Paying less, caring more

Do a rough mental calculation. Take half your annual Council tax and multiply it by four. The result is roughly what you're paying in tax each year to 'protect' other people's children. As Christopher Booker has catalogued in his Telegraph columns, the child 'protection' racket has grown into a national industry, fully sanctioned by populist horror at baby Peter, Victoria Climbie and all the other tragic victims of adult abuse. Your local council will close every library, see each street lamp doused and let rubbish pile-up in windrows on the streets before they will willingly cut a single pound from their child 'protection' budgets.

And yes, of course 'protection' is in quotes. Most children taken from their parents into the care of the State are at infinitely greater risk under the State's 'protection' than without it. Edward Timpson MP writes in the Telegraph this morning on the recent abuse of young girls by Moslem men in Rochdale, girls without exception in the 'care' of the State. Other enquiries are examining allegations that powerful Tory figures grazed à la carte on young boys being held in a State 'home'. Suicide and self-harm figures for children held by the State are abnormal. So yes, under the State's 'protection' is the very last place you'd want a child to be.

Timpson is acting the Muppet in calling for even more investment and greater spending to prevent another Rochdale. We need a radical alternative. We need to make major cuts to State spending, and child 'protection' is a massive one; we really have to face it. Cityunslicker writes on the C@W blog

However, there are no votes in this approach from a populace used to the Nanny state; so what to do? I can see the default position being minor cuts, more tax rises and a slow Japan style death with the national debt slowly climbing towards Italian and then Japanese levels whilst politicians hand out the treats to harvest votes.

Polly's wish may come true

Lady Toynbee has long urged the governments of Europe to tax the wealthy in order to fund the recession. Now, it seems, not only will her wish come true, but Polly herself will be able to share in the noble sacrifice. If Ambrose Evans-Pritchard in the Telegraph is right, and EU finance ministers move to taxing holiday homes, Polly's Tuscan retreat will certainly give her the personal opportunity to contribute a great wodge of cash to the tax-starved club Med administrations.

No doubt readers will share Polly's undoubted joy at the news.

Government has little moral authority

Moral pronouncements by ministers of the crown carry little or no credibility these days, particularly so when the minister in question, David Gauke, is married to a tax-avoidance lawyer and has claimed back £11k in stamp duty on his second home (HT Guido) while also clocking up £120k a year in expenses including travel to his constituency from Westminster. I'll also make a fair guess that Gauke's tax return is a model of maxing-out every single allowable expense, for which he needs large wads of VAT receipts. No wonder he's so in favour of them. Why be restricted, like the little man, to getting back 20% by paying in cash when you can claim 100% with a bit of nous?

Government ministers have destroyed their own moral authority. You can't shove gay weddings and bloody pointless windmills down the public's retching throat and then lecture them about morality; you can't waste their wealth and that of their children and grandchildren on saving your chums in the banks and then lecture them on fiscal responsibility, you can't give the BBC a monopoly of £4bn a year in TV Tax and then condone their arrangements for their richest fat-cats to not pay tax but condemn the poor widow for the tenner paid to her window cleaner, and you can't sell the nation's sovereignty to a faceless supernational power for a mess of pottage and expect people to heed your words. While Blair, Hoon, Irvine and Straw are allowed to walk free in England, while Brown and Balls continue to profit by their malfeasance and while the entire political class is more remote, more separated from the people than ever before you have no firm ground on which to stand and deliver moral pronouncements. Ministers are mired in the ordure of corruption, peculation, patronage and placement, besmirched by deception and mendacity and fouled with the filth of their mutual self-protection at our expense. They have all the moral authority of sewer-rats.

Tax transparency?

Nigel Farage opposes the notion of all politicians having to make their tax and earnings totally transparent, on the grounds that this would deter established and capable persons who had already achieved some measure of material success in their lives from entering politics to 'give something back'. I take his point. Polly on the other hand advocates that all of us should reveal our tax and earnings, so that we can look up the neighbours' claimed allowances in the internet. If all is open, tax avoidance is discouraged. I take her point. Livingstone's repulsive hypocrisy only came to light when his own income tax avoidance was revealed. And then he's lied about it, which is even worse. 

Let me be honest. I avoid tax. I suspect most of us do; every father who has bought the champagne for his daughter's wedding in Calais is a tax avoider; every juvenile geek who has bought gadgets or CDs from Luxemburg or the Channel Islands (before the closing of that useful loophole) is a tax avoider. The fight for the boozy lunch receipt ('corporate entertaining'), 10,000 miles a year of 'business' mileage, the ergonomic office chair in front of your PC screen and all the rest. But then most of us aren't standing for public office with the power to raise taxes and charge others. 

So why are avoiders demonised whilst evaders are getting no bad press at all? Paying your Polish builder in cash to avoid the VAT, or dishonestly claiming red diesel for a Webasto are surely morally more serious offences? Would Polly be happy to disclose all her builders' accounts, payments to her cleaners and domestic staff? 

I'm really ambivalent on this one.

