George Monbiot has written here about the woes of our economy, and some of the supposedly underhand things the government are doing. The gist of his article is that team Cameron is not going to tax income on any profits made abroad for large companies; thus reducing the amount of tax paid significantly on money that has been through Switzerland, for example. It is aimed at the banks. I'm going to deal with some of the points he raises one by one. [Continue reading]
1. "Like the dismantling of the NHS and the sale of public forests, no one voted for this measure, as it wasn't in the manifestos."
i) The NHS reforms were in the manifesto. Here are some quotes that John Redwood used on his blog to make this point:
“We have a reform plan to make the changes that the NHS needs. We will decentralise power, so that patients have a real choice. We will make doctors and nurses accountable to patients, not to endless layers of bureaucracy and management”.
“So we will give every patient the power to choose any healthcare provider that meets NHS standards, within NHS prices. This includes independent, voluntary and community sector providers.”
“We will strengthen the power of GPs as patients’ expert guides through the health system by
• giving them the power to hold patients’ budgets and commission care on their behalf
• linking their pay to the quality of their results
• putting them in charge of commissioning local health services”
Monbiot opposes any market-based strategy, but they are likely to produce better results. Markets in healthcare work: in Singapore, the market system means that more people get better healthcare. We have the most expensive healthcare in Europe, but not the best results. A reformed NHS will still be free at the point of use. It will do all the same things, just – we hope – more efficiently.
ii) The forests are being leased, not sold; part of the negotiations will ensure they are still open to public use, and not expensive. Many of them already charge for parking etc. AND, the Forestry Commission only owns 18% of forests.
2. "The main beneficiaries, in other words, will be the banks."
Well, good. They account for 10% of GDP. The richest 1% pays 24% of all income tax. Morals and principles make for Guardian articles; tax cuts for the banks make for tax revenues that build schools. The tax system should be geared towards optimising wealth creation, not punishing professions for their supposed past crimes. (It is not even a clear case that the banks did cause the crisis in the first instance – see this article from 2008 by Dennis Sewell offering a different perspective, and there are many others.)
3. "By the time this government is done, we'll be lucky if the banks and corporations pay anything at all."
If you want people to pay tax they have to earn money: that requires the right incentives to do so. Public spending went up 3% a year under Thatcher, largely because she partially deregulated the City, allowing it to make vast sums of money, paying vast sums of tax in the process. By cutting corporation tax to 24%, the government is encouraging businesses to earn more money; a smaller slice of a bigger cake means more cake all-round, even if the government's slice ends up smaller (depending on what side of the Laffer Curve we are on).
4. "The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates."
At the beginning of the article he moaned that banks can claim the costs of foreign operations against pre-tax income here. They need therefore to generate enough taxable income in Britain in order to fund the foreign earnings. His argument just doesn’t stack up. They will leave anyway if we taxed them like he wants to. It is a global competitive market and we are offering two incentives to stay here.
5. "The City of London is itself a giant tax haven, which passes much of its business through its subsidiary havens in British dependencies, overseas territories and former colonies; how its operations mesh with and are often indistinguishable from the laundering of the proceeds of crime."
Let me reiterate. The City generates 10% of GDP and the wealthiest 1% of the population pays 24% of all income tax. And that’s only income tax. Vast amounts of Treasury revenues come from the City – the government is quite dependent on it for revenue. The more you tax someone the less incentive they have to work in your country. What right have the rest of us got to their money? As for the crime allegations – if it is true then where are the prosecutions?
6. "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."
Blair: this helped to fund massive public expenditure. His view of the Tory party is ideological nonsense.
7. "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."
Because freedom makes money, it also allows Mr Monbiot to work for a newspaper with operating losses of £30 million, and to draw a salary that he spends on lots of nice things. He is a capitalist in practice, but a socialist in his writing. Those of us on the margins do not pay anything like the proportion of tax that this supposedly criminal city does – but we use the NHS, schools, transport facilities that are funded from it.
8. "We are thrown enough scraps to keep us quiet, while the ultra-rich get on with the serious business of looting the global economy."
Enough scraps? Government spending is ludicrously high: jobs, services, quangos and benefits. Don’t be pious about people who are richer than you. They create wealth and jobs. They support business. They pay the highest proportion of tax. They stimulate economic growth. And they earned their money.
9. "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."
What right has the state got to any of that money in the first place? They give up huge amounts of the money they earn to the state. It is facilitated by their work. Without a large prosperous private sector you have no economy.
To quote Margaret Thatcher, “the problem with socialism is that eventually you run out of other people’s money.” George Monbiot doesn't even seem to have thought through where that money has come from in the first place.