The September 2022 fiscal statement from Chancellor Kwasi Kwarteng, is proving controversial for among other reasons, the ‘cost’ of the tax cuts it contains. For a tax cut to be a ‘cost’ you need to make a couple of assumptions, that (1) allowing people to keep their own money is a ‘cost’, and (2) that changing the incentives will in no way change people’s behaviour.
To tackle the first point that “allowing people to keep their own money is a ‘cost’”. If last month you worked some overtime and say earned an extra £300, but this month you didn’t have the same opportunity to work the overtime, would you say your costs had gone up by £300? Of course not, no one would say that. Most January’s many businesses will put on sales often cutting prices by a third or more. Do we refer to these price cuts as an increase in costs? Do the price cuts get added as Expenditure to the company’s accounts? For both personal and business expenditure we see reduced revenue as just that, reduced revenue, not a new or increased cost. Many people don’t particularly want to work overtime, valuing free time more than the money they earn from extra work. In the case of businesses, we don’t bemoan the cost of reduced prices, we see this as an opportunity for the business to get rid of old stock, gain market share, or simply get more sales. Reduced prices provide an incentive that changes the behaviour of consumers. So why do we refer to changes in tax rates as a cost? And to the second point above, why do we think that “changing the incentives will in no way change behaviour”?
I have written before about the Laffer Curve (Blacklist Press), (Croydon Constitutionalists), the theory that cutting tax rates can result in increased total tax revenue, but even if you are sceptical of this, we all know taxes change incentives. Why do sin taxes exist if not in part to disincentivise people from undertaking the sin? Why are ISAs tax-free if not to encourage savings? Why does the government offer businesses R&D tax relief if not to encourage more Research and Development?
Clearly cutting taxes will impact the behaviour of people. Lower National Insurance rates incentivises employment, lower taxes on profits incentivises business investment, and lower taxes on income incentivises both increased work and releasing invested funds for personal use. It might be fair to say these changes are not incentive enough to make up for the reduced revenue of the tax cuts (I would disagree) but it is not reasonable to argue that there is no change to behaviour as a result of these changes.
The government didn’t just change tax rates in the
budget fiscal statement. We heard about changes both to the Inland Revenue rules known as IR35, and the cap on bankers’ bonuses. Wikipedia refers to IR35 as “anti-avoidance tax legislation designed to tax ‘disguised’ employment at a rate similar to employment”. First introduced in April 2000, the rules have changed over the years, with the latest change being to repeal the 2017 and 2021 reforms.
IR35 was trying to stop people filling basically the same role, from being taxed differently based on how they are employed. This sounds reasonable, except of course that how you are employed does affect your role, and in some cases means different incentives, in this case partly via taxes, should apply. I have worked in the same industry as an employee, what is referred to as Inside IR35 (in effect agency staff), and Outside IR35 (via a limited company) often referred to as a contractor. The naïve assumption behind IR35 is that by changing the tax rules for contractors, you will simply earn the same gross pay and pay more tax, receiving less net pay. Of course, this is nonsense. Being a contractor comes with additional risks and costs, you really need an accountant, you invariably need to take out additional insurances, and a private pension. You tend to change role frequently as companies only want you on the books for peak demand, and your lack of security of tenure both provides an incentive to be productive and means you tend to have a good buffer of savings for those periods when you are not earning.
You might wonder, why anyone would be a contractor with all these downsides? Well of course it’s because you are incentivised by earning more. These earnings are both in gross pay (invoices into your limited company) and net pay (working via a company being more tax efficient). When the Inland Revenue changed these incentives, did they see lots of people stay as they were and simply pay more tax? No of course not, change the incentives and people move. The costs and risks stayed high, but rewards reduced, so guess what, people moved to lower risk roles. It’s not clear to me that the government has ever made more or less money when I have been employed via any of the different methods available. But what is clear is that the economy has lost flexibility in its labour force, business savings, purchasing of goods and services, charity donations and productivity, when I and others like me simply don’t have the money or the incentives needed for these.
Lastly, bankers’ bonuses are not a subject likely to draw huge amounts of sympathy. But that doesn’t mean private enterprise shouldn’t be able to pay people via the incentive method they believe is best suited for the role. I worked in banking during the financial crisis and saw my bonus structure change and total bonus reduce. I should say I worked for a retail bank in the IT department, so the sums involved were far away from those being earned by city traders, but to me and my colleagues they mattered. Over the same period salaries improved to retain and recruit staff in a competitive IT market. Total reward didn’t change much but the incentive structure did. If you believe that moving from a pay structure that in large part rewarded outcomes, to one that mainly rewarded showing up, didn’t have an impact on productivity, we must discuss terms on that bridge I have for sale.
Removing the bankers bonus cap doesn’t increase costs or total reward, it changes the incentive. Changes to IR35 and tax rates are not costs to government, they change the economy and provide the opportunity (they haven’t gone far enough), to develop the more dynamic high growth economy that will benefit us all.
In three articles from 2016 and 2017 Mike Swadling writes in the Croydon Citizen – ‘Is this how a council is meant to function?’, ‘Does democracy travel at 20mph?’ and about a local Special Needs School, St Giles.
