“The problem with the ‘hard choices’ narrative”, wrote Emma Burnell yesterday “is that it always seems to involve someone else’s shibboleths and not your own”.
Fair cop, I thought. It’s a bit like the disturbing trend of modern politics where people trumpet their willingness to take tough choices in order to avoid actually taking any.
So here are some things I think we’re going to have to do to get out of our hole that I don’t like, but I think we’ll be better off lumping.
It’s a manifesto with the attracted qualities of yesterday’s cold, salty porridge.
1. Increase personal taxes
I’m a radical neo-new Labour Blairite ultra zombie. I don’t like putting up taxes. But we’re going to have to. Alistair Darling plan called for it, any realistic deficit reduction strategy will have include it.
We can say that some of the taxes we will raise will just be the removal of benefits from the wealthy, or increase higher rate taxes more to make up for the fact we’re not cutting universal benefits on the wealthy or high incomes, but basically, it’s all the same. The future includes more Taxes for you, sunshine. Sorry. If we’re really good, we might be able to swing fiscal tightening without increasing the standard or higher rate, but only by accepting the current rate of VAT.
At the very, very best, if growth returns, we might be able to make our budgets fiscally neutral, but that still means we’re screwed on personal taxes because we’re going to have to:
2. Reduce corporate taxes and/or business subsidies.
Vodafone are evil. So’s Google. So’s Primark, So’s Starbucks.
Sod it, I reckon everyone is, right?
Here’s a a quick pause for thought. Maybe as well as being mercenary moneygrubbing scum, these businesses are being rational mercenary, money grubbing scum. If you’re a global company, declaring profits in high tax jurisdictions is suicidally stupid. If your competitors, whether in market or for investors, can get away with managing their tax base so profits are reported in lower tax jurisdictions, then you would be stupid if you didn’t do the same.
What’s more, locally UK located companies athat are not able to do this, for whatever reason, soon find themselves at a major competitive disadvantage. Now, there may be some things we can do to address this on a national and international level (more of this later), but one part of the response will include grasping that if the global trend in corporate profit taxation is downwards, then all economies will find themselves forced to adjust to this in order to remain competitive. (That doesn’t mean business isn’t taxed, by the way, simply that the way in which that tax is extracted changes.)
Think about it this way: If we were to increase UK corporate taxation by 5% today, we would reduce the profits my new UK based coffee company, BuckTax’s, would be able to give shareholders, while Starbucks wouldn’t mind one bit. That’s the disadvantage a lot of UK Businesses operate under today, and unless and until that problem is solved, the general trend in corporate tax rates will likely continue to shift downwards. If that’s the case, we’re probably better off working with the grain, not against it.
Further, we will probably have to subsidise new businesses too.
What is a State Investment bank, ultimately? It’s a transfer, from either current or future taxpayers, to Businesses. You make this investment for the same reason that any investor does – that the future returns – for the state, both as specific ROI or the increase in tax take growth generates. Same for support for SMEs, or free ports, or a whole host of other infrastructure, defence, investment or R&D subsidies.
Labour’s Trott report suggests that we could fund a State Investment Bank through using National Savings. Now, National savings reduces the cost of debt to the treasury. Using the flow of money to fund a bank instead will mean an increase in the cost of UK debt (the level of which will depend on how much the debt costs, of course). So, help for business, with a bill for the taxpayer. Worth doing, but not as enjoyable as building hospitals.
Now, as I was saying earlier, one bit of good news is that we can mitigate the impact of tax avoidance strategies. We absolutely should do so, right?
Which means that we’ll have to:
3. Accept a more co-ordinated European Union, and give up some sovereignty.
I can’t stand the bloody EU. It’s so annoying, and prissy, and stupid and interfering, worse, most of the people involves seem to be deluded. But if I want to reduce the shifting of EU profits to low tax jurisdictions?
Well, then I need the EU to do that by being prissy and annoying and interfering to someone else, and I don’t reckon they’re going to love that much if they don’t get to complain about whatever it is I do that annoys them. So I need a deal, and to get one, I’m going to have to do a whole bunch of stuff I don’t like much.
Then, of course, there’s just the fact we basically need the EU to sort out the Eurozone mess, and if we want to shape that debate, so we, can reduce things that matter, like cut CAP or ever increasing spending, or Strasburg, but again, they’ll ask us to do some stuff we don’t like much too.
I suppose I could leave the EU, because, as I said, it’s prissy, stupid etc etc. But I don’t particularly want to do that either, because, y’know, Jobs and markets and foriegn investment.
It’s every which way but lose on this. On balance, I’d rather get stuck in, because you know, I don’t trust those guys not to screw us over if we walk out. It’s the old rule when hanging out with a bunch of gossips: don’t be the first to leave, cause then they’ll talk about you.
So there you go. Three hard choices I don’t want to take.
There are other ‘hard choices’, I guess, from holding down salaries and state spending in the medium term to some pretty hard welfare choices on universality, but those tend to go with the grain of my boggle eyed right wing Labour zealotry, so I feel more comfortable about those.
These ones though, really stick in my craw. But I reckon we’ll need to do them.