question whether there has been massive  material advance in the past two centuries.  A more interesting question in our context is  whether most people are materially better off now than they were in 1960s,  by which time  a fully fledged welfare state was bedded in, housing, both owned and rented, was reasonably priced, social housing was being built in assive quantities, university education was not merely free but students subsidized with grants, unemployment was tiny and inflation low.

Today  the welfare state is constantly under attack by the British political elite and in some areas such as NHS dentistry already seriously inadequate, while the state pension is much reduced as  a fraction of the average wage following two decades of increases linked to the  cost-of-living pegging rather than increases linked to the average national wage. Housing of all sorts in most parts of the country is presently absurdly  costly and social housing is greatly reduced  through Right-To-Buy and minimal new building since the 1980s. The cost of university education is rocketing and grants are a distant memory.

Unemployment remains high today (2005) even by the official figures – approximately 950,000 by the claimant count and around 1.5 million by the most widely used international measure –  figures which  most probably  severely understate the real unemployment level because it ignores the considerable disguised unemployment within the 2 to 3 million people currently on long term sick benefit payments (the 1980 figure for such people was 600,000). The increase in those staying on at school after the age of 16 and going on to university has also reduced the present figures by taking hundreds of thousands out of the jobs market for years.  From 1945 to the late seventies unemployment never rose above a million on the official claimant count and for most of the time was considerably lower even with little  disguised unemployment and far fewer people staying in education after the school-leaving age (which was only 15 until the mid sixties).

There  are other fundamental social changes which bear upon the material state of the nation.  Many more people today have to travel long distances to work than they did forty or fifty years ago.  That is costly both in terms of fares and time.  More generally, it is increasingly difficult for someone on the average wage to support a family on that wage. That often means both parents have to work not from choice but necessity.

 Taxation bears much more heavily on the poorer part of the population now than it did in the past.  Direct taxation – income tax, national insurance, inheritance duty – applies to many more people now than it did in 1960,  primarily because a failure to maintain  personal allowances and tax bands at a reasonable level. Direct taxation is also broader in scope, for example VAT compared to purchase tax.  Such taxation takes proportionately more of the income of the poor than the rich.

It is a moot point whether overall people are generally materially better off than they in 1960. They may own more trinkets such as TVs and computers and some imported goods such as clothes may be at least much cheaper, but those are small advantages to set against the great increase in housing costs and commuting fares and the diminishment in social provision. Doubtless a section of society has benefited, but it would be a brave man who wanted to argue that the condition of the vast majority has improved, especially the poorest third of the population.

Many will  read this with astonishment, saying but we have so much more today, dazzled as they are by the many new  products. It is important not to confuse technological advance with “free markets” and “free trade” or general material wellbeing. People are undoubtedly better off in 2005 in terms of being able to purchase such things as cars or electronic goods then they were in 1960.  But people in 1975 were also better off in those respects than those who had lived fifteen years before. That improvement  was long before “free markets” and “free trade” had become the elite ideology.  It is worth adding that  new products often result in additional expenditure regardless of whether the individual really wants the product – any product which becomes widely used is difficult to resist. Technological innovations are particularly prone to induce reluctant purchases.

Do we really want to live forever?

Research into ageing is progressing to the point where a substantial increase in  the human lifespan may become reality within a generation or two. In November 2010  Ian Sample of the Guardian reported   http://www.guardian.co.uk/science/2010/nov/28/scientists-reverse-ageing-mice-humans#history-link-box   ) on research at the John Hopkins University of Baltimore which has rejuvenated  mice

“What we saw in these animals was not a slowing down or stabilisation of the ageing process. We saw a dramatic reversal – and that was unexpected,” said Ronald DePinho, who led the study, which was published in the journal Nature.

The question which humans need to consider seriously now rather than later are  the effects , both on the individual and on society at large, of substantially increased lifespan.

Greatly increased human lifespans are potentially profoundly dangerous because they will detach humans from the lifespan evolution has prepared them for.  it is a mistake to imagine that few people live to be old until recently, the very low average life expectancies in the past and the third world today were and are primarily due to infant deaths before the age of 5 with very heavy mortality in the first year.  If you got past 5 you had a good chance of reaching adulthood and if you reached adulthood a sporting chance of living  beyond 6o, with significant numbers living into what even today we would consider extreme old age.  In short,. There have always been people living to the outer limits of the natural human  life span so that any substantial increase in longevity will mean entering into virgin territory. 

