The Tories are sorting out the wealthy tax-avoidant

[LittleFrieda]

members of our society. Why on earth did Labour fail to act during their long term in office? Eh? Eh?

I can't believe people are complaining about George Osborne doing something about it.

Pants-

ttosca If we keep on spending 3% more than revenue year after year after year we do, eventually, end up with a very big deficit to pay back. The reason we haven't got there yet is because the deficit tends to get balanced out by the inflation rate meaning things don't appear to change so dramatically. What does happen is that every twenty years or so our money halves in value. With an ageing population, a pension?s crisis and an ever increasing number of us trying to see out our days on a fixed income, inflation promises to be a dreadful thing. In any event, it would have been better to pay down our debts in the boom years to allow more leeway when times get tough.

Do you think we can possibly take in to account economic statistics when arguing these points?

As I have shown many many times before, we have not accumulated more and more debt as a percentage of GDP. The reason total net debt has not accumulated is not just inflation, but growth, and the fact that we pay back some of the debt yearly.

This is a chart of Public Net Debt as a percentage of GDP for the entire 20th Century:

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=G0-total&year=1900_2011&units=p&state=UK

You will notice that net debt shot up during the wars, but since WWII, it has mostly gone down dramatically. It hasn't been ever increasing. It has stayed roughly the same since about 1985 (on average). It then shot up again after the crisis due to the financial bailouts and recession.

Finally, your 3% statistic only tells part of the truth. What about all the off balance sheet spending - the Enron economics. By this I mean PFI, Network Rail, future pension commitments from a bloating public sector etc. If you think that the total public sector net debt is everything you are sadly mistaken. There are several estimates out there that suggest our true debt figure approaches 4x that declared by the government.

I'm not arguing that we should try to limit government spending where possible. I think it's wise to run a surplus because Capitalism cyclically causes recessions and crises.

I agree that there is a lot of wasteful government spending, and no doubt a lot of public liabilities. I would be the first to argue against PFI, The Monarchy, the wars on Iraq and Afghanistan, MPs expenses, etc. We could reduce public spending by tens of billions. We could also increase our tax revenue by tens of billions by properly collecting taxes which are owed.

What I'm calling bullshit on is the idea what the financial crisis is in any way related to 'lavish public spending' - as if the UK is some sort of social-democratic pinnacle of civilisation, with fantastic infrastructure, education, welfare, health, and other services. In fact, the contrary is true. Welfare in the UK is a joke. £65 per week is an almost impossible figure to survive on in the UK. It is low compared with most of europe. The UK spends less on Healthcare than France and is ranked #47 of expenditure / GDP:

www.nationmaster.com/graph/hea_tot_exp_on_hea_as_of_gdp-health-total-expenditure-gdp

So I object to the nasty reactionaries like 'niceguy' and claig who think the public should further pay for a crisis not of their own making, with cuts to public services, which were low to begin with, and which had nothing to do with the crisis to begin with.

It is ideology which is feeding their nastiness, not economic facts.

In other words, we do normally earn more than than we spend??? Otherwise our debt would be an ever increasing proportion of GDP??? Sorry, getting confused by all the disagreements - either we are like someone paying off the capital aswell as the interest on their mortgage and as our income goes up we can afford to get a bigger mortgage if we want without that being a problem because we can still pay it off over time, or we are like someone racking up debts on a credit card which we just swap from one credit card to another and never pay off, we just increase the amount of interest we have to pay until we can't afford that, either. So, which are we?

rabbitstew "So, to clarify. Each year, this country owes more money to banks and other countries than it earns from any source, including from interest on any loans it has handed out? And thus it has to increase its debt solely to fund interest payments? Or is it not that simplistic? What sort of deficit is it that we run every year?"

Don't forget, I'm only talking about government debt.

Each year the government (usually) spends more than it receives in tax. The difference, known as the deficit, is borrowed from the Bank of England through the issuing of bonds (A bond is merely a promise to pay out a sum of money, with interest, at a set point in the future) which are sold for cash to anyone who?ll buy them. The government is now committed to paying out some money at some point in the future - this is what the national debt is made up of. What usually happens is that to pay off these bonds, new bonds are issued. The debt is hardly ever cleared down.

