Letter to a friend, being clear on tax, ideology and the welfare state

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tax and the welfare state

Dear Andrew,

You corrected me when I said I’m not interested in talking ‘around the margins’ of politics. You were, you say, talking about marginal rates of tax. Well, forgive me, but surely talking about marginal rates of tax is the very definition of ‘talking around the margins’!

So let me make myself as clear as I can. Otherwise we are going to get into hot water.

1. I subscribe to no political ideology.

2. On the other hand, I have nothing but contempt for socialism and communism. Political ideologies that required 100m people to be starved, murdered, spied on and imprisoned over a 70-year period should have long ago lost their appeal. (And I really don’t want to hear about how offensive it is to equate Stalin and Mao with Marx. Marx was wrong; and his ideas corrupted leaders, not vice versa).

3. I have no automatic or visceral hatred of anyone – not the rich, not Tories, nor businessmen, not even corporations, nor Labour politicians. The idea that Conservative politicians are ‘scum’ by definition is simply ridiculous.

4. Nevertheless, ideological politics are redundant in the 21st century.

5. Government should be conducted along lines that produce the best possible results for the largest possible number of citizens, and not according to a set of ideological beliefs or visceral bigotry.

Now, on your specific points:

1. Capital Gains Tax
Once people have paid tax on their earnings, government has no moral right to extract further taxes from those taxpayers. So dropping CGT from 28% to 20% gets my vote. Scrapping CGT altogether would be better.

2. Inheritance Tax
Another iniquity. Relatives of mine bought a house in 1979 for £39,500. Today its nominal value is over £1m.

They are both retired, on a state pension only, and the house is falling down around them. They have kept a roof over their and their children’s heads over decades of low earnings (never more than circa £35k pa between them).

Now – where is the morality in the government requiring a slice of tax when their children (equally low earning, living in rented accommodation) inherit that house?

Once people have paid tax on the money they earn, what happens after that should be no concern of HMRC whatsoever.

The fact that it is of concern is based on either fallacious bigotry (the politics of envy when it comes to a Labour government) and/or utter incompetence at managing the nation’s money (both Labour and Conservatives).

3. The cuts to PIP (Personal Independence Payments)
On the basis that hard cases make bad law, discussing the minutiae of this cut (now reversed in any event) is a fruitless enterprise.

Better that we discuss the basis of the £13 billion paid out annually in disability benefits.

Two things spring to mind.

a) Thirteen billion pounds? That leads one to research the background. Turns out that in a potential working population of around 40m, 3.3m are on disability benefits.

Is that credible? That more than 8% of our population is disabled to the point of incapacity?

b) A key pointer to its lack of credibility is that, according to Iain Duncan Smith, disability claimants increased in number by 30% over just a few short years recently. (If you look elsewhere, you’ll find numbers as high as 50%, but that was in the Daily Express, so, hey, let’s ignore that!).

This situation alone must lead one to conclude that a ‘benefits culture’ does exist.

4. Work as a Tory myth
Frankly, Andrew, I’m shocked that you should say “It is clearly a Tory myth that work is always a route out of poverty.” Have we really come to the point where we question the efficacy of work?

The Labour movement was built on the dignity of work and wages. The reverse must be true – that there is no dignity in not working when you are able. Welfare was designed for the totally incapacitated, the temporarily incapacitated and the temporarily unemployed. That is a sane and compassionate concept.

There is nothing sane or compassionate about keeping successive generations on welfare as a demonstration of our ‘virtue’ as nation.

We are in a period of transition, from industrial post-war – where unskilled jobs were well-paid and there was work for everyone; to post-industrial – where 50% of available jobs didn’t even exist 15 years ago. I’ve personally lived through the entire epoch, and no question, the current situation is painful.

But we have failed to grasp the nettle of that change. Millions are leaving school without the requisite skills to be of value in the work place. Even their literacy and numeracy skills are below par. And why are they learning how to fill in an Excel sheet when they should be learning to code for the next generation? And why are they still learning French and German when Mandarin and Spanish are clearly set to be the second and third most important languages after English?

It will be some time yet before we restore a balance. Probably another two generations. Well, if we grasp the nettle – which we still have not done.

But let us not forget that for 13 years, Labour held the education portfolio at a crucial time of change and did nothing but saddle schools with looming bills for PFI buildings, which are now coming home to roost in both education and the NHS. One NHS Trust, and it can’t be the only one, recently complained it is paying £1m a week in interest payments. And now 17 schools in Scotland have been closed because of shoddy standards under the scheme trumpeted by Gordon Brown.

“Education, education, education” was just another soundbite for the egregious Blair.

What I have said here demonstrates, I know, a philosophical chasm between us. I suggest we stick to cricket or books or films in future.

Best
Paul

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