Drunks support 72,000 nurses

Along with the 'Wales' the 'London Bus' and the 'Football Pitch', the 'Nurse' is a standard unit of measurement well understood by the newspaper reading public (as in 'An area the size of Wales is to be covered with wind towers each the height of six London Buses and with a sail area of 0.3 Football pitches; each is equivalent to the costs of 14.7 Nurses'). You see, the headline news that drunks cost the NHS £2.7bn a year means absolutely nothing to most people. Now let's make sense of it.

Some 80% of NHS costs are salaries and wages, so some £2.16bn of the annual drunk cost. An average Nurse is £30k a year, so the UK's socially responsible and altruistic drunks actually directly support the employment of some 72,000 out of the country's 400,000 nurses. What's more, with government income from Spirit duties at £2.3bn, Wine duties at £2.9bn and beer and cider duties at £3.4bn, some £8.6bn, they're paying not only for these 72,000 nurses but another 215,000 of the remaining 328,000. In fact, without the support of the county's drunks, the NHS would collapse.

Drinkers of Britain, this blog praises your sterling and selfless efforts for the care and well being of your fellow Britons. My you never stint in your duty to quaff, may you never refuse just one more and may you never flee from a round. You are the backbone of the realm.

Tax and Duty

I remember research from the 1970s on the levels of sales tax in adjacent states in the US. If the difference were greater than about 3%, folk would cross state lines to buy cheaper white goods. Given that America is vast, and distances great, and petrol (back then) cheap, it is the cost in travel-time to secure a saving of say $30 that's important.

Now, when I was in Hungary three months ago, a packet of fags at the airport duty-paid was HUF710  (£2.27). OK, there are only 19 rather than 20 in a pack. This week the price was down to HUF630 (£2.02); outside the airport, ciggies are normally sold in small corner shops, many branded, er, SPAR (yes really - the same 60s logo, wavy line and the rest that disappeared here twenty years ago) and the price is even lower - HUF590 (£1.89). Given that the cost of an easyjet return ticket is about £120 with a 2 hour flight time, and the saving on a quite legitimate and legal smoker's supply of 15 cartouches is now some £750 against equivalent duty-paid UK fags - an annual tax saving (avoidance, not evasion) of £3k for those like me - why wouldn't you? (and decent locally brewed beer is £1 for half a litre ...)

I'm a tax mitigator, you're a tax avoider, he's a tax evader

So Danny Alexander is to crack down on 'tax avoiders and tax evaders' is he? Many of you will now be mumbling that tax avoidance is quite legal, whilst tax evasion is the naughty thing, and how exactly is he to crack down on tax avoidance. Well, it seems as though avoidance is legal but - note this carefully - is a course of conduct designed to subvert or defeat the evident intention of Parliament. As opposed to tax mitigation, which exploits tax advantages foreseen by Parliament.

Legislation against tax avoidance may also, and sometimes has been, retroactive.

Now, I choose to buy my cigarettes at £2.90 a packet including all taxes rather than at £6.50 a packet including taxes. As far as I'm concerned, I'm a tax mitigator. Parliament has made specific laws with conditions I must fulfil; I must be a personal shopper, and the cigarettes must be for my own consumption. HMRC have issued explicit guidance (after being faced with being dragged through the courts) that I may bring into the UK up to 3,200 cigarettes a time without having to justify why. So this is clearly tax mitigation, yes?

Good. Glad that's clear.

£0.5m fraud the tip of an iceberg

The folly of the State in trusting in Leviathan national computer systems rather than local staff in collecting tax is exemplified in the case of Ukrainian fraudster Dmytro Shepel. Using a fake NI number and a fake Lithuanian passport and ID document, he did as many non-EU Eastern Europeans do and got himself a job here. All went well it seems until he sampled HMRC's online self-assessment computer system and realised just how easy it was to fool the computer into disgorging a tax repayment.

Keeping his claims small, around £3k, at around a level we presume at which the computer could dispense money without human intervention, he made a total of 218 claims for fictitious people, the proceeds of which were paid into 74 different bank accounts. He netted £559,497.42 before he was caught.

Since I've heard of this fraud from a few other sources, I'll bet it's widespread. Not to the extent of 218 false people, but maybe one or two, each netting a couple of grand or so. The less greedy the fraudsters, the longer they can get away with it.

For both taxes and benefits, the lesson to be learned is that the more local they are, the less likely they are to be subject to error or fraud.

Cameron - abolition of 50p tax rate will have to wait

The abolition of the 50p tax rate will 'have to take its place in the queue' under a Conservative government, Cameron told 'Today' listeners this morning. Podcast not up yet. He said his priorities are reversing the tax burdens on those earning £21k - £22k.

Smart move. Only 300,000 voters earn over £150k, but millions of voters earn £21k.

You'd think there was an election in the offing, wouldn't you?

British public is giving Nanny the finger

Idiots such as Liam Donaldson should have been strangled at birth. His latest proposals, for a minimum alcohol price, will no doubt have a hypnotic fascination for this government, which enjoys nothing more than spending billions in taxes on nannyish fiddling that has no effect.

