Taxes about to rise sharply

Taxes must rise sharply over the next decade to bring down borrowing, according to the National Institute of Economic and Social Research (NIESR).  In a report, the think tank said taxes would have to rise by the equivalent of 6p on the basic income tax rate to get the budget deficit below 3% by 2020.

It also said the UK economy faces sluggish growth and rising unemployment this year. The BBC's Nils Blythe said that although the large additional tax rises needed to get the budget deficit below 3% by 2020 would not necessarily come in the form of income tax increases, the think tank reasoned that the scale of the rise is equivalent to putting up the basic rate of income tax from 20p to 26p in the pound.

"Only with that type of increase will the national debt eventually fall below the 40% of national income that before the financial crisis was regarded as a prudent level," he said.  The think tank also said cuts to public spending, which will be necessary for cutting the size of the budget deficit, will push growth lower than it otherwise would have been.  

More reality/truth is slowing filtering out ... just not from the Government.

Two revealing 'private' conversations

'Private' Conversation 1

Yesterday in Rochdale Brown exposed his true self, saying he wanted to meet/speak to the general public (instead of a group of stage-managed supporters), presenting a (false) smiling image and talking to a concerned Grandmother Gillian Duffy.  Forgetting his microphone was still on he then left and proceeded to his car, calling the whole event 'a disaster', blaming organizers and calling the Grandmother he'd spoken to 'bigoted'.  Brown initially tried to deflect it, but his head once again had to fall into his hands as he was confronted with his own words live on Radio.  I'm afraid this person, never elected to be leader of the country, and who as chancellor is also personally responsible for creating the crisis, clearly demonstrates Poweromics (A person using position and power for their own personal gain, based on poor moral values, self interest and greed).  Indeed in the final leaders debate tonight he demonstrated this further, e.g. deflecting blame, hiding the truth, lying to people and trying to creating fear in the electorate.  He continually focused on highlighting the risk to tax credits, the system he personally created as Chancellor (using borrowed money) to systematically increase dependency on his party in order to strike fear in people tempted to vote for anyone else - however it does not appear to be working. For instance the Liberal Democrats have made it clear they are only considering reducing it for those earning over £50k and far more people are starting to see through Brown's veneer and not listen to him anymore.


'Private' Conversation 2

David Hale, a US economist, has claimed that the governor of the Bank of England told him "tough" budgetary measures would be necessary in the UK. He said Governor Mervyn King had said the measures would keep whoever wins the next election "out of power for a whole generation". The Bank of England refused to comment directly but confirmed the two men had a private meeting early last month. Mr Hale, who said he met the governor in London last week, said that the Governor told him that if the government failed to come up with a credible plan to reduce the budget deficit (one of the highest in Europe) the UK's credit rating would be downgraded - increasing uncertainty about the outlook for the uk economy and its ability to pay back its debt. The parties have already been criticised by the Institute for Fiscal Studies for not providing enough detail on their plans and Mr King's reported remarks suggest that some senior policymakers think the deficit reduction plans will have a big impact. The road ahead is now increasingly clear to everyone ... though only through another 'private conversation' being exposed.

Spending cuts to be deepest since 1970s

Following my recent post (Apocalypse-postponed), it is now being made increasingly clear that, whoever wins the election, massive spending cuts are going to have to happen on a scale not seen for generations.  This will once again hit the economy, as well as the well-being of individuals and communities, and move the UK into the next stage of the crisis.

It will hit front-line services (particularly if 21st century management practices are not adopted), reverse the so-called recovery, reduce employment, reverse house prices, and steer the economy into another downward spiral (a double-dip recession). These will all also be exasperated by rising interest rates to pay for spiraling government debt (nb reducing the deficit does not reduce the debt, it just means the debt is increasing at less of a rate!), the risks associated with a flawed/unsustainable economy, and rising price inflation due to foreign exchange rates (and the huge rise in the price of oil).

Greece is starting to feel the pain and frustration/unrest is starting to grow ... and the UK is going to have to act effectively (e.g. introduce 21st century leadership/management and economics) quickly now if it's going to avoid this type of pain/unrest itself in the future.

