Blog 2023 Malcolm Blair-Robinson

The Public Accounts select Committee has drawn attention to the peculiar custom of HMRC hiring accountants to help draft regulations, who then go back into their firms to advice clients how to get round them. There is a clear conflict in the style of poachers and gamekeepers.

It serves to underline the idiotic pass to which taxation has come with it myriad regulations, levels, applications, rates and allowances. This is a good moment to highlight the exception. PAYE-pay as you go- a system of tax collection from the employed, which is the envy of all the world and in which none of this tom foolery applies. What is needed is the same simplicity for the self employed and for business. The issue at the heart of the chaos is the notion  of profit, what it constitutes and where, when and in what tax jurisdiction it emerges.

The way to solve this is to detach profit from tax and instead tax (at a much lower percentage) turnover. Allowances for investment would be deductible and small businesses with a turnover of say £ 200,000 or less could be exempt, but the principle would be similar to VAT – if money flows it is taxed. The burden on business would be no greater, indeed it would be less, because the load would be fairly spread and none, no matter how big, clever, resourceful or multi-headed could escape. The days when the largest corporations, with the biggest turnover, making the most profit, could organise this profit to exit UK and emerge in the tax free land where the Bong tree grows, would be over. So would the days of a mostly unethical tax avoidance industry.

The intentions of Alex Salmond, the UK’s sharpest political operator, in his leadership of his country’s bid for independence are becoming less clear than they initially appeared. Many thought the plan was to cut adrift and go it alone, clean and free. First the Monarchy was spared the axe, then the Bank of England and now the pound. His proposal is that Scotland remains part of a Sterling Zone, with the BoE as the Central Bank. Even if the rest of the UK were to agree to these arrangements, the chances of which are just a shade above zero, what kind of independence would this be for Scotland?

Economically it would have to do as it was told by England, in whose Parliament it would have no representation whatsoever. Every fool in Europe now knows that you cannot have a currency without a government and in the absence of a federal system, the most powerful country runs the currency as Germany now runs the Euro. This means that in matters euro Berlin’s word is law. So it would be in London for sterling.

This is not real independence and it is certainly less attractive than the present Union for the Scottish people. The alternative would be to join the Euro and be told how to organise the budget by Brussels officials working under German orders. That does not sound a vote catcher. So go it alone with a Scottish pound? The trouble is the Scottish banking system is, post the Goodwin era, bust and relying on UK, mainly English, taxpayers to stay afloat.

Alex Salmond is clever and it would be unwise to write him or his project off. Nevertheless he will have to come up with something a bit more plausible if he is to win in 2014.

The issue is the proposed mortgage guarantee the government will give to all home buyers, who cannot find from their own savings the required 20% deposit. The Treasury Select Committee under its  able chairman, Andrew Tyrie, has issued a critical report about this ridiculous proposal.

The financial regulators, the building societies and the banks are only too aware that rash lending with a reliance on ever increasing house prices was at the heart of the collapse of the economic model and remains an ongoing instability in the system. They recognise that house prices in many areas are still excessive and that further falls, especially as interest rates rise, are likely. They also recognise that repayment instalments must form a lower percentage of the income of the borrower than was previously acceptable, in order that the borrower’s own financial model does not become precarious and likely to fail. This is why institutions have returned to the prudential lending practices of earlier times.

A component of property bubbles of the past, notably under the governments of Heath, Thatcher/Major and Blair/Brown, has been an insurance company guarantee of the excess over the level at which the lender will accept the unsupported risk. Losses in this class of business were significant as the margin of value insured was inevitably wiped out when the bubble burst and prices settled back. Moreover borrowers on lower incomes found themselves struggling with repayment instalments beyond their means and unable to sell because of negative equity, leading to potential repossession and a contingent liability to the insurer of the insured balance claimed by and paid to the lender.

To reintroduce this financially unsound and destabilising mechanism into a financial system so many are at pains to repair, is an odd shift in government policy. It makes no sense within the terms of reference of the Coalition’s declared financial objectives and if it is taken up by significant numbers will work against the re-balancing of the economy, which is vital for sustained recovery.

That is underscored with a recent think tank forecast that such growth as may be hoped for in 2013 is likely to be driven by the housing market. This is the road which leads backwards into further crisis. It is difficult to see why this chancellor remains in his job. If he is still there in 2015 it is even more difficult to see a majority in the country voting for the party determined to keep him at the Treasury.

This is the most extraordinary situation which the entire international community finds both perplexing and alarming. There is a tendency to dismiss the tension as bluff from a hermit kingdom full of brainwashed and starving people, run by a despotic family dynasty, supported by puffed up generals and an out of date military, which if the rhetoric sank into all out war would be utterly crushed. Most of this is correct. What is wrong is the policy used to confront it.

When some years back the North Koreans made wild threats about nuclear weapons the U.S President, Bill Clinton, calmly remarked that any such move would be ‘the end of their country‘. This time the responses have been sanctions and speeches, together with some fairly provocative military exercises, but no clear declaration of nuclear retaliation to deter. This has led to a situation almost out of control. It is driven by the uncertainty of the actual status of the North’s nuclear capacity. How many warheads does it have if any? Are they small enough to put on rockets? Are the rockets reliable?

Whatever the answers to those questions, they are irrelevant. The North Koreans say they have them. They should be taken at their word. The key issue is not whether they have them but whether they use them. Nuclear weapons are useful only as a deterrent, but in this regard they are very useful indeed. A third world war was avoided precisely because each of the powers knew that if they launched their weapons they would not live to see the end of that day and their countries would be wiped out. Those who have nuclear weapons know that they cannot use them to threaten, but they can effect deterrence by having them.

