The most common response by today’s experts as a solution to today’s problems in the UK is a call for millions more of Government money to be made available: ultimately, that almost always means more tax. That is unsustainable. Smarter working, smarter spending and smarter thinking would be better. A good start too might be to celebrate and encourage financial success, rather than to abuse and penalise it.
ANTI-WEALTH CULTURE CORRODES HONEST ASPIRATION
It was an anti-wealth campaign, often used by politicians dishonestly when it suits them, which has seriously damaged Rishi Sunak. See Sherbhert Article The Indian Citizen, Tax and Smear It betrayed an underlying UK weakness of denigrating wealth honestly accumulated, and “success” when measured in money terms. This undermines the UK’s ability to work itself out of the current economic pressures which beset most global economies, not just the UK’s. Has the UK constructed a tax and benefits system, which raises everybody’s expectations too high while ensuring they cannot afford them; that, when combined with a culture of demanding that a third party solve all people’s problems, means that the. only resource ultimately turned to is Government and so the taxpayer?
First, to ask some basic questions:
DO most people in the UK aspire to improving their own and their family’s standard of living? That is aspire to make more money for them to provide better and broader life choices?
DOES allowing people to keep most of their earnings encourage them to be more productive and earn more?
IS it a healthy state of affairs for as many people as possible to be financially independent and not dependent on hand-outs, whether official or private or charity?
IS it true that more people being in jobs that pay well mean there is more wealth generally and more tax can be collected, and so more essential services financed?
IS it true that the more people are incentivised to work and contribute to society, the more likely they are to be entrepreneurial and creative?
IS the purpose of education and parenting to enable individuals to maximise their potential, and hold broadly good values, to be responsible independent contributors to their immediate community and society generally?
While there will be disagreement about detail and emphasis, a lot of people would perhaps answer those questions broadly positively, at least as to their intrinsic sentiment. If that is true, then perhaps in the UK it is correct to say that to aspire to improve one’s lot and living conditions is valid and even laudable. Perhaps therefore it should not be such a common sport, or destructive tactic, to denigrate those who succeed in that aspiration. People making money and the financing the Government’s spending are Siamese twins.
PAYING INCOME TAX MAKES PEOPLE STAKEHOLDERS IN GOVERNMENT BEHAVIOUR
While most people consider keeping their tax bill as low as possible, paying income tax is the privilege of those who earn money. All Government spending ultimately comes out of taxes, from Defence to the NHS. It is worth perhaps reflecting on who pays income tax in the UK.
First, over 40%, perhaps as much as 43%, of people pay NO income tax. Also, of those remaining say 57%, only 1% of them (so about 0.6% of all people) collectively pay about 30% of all income tax; and the top 10% pay over 50% of all income tax. The top rate of income tax is 45%. That top 1% (only about 300,000 people) earn not less than £160,000 a year, and who those people are is a constantly changing population. If 300,000 people became 600,000 there would be huge growth in Treasury coffers.
When combined with the other taxes in the UK, such as National Insurance, VAT, Insurance tax, Council tax, duties on things such as petrol, and now inflation on top, the prospect of people fulfilling their improvement aspirations become weaker. And so, should not, as a priority, Government policies and the nation’s culture be geared to increasing and not reducing that prospect?
A culture of disrespecting those who are best paid, while eulogising the less well off, will also disincentivise able and decent people from aspiring at all. What is remarkable too is that the prime abusers of the wealthier are usually broadcasters and commentators and political beings who are likely among that top 10%, and commonly the top 1% of income taxpayers.
It is income taxpayers who have the biggest stake in how Government behaves as they are the ultimate source of spending. There seems today to be very little scope for Government to finance more spending from taxes on citizens, without gravely demoralising and disincentivising smart hard workers and innovators and investors.This sector of the populace need encouragement, and their success should be celebrated. They are fundamental to society being able to support the less fortunate and capable in its midst. This is not to diminish the importance of alleviating poverty, especially child poverty, a separate and top priority issue.
But a couple of thoughts as background to that poverty. It is a good question to ask why the biggest users, some 30+%, of food banks in the UK, are single adult males. Second is it perhaps important to remember when inequality and privilege rear their head that, by definition, half the population will always earn less and will be poorer than the national average? Third, while Government can provide some money and a supportive framework, most of the solutions to child poverty perhaps should rest on the shoulders of parents who made and make the big choices which impact their children.
SKIN IN THE GAME
Is the idea that 43% of the population are paying no income tax at all desirable? To some degree, the vast majority of this group will be dependent on an element of third-party subsidy, probably to a large degree from the State. Is it perhaps dangerous that so many people are not “invested” in the country’s prosperity and finances, in that they have no skin in the game?
There is perhaps a major risk to policy-making and Government decision-making posed by this state of affairs. For example, why should these voters not be in favour of more and more expenditure on subsidised services and benefit payments almost all of the time? Does a government needing to reduce these liabilities risk the ire of this massive part of the voting population? And is not any proposal to increase taxes, other than say VAT, likely to get their approval? There is something inherently unhealthy in such a large proportion of the UK population being unencumbered by the burden of most taxes.
No eureka solution is offered here sadly. However, in principle, the answer generally to improving the overall finances of the country, it is said by many, is simply improved productivity and so growth. This group, 43%, represent a group where, if their productivity could be materially improved, even resulting in an increase in taxpayer numbers, growth would be generated.
Reducing cost, and particularly waste and inefficiency, is the easy but limited way for all organisations, whether in the public or private sector, to be more productive: the big challenge is perhaps the positive approach to how to work smarter and realise potential of people, and technology, to the maximum, which is perhaps where real growth and so prosperity comes from. This requires receptivity to change and risk taking. Normally, to get people pointing in the same direction, they should all have some skin in the same game. How to do these things is for those with expert knowledge to earn their keep, provide solutions and stop passing the buck to the public purse.
GIVE WEALTH A CHANCE
Encouraging people to succeed by earning more and celebrating that achievement is not the same as a culture of greed. The idea that people with money are to be pilloried and shamed is counter-productive and contradicts the aspirations of most working people. Even Rishi Sunak is perhaps a good model of aspiration realised, as his immigrant parents chose to invest in his education, perhaps at the expense of more selfish choices. If it is important that people take responsibility for their finances and choices, then perhaps it would be more enabling and encouraging of self-help to reduce taxes at this time. The alternative of greater subsidies and hand-outs would serve more to embed the culture of turning to the State for help to solve problems rather than incentivising people to resolve their problems and adapt with resilience.
The Government too could set an example of self-help by cleaning its own stable first by reducing waste and inefficiency, with the executive who manage the spending of Government budgets being more accountable. It would for example be a giant leap forward if, when the NHS has issues to address, its Group executives had to accept responsibility and explain their spending strategy to make ends meet, rather than publicly demanding more Government, that is the taxpayers’, money as if that was their entitlement. And, in addition, repeating that philosophy across all public services would surely reap better productivity.