Eventually, the interest due on all of the bonds in circulation gets higher and higher. This increases the annual deficit and requires further borrowing (issuing of bonds) to service.

The whole house of cards relies on finding someone to keep selling bonds to. If we break the deal and try and welch on our repayments we will be really up shit creek! No government has ever reneged on its obligations to the bond market since the Bank of England was established in 1698 hence why people who buy the bonds know that there money is relatively safe.

Hasn't Osborne recently considered lengthening the period of the bonds? wouldn't that make it more difficult to sell the bonds?

Sorry, still don't understand, Mr Pants. Where does the Bank of England's money come from, to lend to the government?????... And is the government's only income from tax?????

ttosca Thanks for the link to the graph of GDP - I think, if you adjust the scale to millions / billions/ trillions it shows brilliantly the ravaging effect of inflation. Other than that, I'm sorry but I don't see the value in the statistics that you have presented. You readily accept that there is plenty of off balance-sheet activities going on, I suggest that figure may be as high as four times the governments own estimate, but that isn't reflected in those figures at all.

As for the healthcare figures, again, I don't know if there's enough information to go on. For a start, complaining that Britain is in 47th place on a league table of health spending by GDP is meaningless. We are a rich country that hasn't hosted a brutal war recently so I'd expect us to pay less as a proportion of our wealth on healthcare than such luminaries as Cambodia (2), Malawi (12) or Afghanistan (40). Also, do we really think our healthcare system is going to be significantly better than Luxembourg?s (79) or Singapore?s (145)?

Finally, do the figures for the advanced nations ahead of us on the list (the US, France etc.) take into account simple stuff such as building maintenance of hospitals? - Many of our buildings are supplied under PFI so those costs will be hidden / unknown.

'So I object to the nasty reactionaries like 'niceguy' and claig who think the public should further pay for a crisis not of their own making'

Eh?
I don't think the public should pay for the crisis, which is why I was against the punitive bin fines, which Eric Pickles scrapped with a sense of urgency.
I think some of the banks should have been nationalised and bonuses should have been scrapped. But I believe that the state did grow too big under New Labour. I think there cuts can be made to bin recycling officers, sustainability liaison officers and climate catastrophe consultants. I think that will save the tax payer some money.

I agree with Osborne, who may nearly have choked on his pasty, when he discovered the low tax rate that some of the millionaires and philanthropists were paying, and wanted to make sure they paid more. New Labour never did anything about that, but Osborne wanted to. He felt it was unfair to make the public pay; he wanted an end to the New Labour way.

'It is ideology which is feeding their nastiness, not economic facts.'

Niceguy2 and I have no ideological nastiness, unlike your incoherent ideological idiocy and rudeness. On the contrary, it seems to me that niceguy2 is a quasi saint for remaining calm in the face of your rabid rants, which refuse to let the truth get in the way of your spurious facts.

sorry, correction
"rabid incoherent rants"

I understand Ttosca's graph. Here's some info that backs that up and the link to the source.

"?Big government? slashed the debt

A look at the longer term history of Britain and the other advanced capitalist countries contradicts the ?big government? explanation for high state debt, except (for the period up to the mid-20th century) insofar as warfare is a government responsibility.

The UK?s sovereign debt varied up and down prior to the mid 20th Century, mainly according to the costs of wars against the other big powers. In the initial and classical capitalist period, there was little or no state welfare, and the income and wealth of the rich was barely taxed; British sovereign debt was over 100% of GDP from 1750 to 1850, spiking at 250% of GDP in 1815 following the war against France. During the late 19th Century and until 1914, the national debt continued to fall fairly steadily, even though this was the period in which the beginnings of the modern public sector emerged and expanded, with for example free and compulsory schooling for children, the road network, sewage, the water supply, gas and even telecommunications being arranged by the state at national or local level. Subsequently, the cumulative effect of two world wars and the intervening massive economic crisis sent UK?s sovereign debt back up to two and a half times GDP at the close of the Second World War.

It was then that what could be decribed as ?big government? was established in peacetime conditions. The utilities and much of industry was nationalised (with compensation paid to previous owners), and the main institutions of the welfare state were set up and expanded- to the extent that by the mid-1970s, government-managed expenditure (including transfers, ie benefit payments and interest) was almost half of national production, and state spending on investment and services- ie, excluding transfers- had risen to 27% of GDP by 1975- compared to between 10% and 12.5% during most of the years between WW1 and WW2.