The greatest fully-authenticated age to which any human has lived is 122 years 164 days by Madam Jeanne Louise Calment of France. She was born on February 21, 1875 and died on August 4, 1997. However, few humans have ever got past 110. More and more people are living to be 100 in the developed world but the vast majority of those die not long after reaching their century.  The average  lifespan of those not struck down early by illness, accident or  violence is  probably between 80-90. 

Suppose  humans begin to live until the average lifespan is  160, about double the average of those living in developed countries now.  That will mean some will probably live to 200+.  Few would welcome a century or more of extreme old age with all its natural physical privations.  But suppose  that scientific advances slowed the ageing process to half it is now , with a man of 80 being the equivalent physically of a man of 40 today.  Surely that would remove the obstacle to enjoying twice our current lifespan?  It would probably not do so.

The person might be physically the same at 80 as they were previously at 40,  but the psychological and sociological place they would be in would be completely different. Imagine having to live with the same partner for 120 years or more. Think of having to deal with your siblings for  a century and a half.  Consider the prospect of having to occupy yourself, with work or otherwise, for 120—140 years, with many decades of waiting for advancement.   Some would  adjust to it, but I doubt whether most would be able to beat off ennui . In this context it is worth thinking of the large number of people, mainly men, who die early in their retirement.

Of course, in all probability expanded life expectancy would not mean a life where the ageing process had been  slowed proportionately to the increase in lifespan, but even if  it  had been, an  average lifespan of  160 would mean  twice as long suffering the physical and mental inhibitions of old age.  Nor is it probable that all illnesses could be prevented or cured or damage caused by accidents or wilful violence repaired to restore the damaged individual to full health and capability. Imagine suffering from arthritis not for twenty years but forty years or having to care for someone suffering from dementia  for  half a century.  The toll on individuals and the taxpayer would be vast.

To those problems would be the prime sociological one of how and when to breed. Even if puberty was delayed in the same way general agein and a person was likely to be 50 before they bred rather than 25, that would still leave 110+ years to know their children. And who would want to have a childhood stretching out to 50 years?

Then there would be the problems of vast population inflation even if breeding rates remained as they are today because twice the longevity equals twice the population and the subsequent pressure on resources.

If age was extended beyond  160 all these problems would multiply.

There would be the very real  danger of the rejuvenation treatment being restricted to the rich or some other form of an elite. This would in effect create two species of homo sapiens. It would also provoke, sooner or later, great social unrest.

Could man ever be immortal even in principle? ? To achieve  that would require the ending of all mortal disease and the repair of all mortal  injury, but even then death from accident, war or murder would happen sooner or later.  Perhaps it will become possible to “download” a personality with all its memories and then “up load ” the personality to an artificial body or more probably a clone of the original, but what would that be,  you or something else altogether?

Don’t be bullied by the bankers

Our ears and eyes are being incessantly  assaulted by a mixture of whining and threats by bankers  and the leaders of big business along the lines of how they cannot possibly remain in Britain if the “penal” income tax of 50% on taxable  incomes over £150,000 is not scrapped, corporation tax massively reduced and the multifarious existing tax loopholes for companies and individuals left unplugged.   Let us imagine what would happen if  they carried out their threat and left.

The place to start is to look at the take from the various taxes. Here are the projected Treasury estimates  for  the financial year 2010/11:

 £billions

150           Income tax                                      

 99             National Insurance                       

 81             VAT                                                      

 46             Excise  (petrol,booze and and fags)      

 43             Corporation tax                                 

 25             Business rates                                       

 25             Council tax                                           

79              Other                                                    

548            Total                           

Easy-to-browse Budget document pages 8/9

http://www.hm-treasury.gov.uk/junebudget_easyread.htm

The first thing to note is that Corporation tax comprises a mere 7.84%  and  income tax, National Insurance and VAT combined bring in 60.21%. Hence, although £43 billion is not to be sniffed at it is still a very small part of government revenue. This will doubtless come as a surprise to most people who are besieged with propaganda about how vital corporation tax is to the economy.