Brown: The collapse of the UK economy was down to me

Gordon Brown today admitted he made a mistake in not introducing tougher bank regulation when he was chancellor.  The PM, chancellor from 1997 to 2007, said that in the 1990s the banks had all been calling for less regulation.

"And actually the truth is that globally and nationally we should have been regulating them more," he said in an interview on ITV1's Tonight.  The Conservatives said Mr Brown had "failed", while the Liberal Democrats said his admission was "not enough".  The prime minister said he should have put the "whole public interest" before the banks.

Mr Brown said: "In the 1990s, the banks, they all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation'." ... "All the complaints I was getting from people was, 'Look you're regulating them too much'. And actually the truth is that globally and nationally we should have been regulating them more," he added.

"So I've learnt from that. So you don't listen to the industry when they say, 'This is good for us'. You've got to talk about the whole public interest."

Ed Balls, who worked with Gordon Brown when he was chancellor, said both had previously admitted they should have done more to control the financial sector.  At Labour's morning press conference he said: "In retrospect we should have been tougher with some of the investment banks which did not know the risks they were running."

Business Secretary Lord Mandelson added: "Regulation should have been more intrusive and the regulatory practice of the Financial Services Authority should have kept pace with the fast-changing developments in the financial services sector."

Shadow chancellor George Osborne said: "So finally Gordon Brown admits he failed to regulate the bankers and increased taxes on the poor (removing the 10p tax band). We've had 13 years of his economic mistakes. Britain can't afford five years more."

Lib Dem Treasury spokesman Vince Cable said: "It's not enough just to hold your hands up and say sorry without having a plan for making sure that the same thing doesn't happen again."

Most people (particularly in the blogosphere) know this already, and many (including myself) believe admitting to being partially responsible for the worst economic mistakes for generations is not enough (i.e honesty) - if he had represented us properly (which as Prime Minister is his job!) he would have always acted in our interests (not the banks), if he was a capable leader he would have asked far more questions (rather than simply listening to the banks), and if he was selfless, honest (and honorable) he would have admitted his mistakes at the time (and resigned without question or delay) ... instead of using spin to create a smoke-screen (e.g. a 'global problem') and deflecting blame onto others (e.g. America - which President Obama will never forget) ... both strategies regularly adopted by those who apply Poweromics* (to maintain their grip on Power).  Given we are fining the leaders of Northern Rock for their failings, perhaps we should fine/charge Gordon Brown for his role too**, so he is made bankrupt, never forgiven and never allowed into a position (or to profit from a position) of power again (e.g. relinquishing any right to a position in the Lords)*. 

* Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. 

** NB In China he would have been locked up and probably receive the death penalty (for 'economic sabotage').

Potential and Fairness

To release "potential" and "give everyone chance to live the life they want" ... we need to "take power away from those who hoard it, to challenge vested interests, to break down privilege, to clear out the bottlenecks that block opportunity and block progress" ... and the simple word behind all these ... "fairness", a message Nick Clegg, the Liberal Democrat leader made clear today as he launched his parties' manifesto (a plan to "hard-wire" fairness into British society) ... which includes 4 steps to a fairer Britain, including 

i) fair taxes (e.g. by introducing a £10,000 tax-free allowance)

ii) a fair future (e.g. creating jobs by making Britain greener)

iii) a fair chance for every child (e.g. by reduced class sizes)

iv) a fair deal (e.g. by cleaning up politics & introducing a fairer voting system).  

He also highlighted the need for trust, stating in detail where taxes will have to rise to pay for tax cuts (as well as to cut the deficit).   With the "Seven Principles of Public Life" in mind (which all UK Politicians are meant to sign up to  - see above picture) straight forward honesty is key. Speaking at the same event, Lib Dem Treasury spokesman Vince Cable said the issue of the deficit had to be "confronted" ... but said Labour and the Conservatives had "banished" the subject from their manifestos. 

With trust in politicians at an all time low the Liberal Democrats were one of the few parties wanting to tackle this head on (nb they do not have disgraced MP's currently heading to Court and trying to use 'parliamentary privilege', as well as taxpayer's money to pay for their defence), with the Liberal Democrats leading the way during the expenses scandals but getting little support from the other parties (they all wanted to go off on their long summer break and/or stop it by changing the Freedom of Information Act).  