Much work has been done on the price elasticity of demand for alcohol in the UK. It varies for beer, wine and spirits. It varies for some other factors. Both own-price elasticity and cross-price elasticity must be considered. The Treasury Model (.pdf) in particular suggests that spirits taxation in particular is far below its revenue-maximising level; that the duty on spirits could be raised by 40% to maximise revenue, and sales (and revenue) would only fall off if duties went beyond this. This means swingeing price increases on cheap supermarket vodka, with the cheapest under Donalson's proposed 50p a unit tax at £18.75 for a litre of own-brand 37.5% abv Tesco voddy, from a current £10.98 a litre.

In practice the poorest and unhealthiest families will become even poorer and more unhealthy. As their booze costs more, they will give up fresh fruit and veg, fish and proper cooking and live on biscuits and Iceland 99p pizzas as long as they have a few tinnies of Stella or bottles of WKD to wash it down. Their children will grow up with rickets and ringworm. We'll go right back to the 1920s in a perfect example of regressive Socialist doctrine.

And the village pub, so long a fixture of our society and people, a local institution that does more to foster community cohesion, build social capital and combat social exclusion than the efforts of every Nanny State worker combined, will become history.

The House of Commons Health Select Committee has just published a report (.pdf) that has found that this government has pissed away billions in failed social engineering experiments; rafts of knee-jerk measures that cost the earth and have had no overall effect whatsoever. In fact, health inequalities have widened - by 4% amongst men and 11% amongst women, since 1998.

If these cloistered fools ever once asked themselves why people drink to excess they might just find that it's the escape that many have from the suffocating, cloying, overweening, intrusive, impertinent and unwelcome interference of Labour's Nanny State in the minutae of their lives rather than the cost per unit that's the more important factor. But that's a lesson these idiots will never learn.

High tax rates will lower competitiveness

Yes, I know this is axiomatic - everyone but Labour knows this. Let's just take the effect on one sector of the economy - private education. As this piece in the Telegraph graphically describes, high earning parents want their kids in private schools, and "Parents would rather crawl over broken glass than take their children out of independent schooling".

Now like them or not, the private schools turn out large numbers of well rounded highly qualified young people. Not to say they don't come out of the State sector as well - some decent LEA schools produce outstanding pupils, but consider that Eton got more GCSE A grades last year than the whole of the borough of Tower Hamlets.

Overall, higher tax rates with no tax exemptions for school fees will tend to depress the quality of pupil output as the private sector shrinks and the poorly performing State sector grows. And of course all the pupils taken out of private education will now have to be educated at the taxpayer's expense. Both ways we become marginally less competitive as a nation.

So long term losses in return for short term electoral gains. Isn't that Liebour all over?

Does Scotland really need England?

It has long been received wisdom that Scotland is dependent on English taxes. Commentators will quote the unfairness of the Barnett formula, and from time to time the papers will get themselves into a froth over per capita government expenditure in Scotland being £3k a year higher than England. Or whatever. So I was a little surprised this week when a report from Oxford Economics virtually slipped under the radar.

The 'Standard' carried a paragraph yesterday:

London and the South-East's subsidy to the rest of the country is rising rapidly and is now nearly £40 billion a year compared with just over £20 billion in 2004. The study by Oxford Economics balances Government spending against tax revenues in each region. It shows that London, the South-East and the Eastern regions made a net contribution of £37.7 billion to the UK public finances in 2007. The North, the Midlands and the South-West joined Northern Ireland, Wales and Scotland as a net drain on the Exchequer.

Which prompted me to find the original report to see exactly how much Scotland's deficit is running at. And was astonished by the data - most easily understood in the graphs below. Scotland is very nearly fiscally balanced; Salmond would only need to raise an additional £2bn a year in taxes from the Scots to break even. It seems what London and the South East is really paying for are public services in Wales and Northern Ireland. Which makes the DUP's recent treachery over 42 days even more galling.

Bring it on!

As the Sunday papers are full of political consensus to impose swingeing increases on alcohol duty and Darling is being urged to raise the price of a packet of fags to £10, I can do no more than turn to my Kipling:

Brandy for the Parson, 'Baccy for the Clerk.
Laces for a lady; letters for a spy,
Watch the wall my darling while the Gentlemen go by!

The Burghers of Calais and the French government are set to do very well from Darling if he follows all the advice he's being offered today.

I haven't paid a penny in ciggy tax to the UK Treasury in 11 years. My regular 6-weekly shopping trips across the channel, to stock the larder as well as the cellar and humidor, leave me buying little more than fresh fruit, veg, meat and fish in the UK. And shirts, of course; even the French can't make shirts to compare with Jermyn Street.

And now I plan to rent an allotment. I've calculated I can grow an entire year's worth of Virginia tobacco on a single allotment plot, and it seems I'm not alone. The interweb is busy with websites offering advice, encouragement, seeds and practical tips for legal growing, curing and storage of home-grown tobacco in the UK. And no doubt home wine and beer-making will show a similar increase in interest for the law-abiding and practically-minded.

For those more indolent souls, and those who don't mind paddling in illegality, there will always be the smugglers.