Of course there is no prospect of Britain suddenly losing all or most of the corporation tax,  because we know from previous periods of much higher British taxation than is now proposed that most who threatened to leave did not do so and, in any case, most of private enterprise economic activity has of necessity to operate with any country’s tax system.  Moreover, as the Euro bids fair to go over the cliff to oblivion at worst and to stagger along supported by Germany (which will undermine their economy) at best, Britain is looking like more and more of  the  safe EU haven for business and individuals. 

The total tax (all taxes) paid by  the UK  financial sector, according to a recent PricewaterhouseCoopers report, was   “Taxes paid by financial services companies were worth £53.4bn in the 12 months to March” 2010. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8204623/Financial-services-sector-pays-most-tax-to-UK-Government.html

That is a substantial amount but it is only around  10% of the tax collected in 2009/10 financial year.  Again, as with corporation tax,  there is no way the majority of that economic activity is going to move  out of Britain because much of it serves the domestic British market and because Britain has the structural advantage of having many of the internationally important  financial institutions on its soil. But let us suppose half of the tax paid was lost by personnel and businesses moving abroad. Compared to the quite fantastic  sums of money  – hundreds of billions –  which these supposed financial wizards have already cost Britain, a cost which will continue rising as the bad debts keep growing,  £26 billion lost would be a drop in the ocean.  

But the PwC  estimate  of tax paid may be too high. The reported tax take from the City in the  financial year 2008/9 is £32.5bn (Open Europe 28 7 2009 Government reveals City firms contributed £32.5bn in tax revenue in a year) This is  interesting for two reasons: firstly, the £32.5 represents only around 5% of  the total UK budget spend for 2008/9 (excluding the bank bail-outs).  Hence, the idea that the City is massive  driver of tax revenue is objectively wrong. 

The truth is that whichever estimate is taken the  tax paid by  the City is tiny compared with the amount that the taxpayer has pumped into the banks so far – hundreds of billions and perhaps as much as a trillion. Therefore, the total amount in taxes contributed by the City since 1997 is almost certainly much less than the taxpayer has had to pump in to date. Moreover, the pain is far from over because the banks and their ilk are almost certain to have further massive bad debts to announce which will result in more taxpayer support.

The scale of the debt created by reckless behaviour in the financial sector is shown by the growth of the   national debt and its projected future growth. . The Office for National Statistics (ONS) projects a  national debt of £792 billion by the end of the 2009/10 financial year  with another possible £1.5 trillion being added before the crisis is over. (Independent 5 11 2009 1.5 trillion  could be added to national debt). This would leave Britain with a national debt of  £2.3 trillion, substantially more than current GDP which is around £1.5 trillion. Before Northern Rock was nationalised, the National Debt was officially less than £600 billion. ( It should also be borne in mind that the National Debt is substantially larger than the current official figure because Brown’s Enron-style accounting has kept the true cost of PPP and PFI off the books, most of the ongoing debt not being included in the National Debt.)

If we can only guess at what the ultimate cost will be to the British taxpayer, it is clear that that the sums involved are so vast they will  swallow up many years of the tax generated by the City. For example, if  the £2.3 trillion national debt figure is reached, that would mean the profligacy of the banks and their ilk in Britain would have saddled the taxpayer with  around £1.7 trillion pounds (the national debt before the Northern Rock crash was less than £600 billion.). Taking the £32.5 billion tax figure for the City in the past financial year, it  would require approximately  52 years of  tax revenue from the City at that level to meet the £1.7 trillion the taxpayer may have to service and/or pay down  if the predictions turn out to be anywhere near correct.

Even the City’s  contribution during the boom years is overstated, viz.:  “…we are apt to attribute the sudden spurt in Britain’s prosperity in the mid- to late-1980s to a deregulated and reinvigorated City, it owed far more to the massive windfall from the North Sea. Take a look at the numbers. In 1979, when Margaret Thatcher came to power, the amount Britain owed, as a nation, was £88.6 billion. In the subsequent six years, taxes from the North Sea (which had been pretty much non-existent previously) generated an incredible £52.4 billion. “(Edmund Conway Telegraph 4 11 2009).