21st century leadership and management will fundamentally change how enterprises operate, how economies will prosper, and how successful democracies will work in the future ... it will also change people's lives for the better ... by challenging the misuse of Power*, releasing  'potential' and creating a "fairer" society ... are we about to see this occur at little faster in the UK ...?

We shall see in the next few weeks ...


* Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. 

Masters or Servants?

Nick Clegg, the Liberal Democrat party leader, unveiled five proposals to control "the bonus culture" in the City. Clegg said there should be "no rewards for failure" and called for a "top-to-toe" overhaul of the British banking system (including an end to "morally obscene" salaries and bonuses).

"The problem started with the banks so the solution must start with the banks too," he said at the party's daily news conference yesterday, and he said the public should feel that "never again are your everyday savings held "hostage" by people in the City.

The Liberal Democrats' five-point plan to reform the banking system would:

1. Limit cash bonuses to £2,500 annually, with any bonuses in excess of this figure to be paid in shares which could not be sold for five years
2. Ban board directors from receiving bonus payouts
3. Extend the Financial Services Act so loss-making banks were not allowed to pay bonuses
4. Ensure the names of all banking employees earning more than the prime minister were published
5. Lead to directors of banks being fined if their institution broke the industry's code of practice

These five steps would "transform the culture of greed which continues to disfigure the banking industry in this country" and ensure the banking system became "the servant, not the master", Mr Clegg said.  

The party's Treasury spokesman, Vince Cable, said the UK was "still in a major economic disaster" and that "The country is now poorer than it was before the banking crash and what we need to be focusing on is how we prevent it happening again” (echoing many of the posts on this blog).

Mr Clegg said it would reveal a "new approach" to a financially-stable economy, based on equity not debt, "where we learn as a country to build things again, not just bet on things on computer screens in the City" … from a leader who may well yield significant influence/power in a few weeks time this is good to hear, but he will need to think more carefully about the steps needed to successfully transition from an outdated and flawed economy (Poweromics) to a 21st century value adding economy (Leanomics) … and just like President Obama made clear, we must ensure the banks pay taxpayers every penny back (and make sure investment banks are separated from commercial/high street banking too).

In my humble opinion, Vince Cable appears to be the closest to identifying what a successful 21st century economy needs, having also hosted sessions promoting the introduction of a Land Value Tax (to replace unjust/unfair taxes) for instance. The Liberal Democrats also want to completely overhaul the archaic (19th Century) voting system, so MP’s properly represent (and are held accountable to) the people they are supposed to serve. 

If you’re relying on others to help you – good luck – you’ll need it. Labour are relying on spin and clearly cannot be trusted e.g. this week Brown stood up to tell us there will be no more income tax rises … but he said that last time, and watch out for National Insurance everyone, which is just another name for the same thing (n.b. they’ve given no guarantees on this one and Brown has also raised it before) – why did the press (e.g. the BBC) not ‘press’ him on this…?  As for the Tories, Cameron has said he wants to give people ‘power’ (e.g. by letting parents set up their own schools – more of a gimmick than a practical solution), but at the same time has no desire/interest in changing how MP’s are given power or wield (e.g. profit from) power.  Instead the Tories want to slash public spending, change inheritance tax laws to favour the rich … and would vehemently oppose changing/removing unfair taxes and replacing them with a Land Value Tax (as the Tories represent, and are heavily backed by, all the rich land owners/bankers profiting heavily from land without adding any value at all). 

The election provides an opportunity to allow a little more common sense to filter into our Economic/Political System (e.g. values, fairness, justice) and if this happens our failing economy may actually start to turn around.  If it does not it will simply continue its downward spiral (don’t be fooled by any apparent ‘recovery’ – as the Government simply postponed all the ‘pain’ until after the election) until the situation gets so dire that people finally decide to do something about it – but at this stage it’ll probably be too late to successfully turn things around (NB I do not support any political party and like most people hold the vast majority of MP’s in contempt – however I do care about people’s future, the state of the economy and the level of democracy in the UK).

Let’s see what the next few weeks hold …