Tactics
CHECK THE VAT FIGURES
Better to cut tax and spending than to reduce government debt because unlike tax cuts , debt reductions are very easily reversible politically. In the mid 80s Mrs. Thatchers government was running surpluses and paying off the national debt, it was soon reversed. It would be better to wait till tax/ spending to GDP ratio was under 10% or 0% and then pay off the debt with some kind of fixed term tax i.e. like one would pay off a loan- in a certain period of time with a certain amount of money per month.
Debt to GDP once higher , US 100% just after WW2, low point of 25 in 74, rising to 35 in 83, then 43% in 86, 51% in 92, 53% in 1994/5. Average for the othe 9 OECD was 49% ( about same as US,Canada, Japan) ( but varied from 25 in France/Germany to 100% in Belgium, Italy). UK 100% in 50s steady decline to 31 in 1991. Germany was only 6-7% in the 50-70s. There seems to be little correlation with growth in GDP or inflation and debt/gdp.
Its always going to be easier to reduce corporation tax if you insists that they use the money to employ new people ( only in the short term)
Gradualism versus Rapid change
Elizabeth won over the English Catholics to Protestantism by not enforcing the edicts too rashly
Mary made England hate Rome by executing the Protestants (300)
The laws were changed but the enforcement was lax
On the other hand by being radical and enforcing surely Italy and Spain were kept RC.
Thesis : can keep things the same by radical action but if you are changing you need to be gradual
but Netherlands - raising taxes killed it ( but it didn't in Spain)
Make it compulsory for people to work to draw their social security. The business initially pays nothing for the people then when all the people are soaked up then the benefit is cut off and the business expected to pay it direct - still cheap for them. Make sure they know this to start with. Special tax incentives to take people on initially.
Pay the civil service bonuses to reduce the costs of their department.
Henry the 8th imposed the reformation in England and then it became popular, in Scotland it was already popular.
Archbishop Laud (Chanc of Exchequer) beheaded for raising taxes without consent of parliament
Financial self-interest: The gentry's ownership of previously monastic land saved England from reversion to RC.
Given the west's democratic relativism , our strategy must be to accuse it with Anti-Christian relativism
US :1% of taxpayers pay 29% of all income tax ( those with incomes over $196,000)
5% (over $96,000) pay almost half, those with incomes below $22,000 (50% of taxpayers)pay less than 5% of all income tax. (Chalcedon Report p29 no 381)
only 12% of US tax is corporation tax, seems even smaller % elsewhere
"Politics is not the act of the possible but the act of making possible what is necessary" Chirac
John Wayne "Never apologize and never explain its a sign of weakness"
$1 per barrel in Nigeria the government the rest $21 a barrel,
Total Expenditure £279, 994 mil
Collection Costs : Finance & Tax Collection £3206 million,
Social Security Bureaucrats £4055 million
( £400 per year for each household)
THE MAIN PRIORITY
Altogether Health , Education and Welfare take up around 2/3rds of government spending ( 160 billion out of 240 billion). The other 15 areas of spending only take up 1/3 of spending. Clearly then the task is to take care of these areas first.
TACTICS FOR MOVING TO A CHRISTIAN CIVILISATION : (1) Taxation
As Christians and Theonomists it is important to work out a general theoretical framework for how a nation should operate in accordance with God's law. It is also important however that we consider how we can practically move our nation from where we are to where God wants us to be. Crucial in this respect is the lowering ( or possibly even elimination ) of the taxation burden. In this article I hope to address ways to do this.
TAXATION AND BALANCING THE BUDGET
In certain other parts of the world efforts are being made to balance budgets which haven't been balanced for many years. This is a commendable undertaking in that an unbalanced budget financed by borrowing is simply stealing from future generations. It is the legacy of an existential present orientated generation . 'The wicked borrow and do not repay'.
However from a strategic point of view it is not the priority. Britain had some balanced budgets in the 80s under Mrs. Thatcher. Surpluses helped pay off the national debt. However in the nineties these returned to their previous levels and indeed exceeded them. This was partly the result of the bust section of the boom-bust money supply cycle catching up with us and partly because the John Major government didn't have the same desire or ability to live within its means. All the belt tightening of the 80s was lost in the nineties.
In summary then Balance Budgets are a good thing but easily reversed. Not so tax cuts, if pennies come off income tax then it is a very risky and unpopular political gamble to put them up again. ( e.g. George Bush and 'No new taxes'). Every tax cut or debt repayment is the result of a spending cut or privatisation, the most efficient use of the proceeds is a tax cut because it is least easily reversed.
THE OVERALL TAXATION PICTURE
Last year the government of the United Kingdom spent £279, 994,000,000 of its citizens money. That over £12,000 for every household . This includes the administration necessary to collect and distribute this money . Two such groups alone cost £7261 million ( Finance & Tax Collection £3206 mil, Social Security Bureaucrats £4055 million.) . That's about £400 per year for each household
merely in the collection costs. This figure will become increasingly significant as taxes come down.