Yet at the same time as this huge growth in ?government?, the sovereign debt was reduced so rapidly that between 1946 and 1975 it fell from 252% to 45% of GDP

A similar story emerges when the combined national debt levels of the G7 major capitalist countries are considered; their gross sovereign debt fell from 80% of GDP in 1950 to 35% in 1974, although the state was increasingly involved in owning or otherwise directing the economy, and overall state spending rose very steeply during that period.

After the 1970s, during widespread privatisation and deregulation, and with the growth of public expenditure considerably reduced (despite higher levels of unemployment) the sovereign debt of the G7 countries climbed back up to 80% of GDP in 2007. In the case of the UK, the sovereign debt ratio hovered around the 45% level- despite the proceeds from privatisation, the revenue from North Sea oil, and the increasingly lucrative activities of the City of London, which since the 1980s has been by far the world?s most prominent centre for financial speculation.

There are various factors involved in this failure of the advanced capitalist countries, after the 1970s, to continue the post-WW2 pattern of reducing state debt. One is the higher (on average) interest rates compared to the rate of inflation in the later period, representing the rising power of financial capital in the increasingly deregulated global economy. Another is the lower (on average) GDP growth in the later period, attesting to the overall inefficiency (despite the claims of neo-liberal economists) of privatised and deregulated capitalism"
21stcenturysocialism.com/article/sovereign_debt_is_a_capitalist_issue_02079.html

Why di dI mention Greece. They have been the victims of extreme politics, no reparations from Germany who savaged thei rcountry, dictatorships backed by communist fearing America, extreme left groups causing riots for years . Hence, lack of faith in state and people did not pay their taxes. Interestingly Portugal and Italy had dictatorships too and tax revenue i slower some think as people were afraid/shy to invest in the state.

I believe tax paying countries keep an economy and more importantly a society stable.

If you do not believe in "big government" then surely you believe in big business and heaven help us if the likes of Tesco's Shirley Porter's take hold of us - by definition they are usually agressive going for maximum growth and do not care about the punters. Governments must be strong and united where they can be to rein back agressive free markets.

Steady growth= steady society

rabbitstew "Where does the Bank of England's money come from, to lend to the government?????... And is the government's only income from tax?????"

The Bank of England creates a bond - an IOU - which pays out cash & interest after x many years. These are then auctioned off (usually once a month). For example, I could create a bond which stated that whoever buys the bond will get a payout of £10 plus interest in April 2022. How much would that be worth to you? Let's say you pay me £10 today for that bond (which the government can immediately spend) and that ten years down the line, the bond plus interest is worth £12, I give you £12, you go away happy.

The problem comes when I rely on selling more bonds to pay you your £12 back. Eventually, the market gets saturated with bonds and you can't sell any more - or if you do you end up giving them away. This is when nations get into big trouble. Experience shows that this happens when counties build up debts of around 100% - 120% of GDP - Britain is currently nudging around the 80% mark and it's still increasing.

Regarding your second question, the answer is 'usually'. Under normal circumstances the government?s only income is from tax, however, it can also bring in some money by selling off assets such as nationalised industries, unused buildings and council houses. This has been quite controversial in the past and, needless to say, isn't a bottomless pit - once everything has been sold, it's gone forever. Finally, there is the Mickey Mouse economics school of raising revenue. This is stuff like Quantative Easing - also known as printing money. This only works for a short time and can cause inflation. When it goes wrong, it goes very wrong - see Weimar Germany, Post WWII Hungary or Mugabe's Zimbabwe for further details.

All this stuff about the % of GDP that we are borrowing is (IMO) completely irrelevent.

What really matters is the perceived risk of lending from the lender's point of view - this is what governs the interest rate at which the UK can borrow. If the UK government had not implemented what has become known as austerity, the rate at which we could borrow would have risen with the very real potential to send us into a downward spiral.

Before anyone says that because of this bankers are dictating economic policy to us - yes that is true - and that in itself is a very good argument why governments should try to get somewhere near balancing the books. The problem with the idea of borrowing year on year against future economic growth is (IMO) flawed because no one can predict the future - as we found out to our great cost a couple of years ago.