Is this how a council is meant to function?
“Alison Butler, answered most of these questions. It is fair to say that the cabinet councillors’ answers did little to pacify the view of those that I was in the room with. This is understandable given the amazingly dismissive attitude that councillor Butler displayed”
“Two answers underlined the attitude. When asked about traffic problems, cabinet member for transport and environment councillor Stuart King didn’t know the difference between the A232 and A23”
“The whole meeting continued on this theme: we didn’t see councillors debating the issue of Croydon, instead we saw politicians point- scoring. Given the lack of local media coverage of these meetings they were mainly doing this for their own party members”
Does democracy travel at 20mph?
“The Merriam-Webster dictionary definition of democracy includes the definition of “the absence of hereditary or arbitrary class distinctions or privileges”. This leads to a question – why is Croydon Council looking to have a two-tier democracy in the borough?”
“The people had a chance to respond to the opinion surveys, and they responded in favour of the 20mph speed limits. Whatever your personal view on the speed limits, believers in democracy would therefore agree that they should be implemented”
“Why are council officers, people paid by us to serve us, recommending taking away our right to a democratic process?
Why does the Labour council not consider the people of Coulsdon, Kenley, New Addington, Shirley, Waddon and other areas worthy of having the same democratic rights as the people of Thornton Heath and Addiscombe?”
St Giles: a very special school indeed
“Croydon has six dedicated special schools and over a dozen Enhanced Learning Provision units inside mainstream schools. These schools meet a wide range of needs for pupils with profound, severe and moderate learning difficulties, autism, physical disabilities and speech and language difficulties. The six schools have between them over 700 pupils on the roll.”
Come and meet-up with likeminded freedom lovers, at our No Passport Required drinks at The George, Croydon on Wednesday 19th October, from 7pm.
We will hold these in association with Dick Delingpole’s #ThirdWednesday Libertarian drinks club.
Join us at The George. 17–21 George Street, Croydon. CR0 1LA on Wednesday 19th October, from 7pm.
We are joined by Chris Wilkinson, the founder of Blacklist Press and now a co-founder of a new political party – Choice, as we discuss Liz Truss’ new cabinet, the proposed energy price cap and Chris’ new party. We then chat with Chris about Blacklist Press and his soon to be published book about the late Labour Party leader John Smith.
Chris’ new book ‘John Smith: A Reappraisal: A critical analysis of the leadership of the Labour Party’s lost leader’ is now available at https://www.amazon.co.uk/dp/B0BGCXJKJ5.
In two articles from 2017 and 2018 Mike Swadling writes in the Croydon Citizen – What has Croydon’s Labour council actually achieved? and sets out his priorities for next year’s local elections.
Potholes and pointless art
“The Fairfield Halls redevelopment has closed off a major car park and our main cultural venue. This has resulted in a corner of the town that is covered in graffiti (sorry, ‘street art’), and in which businesses keep closing down”
“To top all of this, Westfield hasn’t discernibly progressed. As I have written before, trade in Surrey Street has dropped despite – or maybe because of – council investment”
“In Barcelona, they have been building the Sagrada Família for over one hundred years. Maybe Croydon will become the Barcelona of northern Europe with – at four years and counting – not a single house having been delivered by Brick by Brick”
As elections loom, what kind of Croydon do you want?
“The Conservatives took steps to reduced stop and search in 2010, and are cutting police numbers. Labour supports reduced stop and search. Neither propose any action beyond soft words to stop knife crime”
“Both the Conservatives and Labour support green taxes on landfill. They have slowly reduced and made more complex our dustbin collections. Now you need permits to enter the council tips, and yet they all feign surprise we have rampant fly tipping across the borough”
“Stop this folly of green taxes reducing the quality or people’s lives. Locally asking for new refuse collection contracts to simplify the service”
By Mike Swadling
I have a habit of referring to things that work as Ronseal Quick Drying Woodstain. Many of you will remember the 1990s advert that proclaimed that Ronseal Quick Drying Woodstain, does exactly what it says on the tin.
One of the challenges with this and my many other 80s/90s British TV references is that in these increasingly interconnected times the person I’m speaking to either isn’t in the U.K. or doesn’t remember most of the 90s let alone the 80s.
I don’t feel I would have this problem if I worked for the government. I mean for starters they don’t seem to have anything that works and there is certainly nothing that does exactly what it says on the tin.
The list is endless, as I write this, we have had a drought declared in some parts of the country. We have also seen many news stories lamenting the lack of any new reservoirs in a period the population has increased by about 10 million. Thames Water has a desalination plant they have never used, whilst at the same time they are imposing hosepipe bans.
With all this going on where are Ofwat the water regulator? Where is the Environment Agency? Surely, they are leading the fight to get people water. Surely, they are driving the water companies to invest more and improve services. They must surely be imposing fines on water companies for reduced service to customers through hosepipe bans. No, quite the opposite. Ofwat commissioned a 2018 paper “to analyse and present the options available for making deep reductions to per-capita consumption over a minimum fifty-year period”. Water companies are far from blameless for the failure to keep a plentiful supply of water flowing, but when Thames Water did try to build a new reservoir in Oxfordshire, the Environment Agency blocked it on the grounds there was apparently no need for it. This isn’t all that new, the 2014 flooding of the Somerset Levels, was widely blamed in part on the Environment Agency’s decision to stop dredging the rivers, something they were tasked with undertaking, for the purpose of reducing flooding.