THE MAIN PRIORITY
Altogether Health , Education and Welfare take up around 2/3rds of government spending ( 160 billion out of 240 billion). The other 15 areas of spending only take up 1/3 of spending. Clearly then the task is to take care of these areas first., rather than play about with equally unpopular but less far reaching proposals regarding the 15 smaller areas.
TAXATION AND SPENDING CUTS : LINK THEM
Up till now tax and spending cuts have been put forward by politicians as separate unrelated events. I think this is a mistake. Proposals have to be linked. For example a proposal might be something like : everyone must pay for prescriptions at a average cost of £20 per year . So we are raising income tax thresholds by the same amount to compensate. This way people don't go away thinking they've got a freebie but at the same time they don't come away feeling they've lost something. This way people will back spending cuts at times because they see where the money is coming from for them to pay for the newly non-free services. If people perceive genuine savings from this system ,as we would expect from increased efficiency of institutions moving into private sector, this process could be repeated and escalate.
EDUCATION ( Total Budget £36 Billion)
There are many options to how this could be brought into the private sector. If it was privatised then this saving could reduce basic rate to 12% and increase the personal allowance by £3000 ( i.e. zero rate on lower rate bracket).
However we must always seek to match up those who gain from the tax cut with those who loose by having to pay for the service that is no longer free to consumers. With education this is the easier of the 3 main areas in this respect.
Education costs £3500 ( including Department of Education administration etc.) per secondary pupil of which there are 3.4 million, and £2500 per primary pupil of which there are 5 million. This makes a total budget of £13 billion for secondary and £12.5 billion for primary(The rest I presume is higher education )
A simple education allowance against income tax is the easiest way to transform this area. Thus as well as deducting the usual personal allowance and married person allowances from salary to work out what is due we also deduct the education allowance before we reach the figure that tax must be paid on. The full allowance ( transferable in whole or part between husband and wife ) would be £10000 against basic rate tax for primary or£14000 against basic rate for secondary. This gives £2500 or £3500 respectively in tax that they don't need to pay.
This is per child of school age at 25% rate. Better still give the allowance from NI contributions and employers NI . This means an allowance of £6000 or £8500 respectively. The reason this is better is that it means that more people would earn enough to benefit from the allowance. ( If the allowance was £14000 and the couple had 3 kids at secondary then they would have to earn 3 x 14000= 42000 plus personal allowances in order to benefit from the all of the allowance)
Politically ,this would be better introduced gradually as budgeting for paying £300 per month for schooling might be too much initially for some people and press would give much coverage to anyone who got into trouble .If people were to be given a quarter of the allowance first of all - so they paid £75 per month to the school for secondary, £50 pm primary, then this may be a worthwhile transition. Each year the allowance could go up by a quarter of the total amount until it reached 100%.
For parents with more children than tax allowance there wouldn't be a huge problem because as the system was phased in over 4 years prices per year would be dropping due to the new competition and by the time the system was in the tax allowance would easily cover it, particularly since their incomes would be rising quicker due to a lower taxed economy.
From Family Spending survey (sample)( Government stat service) : seems that of 6797 households- 555 have one child( 485) , 732 have two (516) , 258 have 3 (507) , 86 have more (406) (that's of two parent families) , with households with more than 2 adults there are 218 with one or more children( 670), and there are 191 single parent families with one child (157) and 250 with two or more.(176) Weekly gross household wages are in brackets
Retired 2 person households dependent mainly on state pensions are 238 ( 139) and other retired households are 439 (312)
There are 1339 couples with no children and 1821 one person households of which 508 are retired dependent on state (84) , 418 are retired otherwise (189) and 895 are non retired ( 251)
So 2290 families have children out of 6797 ( aprox 1/3rd)
Av income for 1 child is 485 per week gross which is £9124 in income tax and both sorts of national insurance (more than enough to cover the tax rebate to pay for the £3500 or so ultimate allowance
For 2 kids is £9817 which is enough to pay for 2 allowance
For 3 kids at £9600 its about the same as the allowance if two kids are at primary school and one at secondary.
For 4 kids at £7358 its not enough even if all the children are at primary. Falling costs of education and rising incomes may raise this enough to cover 4 at secondary. Private schools often give discounts to children from the one family appreciating the better costs.
Households with more than two adults have a much higher income and so tax allowances could cover here if they were transferable to an older child ( who is the third adult in most of these households)
One parent families at £1750 this isn't even enough for one child at primary.
These are working of average date of course and some people would be lower than the average, for 1 2and 3 children families which are about 76% of all families with children.