The generation of leaders matured into politics following the cold war have lost the plot on this issue and are wholly muddled in how to deal with it. All their softly softly step by step processes leading to isolation, condemnation and sanctions have got nowhere with Iran nor with North Korea. What is required is a bold firm statement. Waste the money you have not got on developing nuclear weapons if you want to, but try and use them and your country will be erased from the map in a full retaliatory strike launched before your weapon is half way to its target. It should be said in public. again and again, loud and clear.

It has worked before and it will work again. Once assured it will not be attacked, North Korea will be forced  to think about how to feed its people. That is when meaningful discussions can begin with a real prospect of a better life for the hungry and starving north of the 38th parallel. On the present course anything may happen. Even something so bad as to be beyond imagination.

The unfortunate and unhappy teenager Paris Brown, who has been put through an emotional mangle by the media over her tweets of the past, has resigned from her extraordinary post as a youth police and crime commissioner in Kent. One can only hope that she quickly recovers her self confidence and self esteem after a ridiculous episode in her life, which was not of her making.

There has not been a coherent understanding among the general public about who or what police and crime commissioners are, what their qualifications ought to be, what they are supposed to do, or why a half hearted opportunity was created last November to elect them.

This bafflement can only be enhanced by the farce in Kent. Evidently these newly elected Commissioners have the power to appoint the Chief Constable. The residents of Kent and their police force must hope that the present incumbent  Chief Constable stays in post. In the event of a change it is anyone’s guess on whose unlikely head the choice of a replacement would fall.

In the forest of British and world Politics a great oak has fallen. The death of Margaret Thatcher is an event of great significance, whatever political views you hold and whether you think her brand of politics, Thatcherism, good or bad. The measure of her greatness as a politician is that she has a political philosophy named after her.

Twenty five years will have to elapse before a measured view of the lasting value of her reforms can be assessed. There is little point in this blog trying an evaluation now. What can be said is that she put the spine back into a country which had lost its way following the evaporation its Empire. She demonstrated that trades unions must operate within a constructive legal framework to advance the causes of their members and not as a separate organ of brute power within the state. She banished the ghosts of Suez with a stunning victory in the Falklands. She gave the Conservative Party four consecutive victories of which she herself won three. To many, most important of all, she showed there is no glass ceiling above which women should not hope to rise.

On the downside she unleashed a set of simplistic economic principles which formed the framework of an economic model which has now collapsed and from which recovery is proving elusive. She decimated Britain’s industrial base and reinforced a national obsession with home ownership which has left a housing shortage and the biggest national debt overhang in the country’s history.

She changed the nature of politics and the positioning of the political parties. She destroyed the Conservatives as a national party; now they prosper only in England. Since her, the Tories have won  just one general election under Major with a small majority, which they subsequently lost in bye-elections and one other under Cameron, when they failed to get a majority altogether. The Tory party, once renowned for its unity of spirit and purpose is now split between right and left and pro or anti Europe.

These are just a handful of thoughts plucked  from a huge harvest of extraordinary contributions from a towering twentieth century politician. To her family and friends we extend our sympathy and warm thoughts.

Others will judge this moment dependent on who they think they are,  what they believe in and where they think they are headed. And what, if anything, they believe they owe to the age of Margaret Thatcher.

To highlight the extraordinary situation of a huge family, led by able bodied work age adults, living entirely off benefits and no work, at public expense while their neighbours toil and pay taxes to fund the fiasco, is a point worth making. Whether it is quite as simple as that and whether senior government ministers, namely the Chancellor, should make it is another question.

Child benefit is paid to prevent children falling upon the hardship of extreme poverty and by all accounts of teachers and neighbours who were in contact with the Philpott children, they were well fed and clothed, never late for school and never missed a day. The side product of this successful state support was its manipulation by a ruthless egocentric who treated everyone, especially women, his women as he saw it, with contempt and the siring of  more and more children as a profitable business.

Unhappily any system, for whatever laudable purpose established, can and will be abused by those whose only navigation tool through the challenges of life is personal gain by any means.This does not mean the system is bad, nor that the majority of those who benefit from it are bad; only that a handful are bad and in this case one very bad indeed. There is at issue a principle, dear to Conservative party activists who believe surveys that suggest the majority of voters agree, which questions the level of obligation of hard working taxpayers as the phrase goes who want to get on funding such exploitation.

Underlying this self-righteous assertion is a rather nasty trend. It is the divisive one of seeing taxpayers as one part of a state burdened by another which is feckless, lazy and composed of spongers. Of course there are spongers among benefit recipients, just as there are liars in the Cabinet. This does not mean we should end benefits any more than we should end democracy.

The stark truth is one few dare face. The economy is wrecked by a shrinking of its industrial base and a headlong dash into property and debt on such a titanic scale that nobody knows how to get out of a bind that the majority of the hard working taxpayers had a hand in setting up, with their profligacy with plastic money, equity releases and abandonment of saving, during a debauched celebration over many years of a boom without any real foundation in mathematical fact whatsoever. The consequence of that is a benefits bill amounting to a third of government spending necessary to prevent a descent into poverty and deprivation of third world dimensions.

The whole nation pays some tax, if only vat, and there is no such thing as taxpayers as a separate entity. To get out of a prolonged and continuing economic crisis, for which none thus far has offered a convincing route of escape, will require a sense of national unity and pulling together Olympic style, including bankers, speculators, spongers, ambulance chasing lawyers and all. Even then salvation is far from certain. Politicians who think they can pick up some votes by sowing division come form a political tradition of the very worst kind. History is full of examples. They all came to an unhappy political ending.