'The problem with the idea of borrowing year on year against future economic growth is (IMO) flawed because no one can predict the future - as we found out to our great cost a couple of years ago.'

But the problem is that the banks lent the money out, they made easy credit available and then they reined it in. Many banks took great risks and gambled and when the music stopped, they were effectively bust. Then many of the banks borrowed from the public purse (i.e. all of us) to stop them from going bust, and now you say "bankers are dictating economic policy to us - yes that is true". Is this rule of the many by the few?

But, I agree, that in the real world, we have to maintain a low borrowing rate, and on that front, Osborne and the government have been successful.

daffodilly2 "If you do not believe in "big government" then surely you believe in big business" Nope, not at all - this isn't an either / or subject at all. I believe in free markets where new companies can start up easily and with minimum interference from the state. Big businesses hate free markets - which are the businesses trying to do away with red tape? It's always the small business. The big business can absorb extra costs that bureaucracy throws it, small businesses cannot.

I believe in a small government, small state, minimal regulations, low tax, low government spending, free market, free enterprise, non-interventionist county run in accordance with the rule of law and presided over by the fewest number of politicians it takes to do the job. I would like the fewest laws to live by and the most personal freedom (including the freedom to screw everything up and fail miserably) as possible. It's not too much to ask for is it

'the freedom to screw everything up and fail miserably'

Not more New Labour?

So, borrowing is good if you are a business trying to expand and ultimately to make a bigger profit, because that's why banks exist in the first place, to lend out money generally to be paid back at a certain rate of interest, but bad if you are a country/government, even though neither the business nor the country can predict the future? And I'm still none the wiser where the Bank of England gets its money from, if it is true, as you said earlier, that the deficit is "borrowed from the Bank of England."

What holds the "small state" together if it has no particular interest in the fates of its citizens? And if it does have any interest in the people within it, then the healthcare, education, police force, legal system, help for the sick and vulnerable etc, required are actually a big cost, not a small one. You just seem to want to sweep bits of it under the carpet, rather than admit to the reality that a small state is just a state that allows rampant poverty and ill health for the majority, which is no kind of freedom, but freedom and wealth for the most cutthroat minority.

claig-

Osborne knows very well the low tax rates that the rich pay, as well as the extent of tax avoidance and evasion which goes on in the UK. His own party has been fighting since its inception to keep tax rates as low as possible and to help the richest avoid taxes.

The Tories are not going to go seriously go after the rich. They are the party of the rich, by the rich, for the rich. We'll likely see token gestures as a matter of PR - as we have already seen the top rate of taxation drop from 50% to 45%, while we see tax breaks for pensioners scrapped. Don't be foolish.

The Tory scum are now redefining the rules for 'tax avoidance', so that more tax avoidance can be made legal, and thereby not officially classed as 'avoidance', while simultaneously cutting staff and funding at HMRC, so there are fewer resources available to go after tax cheats/avoiders:

www.taxresearch.org.uk/Blog/2012/04/18/how-can-hmrc-be-serious-about-large-company-tax-abuse-when-theyre-cutting-the-staff-who-tackle-it-by-20/

Businesses borrow money in the hope / expectation of making a profit (surplus) in the future and paying the debt off. Governments, like the UKs, borrow year on year with no expectation of paying off the debt but gambling that economic growth and inflation will be high enough to keep borrowing indefinitely.

So, borrowing is good if you are a business trying to expand and ultimately to make a bigger profit, because that's why banks exist in the first place,

Banks exist in the first place to make a profit. They are the only entity legally allowed to loan money which doesn't actually exist. They then charge interest on that loan of non-existent money, and make profit on the difference.

It's a nice scam, isn't it? Wouldn't you like to be able to do the same?

People dying because of cuts in public spending to pay for the bank bailouts:

www.guardian.co.uk/society/2012/apr/18/disability-benefits-cuts-protest-trafalgar-square

ttosca, you are right that a lot of politics is about spin.

But it is fascinating that questions about fractional reserve banking, who prints money, who owns the Fed have nearly always been asked by conspiracy theorists (mostly on the right) rather than socialists. The recent left wing demos against bank bailouts came many years after the original demos by the Tea Party, which were ignored by everyone.

I haven't read Marx. Did Marx himself talk about any of that?

Did he discuss central banks and the printing of money?