But it’s not just water management that doesn’t work in the UK. The Department for Business, Energy and Industrial Strategy exists yet our island made of coal, with gas and oil reserves and an advanced nuclear power industry, is not expected to have enough power generation this winter. Of course, as is made clear in a March statement to Parliament, the department puts every barrier in the way to fracking. Not long before he became Deputy Prime Minister, that visionary Nick Clegg expressed his opposition to new nuclear power stations as they would take too long to come online. Of course, the prediction had they been commissioned then is they would have come online about now, right when we need them!
Net Zero and the green agenda are in large part behind these departments working towards grand environmental plans, rather than for the benefit of taxpayers. But it’s not just on the environment our government lacks the essence of doing what it says on the tin, take for example public health. Public Health England before they were dissolved had some 5,000 staff, who whilst very productive at telling us how to live our lives were woefully under prepared for Covid 19. Public Health didn’t protect the publics health, they did however lead to the shutdown of our economy and massive loss of freedom.
Failure is in all parts of our government. Paul Lincoln the disastrous Director General of the Border Force from 2017 to 2021, described ‘bloody borders’ as ‘just such a pain in the bloody a***’. Nationally the Police failed to solve a single theft in 84% of neighbourhoods in the past 3 years. 70% of Metropolitan Police officers didn’t make a single arrest in the past year and the RAF has seemingly stopped recruiting on ability but now recruit based on wokery. We have a Bank of England that is charged with keeping inflation at around 2%, yet no one is losing their well-paid jobs as inflation soars above 10%. None of these departments are Ronseal Quick Drying Woodstain, they are not even close. The departments we pay taxes for, and the regulators we rely on, are consistently working against us.
What can be done about this? Firstly, we need some desire from government to actually act to improve the lives of the citizens of the UK. Let’s assume for a moment the next Prime Minister ushers that in, and I’m not saying I expect them to, but it is a prerequisite. We need to start with a requirement government departments and quangos act to improve the standard of living of law-abiding UK citizens.
The improvements they are planning to deliver needs to be codified, and for this all-government departments at all levels need published Key Performance Indicators (KPIs) or targets. Much maligned as targets are, without them we simply have no measure of success, or even an indication of what a department is trying to achieve. There will be problems, some departments will focus on targets to the exclusion of other activity. Some may cook the books on the numbers, and if staff submit fraudulent data, then action should be taken. Others will set easily achieved goals, fine, better to achieve an easy goal that benefits us, than to actively work against our interests. We will be able to see what an area of government believes is its purpose, and what success it has in achieving that goal.
It seems as if nothing in government works. Let’s get back to first principles across the state, with for instance a Police force who police, a Border force who protect the borders, water regulators who believe in ensuring people have water. And with a costs of living crisis upon us, and a few troubled years ahead, lets hope someone in government apply the principles of Ronseal Quick Drying Woodstain, to provide the services we pay for.
We are joined by Alasdair Stewart, the newly elected Conservative Party Councillor for Purley Oaks & Riddlesdown, as we discuss the latest in the Conservative Party Leadership campaign and Croydon’s Directly Elected Mayor, Jason Perry’s, first 100 Days in office. We then chat with Alasdair about his initial experiences as a Councillor on Croydon Council.
Come and meet-up with likeminded freedom lovers, at our No Passport Required drinks at The George, Croydon on Wednesday 21st September, from 7pm.
We will hold these in association with Dick Delingpole’s #ThirdWednesday Libertarian drinks club.
Join us at The George. 17–21 George Street, Croydon. CR0 1LA on Wednesday 21st September, from 7pm.
Image: By GodeNehler – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=74650075
Join us on Wednesday 28th September for an evening talking about the climate, rational action, and affordability.
Our guests, Harry Wilkinson, Head of Policy at Net Zero Watch and Benjamin Elks of the Taxpayers’ Alliance will each present and hold a joint Q&A.
As energy prices rocket and everything from driving your car to changing your boiler becomes more restricted, Ben and Harry will be giving their thoughts on the government’s Net Zero measures.
Come along 7pm, upstairs at Elliott’s Bar, 5 High St, Purley CR8 2AF.
Benjamin Elks worked in pension prior to moving to the TPA last year working in Fundraising, Operations and Events. Ben supported our recent action day with the TPA in Purley questioning executive pay at Croydon Council. Ben has a degree in Politics and War Studies from the University of Wolverhampton and plays for a local rugby team in his spare time. Ben can be found on Twitter at @elksy91.
Harry Wilkinson is the Head of Policy at Net Zero Watch. Net Zero Watch aims to is highlight and discuss the serious implications of expensive and poorly considered climate change policies. Harry has regularly written for the Conservative Woman and has appeared with us on our Podcast. Harry can be found on Twitter at @HarryWilkinsonn.
Facebook Event: https://www.facebook.com/events/1119759738961387