There is also the question of the amount of tax bankers actually pay compared with what they would pay if they were under strict PAYE, the fate of the vast majority of British employees.   The Daily Telegraph reported (James Quinn  16 Oct 2009) that the tax due on a Goldman Sachs bonus pot of £13.5 billion  for 2009/10 would £2.5 billion.  Let’s do a bit of arithmetic. Suppose all of the Goldman Sach’s bonus pot of £13.5 bn is taxed at 40%. That would be £5.4 billion. Of course they will all have personal allowances and be taxed at the standard rate of tax up to the point where 40% rate comes into play. However,  balanced against those reductions are the NI contributions, both employee and employer, and the new 50% tax band above £150,000. That duty  would almost certainly substantially outweigh reductions caused by  the lower rate tax band duty and the personal allowances.  However, for the sake of simplicity,  let us assume that the higher rate tax band and the NI c contributions  merely balance out the lower rate tax and personal allowances. Instead of the £5.4 billion due at the 40%  tax rate the Treasury is only slated to receive less than half that amount (46.20% to be exact).. The balance is tax avoided at best and evaded at worst.  If it is only £2.5 billion the average real rate of tax on their entire earnings will be around 18% based on the entire sum being taxed at 40%., although  it could be even lower in reality depending  on  the balance  between  tax allowances and the lower rate tax band and national insurance and the higher rate tax band, possibly as low as 15%.  That would be a  substantially lower rate of tax than a worker on average pay under PAYE. Nationalise the banks and that type of  avoidance  would become a thing of the past if politicians have the courage and lack of self-interest to control banking  remuneration. 

The City of London has not been a boon to Britain, but an albatross waiting to be hung around all our necks.  The size of the financial services sector is large but it accounts for only a small part of British GDP. Estimates of its size vary but most  are  in the range of  7-10 percent of GDP. IFSL Research puts the contribution of financial services for 2007 (the height of the boom) as low as £7.6 billion, put employment in the financial services in 2008 at 1.03 million and their positive contribution to the balance of payments  in 2007 at £36.9 billion.

That leaves a great deal of other British  economic activity and employment. Even with every financial institution in the country nationalised most of that banking activity would remain. In addition, the profits to be made by cautious state banking would substitute for substantial parts of the current tax revenue which is spent by government. Moreover,  as economic commentators and politicians are beginning to acknowledge,  Britain’s heavy reliance on financial services has caused  the British economy to suffer  more than any other advanced nation in this recession  because the catastrophic losses sustained by the banks were proportionately larger because the banking sector was larger. Arguably, reducing the proportion of  Britain’s economy which is dependent  on financial services would be a good thing in itself, although nationalised banks restricted to cautious banking should not get into the same sort of difficulty  again.

The cuts which are beyond the Pale for Britain’s political elite

We are incessantly told by the Coalition government that massive cuts must be made to British public spending.  They say this  will mean large cuts in public servants, reduced legal aid, fewer courts, higher fares on trains and buses as public subsidies are lowered, pensions,  both taxpayer funded and private,  reduced by moving from the Retail Price Index  to the Consumer Price Index  for annual inflation uprating, massive hikes in student fees, severe reductions in benefits and a re-shaping of our armed forces in a time of war which not only leaves Britain  seriously deficient in the means to defend herself or meet her existing commitments, but has made her a laughing stock by  the proposal  to have two new aircraft carriers, one of which will never have any British aircraft on it and the other which will have to wait until 2020 before their planes arrive.  

But while cuts are being made to almost all of the  public services which Britons most need, plenty of money is being found for things which the majority of the population  do not wish to fund.   Let’s have a look at them:

–          £15 billion in higher Treasury per capita  payments to Scotland, Wales and Northern Ireland  

(http://englandcalling.wordpress.com/2010/11/12/celtic-hands-deep-in-english-taxpayers%e2%80%99-pockets/)

 –          Foreign Aid £6.3 billion  (rising to £9.4 billion by 2013)

 (http://www.dailymail.co.uk/news/article-1322361/SPENDING-REVIEW-2010-Foreign-aid-increase-37.html)

–          UK Gross gross contribution to EU  £14 billion ( rising to  £19 billion 2015).

