Friday, 14 July 2017

The Truth About Taxes

The Office for Budget Responsibility, the official watchdog of the nation's finances and independent of the government, warned yesterday that we are becoming worryingly, dangerously dependent upon taxing the rich to make ends meet. This is under the current government which has imposed so called austerity on us all. Just imagine what would happen if Labour were to get into power and actually put those taxes up.

Many of us have been making this argument repeatedly now for years and yet this has was ignored by those who voted for every other party but Conservatives at the general election.

Yet here it is in black and white from the OBR: over the last decade the top 1% of taxpayers in the UK have gone from paying 24.4% to 27.7% of all taxes. To put it in more prosaic terms, not only are the paying more than their fair share, we have become reliant upon them staying put and continuing to do so.

A sane response to this would be to thank them very much and pledge that taxes will not be put up. Indeed a sane response would be to pledge to lower the top rate of tax further since we did that during the last 10 years and it raised more money.

This is why a punitive, envious, hateful Labour government would do such profound damage to the British economy. The rich 1% would take their money and run. And who could blame them?

Not that this situation is healthy in any event. It is profoundly worrying that the country has become so reliant on such a small number of people to pay our way. Were we to suffer a serious recession or a Labour government then the shock to the public finances would be devastating, borrowing would shoot up and we would quickly find ourselves having to make deep cuts to spending rather than the ridiculous spending spree dreamt of by Labour. Within a year of Chauncey gaining power he would face a number of unpalatable choices as a consequence of the crisis of confidence his policies would engender amongst those we rely on to pay our way. Either Britain would have to start printing money meaning roaring inflation or we would have to default on our debt for the first time in our history or he would have to impose the kind of swingeing cuts we last saw in the 1970s and 80s.

There are no easy choices with tax and spending as Labour pretends. Britain does not exist in a vacuum and other countries would dearly love the opportunity to offer to our wealthy elite and the companies they work for a haven from punitive levels of taxation. To raise taxes is always risky. To raise them to the levels advocated by Labour would be reckless. To do so at the same time as Britain leaves the EU would be lunacy.

This, as we tried to point out during the election campaign, is the real choice. Austerity is not something that is done through choice but through necessity. The country cannot afford to keep spending money we do not have. Just putting up taxes is not the easy choice Labour claim it to be. And their promises of free tuition fees, cancellation of student debt, lavish spending on hospitals, schools et al? It simply would not happen. It would be a promise they could not keep paid for by taxes that would never raise enough. That is the reality of socialism. It always runs out of other people's money to spend.

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