Taxing times ... but not for everyone

Extracts of an article written by George Monbiot,  and published in the Guardian 8th February 2011.

In David Cameron we have a leader whose job is to quietly legitimise a semi-criminal, money-laundering economy.

“I would love to see tax reductions” David Cameron told an interviewer at the weekend, “but when you’re borrowing 11 per cent of your GDP, it’s not possible to make significant net tax cuts. It just isn’t.”

Oh no? Then how come he’s planning the biggest and crudest corporate tax cut in living memory?

If you’ve heard nothing of it, you’re in good company. The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone. They are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d’etat is taking place. Like the dismantling of the NHS and the sale of public forests, no one voted for these measures, as they weren’t in the manifestos. While Cameron insists that he occupies the centre ground of British politics, that he shares our burdens and feels our pain, he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century. Here’s how it works.

At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil PLC pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match the corporate tax rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to “large and medium companies”: it is not available for smaller firms. The government says it expects “large financial services companies to make the greatest use of the exemption regime”. The main beneficiaries, in other words, will be the banks.

But that’s not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate “of any major Western economy”. By the time this government is done, we’ll be lucky if the banks and corporations pay anything at all. 

David Cameron said “what I want is tax revenue from the banks into the Exchequer, so we can help rebuild this economy.” He’s doing just the opposite.

These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates. Any UK business which doesn’t outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage. The new rules also threaten to degrade the tax base everywhere, as companies with headquarters in other countries will demand similar measures from their own governments.

So how did this happen? You don’t have to look far to find out. Almost all the members of the seven committees the government set up “to provide strategic oversight of the development of corporate tax policy” are corporate executives. Among them are representatives of Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays.

The world’s tax havens have not, as the OECD claims, been eliminated, but legitimised; with the City of London itself being a giant tax haven, which passes much of its business through its subsidiary havens in British dependencies, overseas territories and former colonies; its operations mesh with and are often indistinguishable from the laundering of the proceeds of crime; and the Corporation of the City of London effectively dictates to the government, while remaining exempt from democratic control. 

Tony Blair came to power after assuring the City of his benign intentions. He then deregulated it and cut its taxes. Cameron didn’t have to assure it of anything: his party exists to turn its demands into public policy. Our ministers are not public servants. They work for the people who fund their parties, run the banks and own the newspapers, insulating them from democratic challenge.

Our political system protects and enriches a fantastically-wealthy elite, much of whose money is, as a result of their interesting tax and transfer arrangements, effectively stolen from poorer countries and poorer citizens of their own countries. Ours is a semi-criminal money-laundering economy, legitimised by the pomp of the Lord Mayor’s show and multiple layers of defence in government. Politically irrelevant, economically invisible, the rest of us inhabit the margins of the system. Governments ensure that we are thrown enough scraps to keep us quiet, while the ultra-rich get on with the serious business of looting the global economy and crushing attempts to hold them to account.

And this government? It has learnt the lesson that Thatcher never grasped. If you want to turn this country into another Mexico, where the ruling elite wallows in unimaginable, state-facilitated wealth while the rest can go to hell, you don’t declare war on society, you don’t lambast single mothers or refuse to apologise for Bloody Sunday. You assuage, reassure, conciliate, emote. Then you shaft us.

Monbiot - another great web site uncovering the truth ... and more about how power is being misused ... for the benefit of the few (i.e. ultra-rich), and at the expense of everyone else.

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.

Steaming ahead ... to a Precipice?

As the UK Government continues blindly along its path (without changing a thing), the 'elephant in the room' is still steaming ahead and taking the UK economy towards the edge of the precipice.  With buoyed up (i.e. inflated) asset prices, colossal debts (Government and personal debts), collapsing tax receipts (income tax and corporation tax) and economic activity 'quietly' but steadily declining (and with massive jobs cuts predicted in the public sector too), it doesn't take long to see the unsustainable nature of the currently 'recovery' (0.1% growth!) and where it's heading.

However, 'talking things up' appears to be back, with news of house prices 'apparently' on the rise once again (i.e. more asset price inflation/speculation - rather than building of new property, which is real wealth creation).  The folly of such concepts is plain for all to see, with just a little digging, as the only people who truly profit in the long run from this are the landowners and the banks (who take away most of our younger generation's salaries). Reports of banks making bumper profits (and paying themselves large bonuses are also back), which is not hard to do in the short term when you can pay out at 0.5%, whilst lending out to businesses/individuals at 5%-30%, and whilst you can also take taxpayers money and re-invest and speculate it in the short term on collapsing assets prices (that are a result of previous actions of the banks themselves) whilst the Government/taxpayer underpins any of their bad debts.

However, inflation is now rising (the Bank of England has had to write to the Chancellor this month), and in normally the best month for tax receipts (January), the Government has had to borrow yet more money rather than being able to pay any debt back - for the first time since records began!! Our economy is in crisis, and founded on outdated/flawed leadership and management practices (i.e. poor moral values, self interest and greed).  The present system is continuing to collapse, but those in power (e.g. Government leaders, banks) are choosing to look after themselves rather than doing anything about it (for the majority of people in this country, and particularly younger generations).  Real economic inactivity and the impact on future generations has been recently highlighted, and there will be more of this to come in the future unless we change things quickly and for the better. The opportunities in the future are vast, but only if we embrace them.

As the risks associated with our economy grow, investment in the UK will drop, our debts will become increasingly expensive to service, and more young people will look elsewhere when considering their future - none of which the UK can afford ...

UK budget deficit soars ... and drastic action's needed

The UK recorded an all time high budget deficit of almost £90,000,000,000 in 2008/09, and with the deteriorating state of UK public finances, the Centre for Business and Economic Research (CEBR) today highlighted the need for a £100bn programme of cuts and tax rises to repair the UK's public finances and get the UK's budget deficit back down to £50bn by 2014/15.

Honesty, Honestly III

Given my previous posts on this subject, I'm pleased to see the area of honesty being picked up by Nick Robinson, and a few politicians too ... for instance the Chancellor is starting to express a need for it now too ... 

In an interview with the Telegraph, Chancellor Alistair Darling said voters are entitled to know about the government's future plans for cuts and spending before the next election. He said both parties are going to have tell voters, "the lie of the land" when it comes to which areas are going to be subjected to spending cuts. He resisted being specific about where future cuts could come but indicated that nearer the election the government would be more specific about the detail.

Mr Darling told the Daily Telegraph public spending would be tighter than in the past and that it was important to "try to level with people".  He said the government could still hold a review of public spending before the general election, and yet the Business secretary Lord Mandelson had previously suggested that this had been ruled out.

Gordon Brown and Peter Mandelson (a resident expert in smoke, mirrors, deception and spin), must be fuming right now, and regretting the fact that Gordon did not get rid of the Chancellor in the last re-shuffle.  Go for it Alistair, tell us the truth, and remember to include the fact that the UK's financial crisis was actually created by Gordon Brown during his 10 years as Chancellor (i.e. and not America, or anyone else for that matter, which he would like to make us believe) ...