            (net contribution £6.4 billion rising to £10.3 billion in 2015)

(http://blogs.telegraph.co.uk/news/danielhannan/100058636/european-parliament-demands-a-higher-eu-budget/)

Much of the EU contribution which is returned to Britain is spent on things Britain would not choose to fund if the decision was made by Westminster. But  even if the net EU contribution is taken, these three items alone come to more than £27 billion this year. Take the gross EU  contribution and it is £35 billion.

 Those figures are solid. There are others which obviously involve large sums but which are difficult to tie down exactly.

 –          The cost of the war in Afghanistan in 2009/10 is estimated at   £4,200m.

 (http://www.dailymail.co.uk/news/article-1288062/Cost-Afghan-Iraq-wars-rises-20billion.html)

This does not include the pay of service personnel or the long term costs of providing for the wounded and dependents of those killed, but includes some foreign Aid. The absence of the wages is reasonable in that the armed services would probably be as large even if we were not in Afghanistan.  However, those on active service receive enhanced payments which would defray the Aid expenditure.   WE could probably save £5 billion a year if we left Afghanistan.

 –   Spending on politically correct initiatives. In 2006 the Metropolitan Police spent  £187 million – six per cent of their  budget – on equality and diversity issues.  

(http://www.dailymail.co.uk/news/article-412948/Outrage-police-spend-450m-equality-diversity.html#ixzz14o254LHk)

This type of expenditure will almost certainly be repeated throughout public service both at national and local level, because the last Labour government institutionalised political correctness within public service by placing a legal obligation on all public bodies and private companies and not-for-profit  corporations such as charities to demonstrate that they were not discriminating on the grounds of race, gender or sexual inclination.  The potential sum to be saved if such an obligation was removed  would certainly be billions.

 Removing politically correct expenditure would not only save the money spent but improve efficiency by allowing staff to concentrate on their work without the distraction of having to be politically correct. It would also improve morale amongst the large majority of public employees who presently live in fear of being accused of a pc “crime”  which would mean a very real risk of losing their jobs.

 – Leaving the EU – Apart from saving our contribution, it would also save Britain considerable amounts by allowing her to remove many  legal and bureaucratic  costs. In their “The Great European Rip-Off”  David Craig and Matthew Elliott estimate that our membership costs Britain £118 billion a year between such costs and  our contribution to the EU budget.  (http://www.telegraph.co.uk/news/worldnews/europe/6198708/EU-costs-Britain-118bn-a-year.html)

Leaving the EU would save other substantial amounts. Having regained control over our own borders we would no longer have to allow any person legally resident in the EU to come to Britain and be treated as a British citizen. This would allow us to end mass migration which would have three  major effects. The first would be a freeing up of jobs taken by immigrants  for Britons which would reduce our unemployment and benefit rolls. The second would be the removal of the legal requirement to treat EU migrants to Britain as if they were Britons for the purposes of state funded services such as health, education and council housing. That would both reduce public expenditure and reduce pressure on  public services. Third, fewer immigrants in Britain would generally reduce competition for goods and services especially housing.  

Withdrawing from the EU would also have beneficial effects on our relations with the rest of the world. We should be freed of the European Court of Justice, which in practice implements the  European Convention on  Human Rights when making judgements. Britain would still be a signatory to the Convention and the European Court of Human Rights could still pass judgements which in theory Britain would be bound to follow, but in practice such judgements could be ignored because, unlike the European Court of Justice,  there  would be no legal sanction the court could enforce.  Moreover, outside of the EU Britain could repudiate the Convention in whole or part.   Other benefits would be Britain negotiating all treaties on her own behalf, something particularly important when it comes to trade, rather than leaving this to the EU and the end of much of the foreign Aid from Britain being funnelled through Brussels.  Generally, our departure from the EU would lead to a culture  change whereby our political elite had to ask through force of circumstances,  not what is good for the cause of liberal internationalism but what is best for Britain.

Why is the entire British political elite keeping quiet about such savings? Why do they prefer to impoverish their own people and leave them without the means to defend their country?  Because they are all wedded to the liberal internationalist fantasy, the desired end of which is a world bereft of national boundaries and loyalties.   Our political elite  are Quislings in the service of globalism.