Single parent families are the other 20% but this is, of course, mostly a phenomena created by social security and if this was also privatised then there's reason to expect incomes to grow to a level that made the tax cut worthwhile in time. When all children are at school the parent would be able to go out and work and the tax cut would give her an incentive to do so. Before the younger children went to school the money for education could be part loaned and part given to the person if they didn't have a job on terms that made it worthwhile to get a job. In some cases the allowances might bring parents back together as it becomes more economical as he can get the allowance now rather than her loosing benefits in the previous system. In a small survey done in the a worse off area of the city with people ordinary people we know well we found 73% of those officially classed as single parents are single parents for benefit purposes only i.e. they really are stable families but tell the DSS they are separated to get more money, of the other 27% of the ones we knew best, they might well have stuck to their relationship, or one of their subsequent ones ( in some cases) if there had been an economic reason to do so. However if we incorporate that into our education figures we find only 27% of 20% = 5.4% of all families have income types that are below the amount where a tax cut would be less than what they were expected to pay in school fees. Cuts in taxes on basic goods through cuts in VAT would be the best way to help these people though less direct than the tax cuts we have been discussing. If we made the tax cut transferable to parents of those with children ( grandparents of the children) then that would be another way.
With regard to including the employers NI in the allowance this may be politically problematic as many people aren't aware employers have to pay tax on their employees wages and if they know they wrongly believe that the employees don't get less because of this . In view of this it might be a prudent measure to only give the employers the exemption if they raise their employees wages by the amount that they would have paid in employers NI. This is a short term measure that would be popular yet the market would set the most efficient wage in time anyway at some point in between the two levels in the medium term. ( as the employer hired new people )
If the allowance was made against National Insurance tax ( employees only ) then the allowances would be £7000 and £11000 respectively. In other words any couple earning more than £29000 between the two of them( > 14500 each) with two children at secondary. would still pay some income tax and NI . (extra £7000 comes from personal allowances) . A couple with one child in primary would exceed their allowance after their joint income exceeded £14000, £7000 each.
SOCIAL SECURITY ( budget £98 billion)
American has shown us the way to scale back social security in its recent welfare to work scheme.
In some states this has reduced the welfare rolls by 60%. The reason is simple. Most people on welfare that I know are there because it makes sense to be there financially especially since 82% ( in our small scale survey in a bad area of the city) are actually working as well. The others would have been working if they deemed it to be worth it. If people have to take a government designated job which is harder than a normal job then they will opt to take a normal job instead and all the multitude billions of social security payouts and housing benefit will return to the government.
Of this 34 billion is spent on unemployment benefit/ income support/ housing benefit.
. This would strongly induce people to get a job if they could and would radically reduce fraud which my experience in poorer areas of Edinburgh would indicate could be as high as 40% of the budget. Some people are highly efficient and well trained entrepreneurs in the business of working the system: that is the entirely predictable product of the incentives they have been given.
The way to return the money to fund this would best be through indirect taxation.
This could be 10p of the price of petrol and diesel, 50p off the price of wine, £3 off a bottle of spirits, 20p off a pint of beer (7.2 billion) and bring VAT down to 10%..(17 bn)
The reason I think indirect tax reductions are the way to fund this is that lower income households are more likely to have parents or children who are unemployed , this means that they would have to pay more to help their kin. Indirect taxes make up the bulk of this sector's tax bill thus refunds in this area most closely match the group that are going to be making the extra payments. Council tax is another area that could be reduced here though I believe there are some legal problems for central government to try to interfere too much with this area. The next essential step is lowering the small companies rate of income tax ( £2 billion could zero it) at the same time at introducing welfare to work would be a great way to create new jobs for the (not so new, as most work already) workforce, this cut could be linked to job creation (i.e. you don't need to pay the tax as long as you put an equivalent amount into job creation)
If there people were afraid this would leave people without any help between jobs then temporary loan scheme could be arranged where between work and finding more but with this being repayable at interest there might not be much take up.
With the remaining £10 billion the obvious thing to do is to increase the personal allowance by about £2200 giving low income groups an even bigger incentive to work.
INVALIDITY
13.7 billion
We've done another survey and guess what most of the invalidity claimants are working too! Admitably its not as many as the income support figure- some ( about 17%) are genuinely ill . The others would respond to the same pressures as other welfare to work people. Most people who are on invalidity are not ( even if their stories were true) unable to do any kind of work. Most can do some jobs, if the incentives are right. To pay them their benefits only if they do work of some kind is the best way to see them getting back to work. It also stops them going to their off-the-books work if they have some, or keeps them going there are stops them claiming. The beauty of welfare to work is that in the (admitedly few) cases where the claimants are 100% genuine, they are not loosing their money but they are also having to contribute to society through a job which is good for society and also good for them since the single best cure for depression , psychosomatic or some other mental illnesses is , in out counseling experience, when the person gets themselves a job and becomes more active and valuable.
Best way to return money to the poor is through indirect taxes. - VAT down from 10% to 2% (along with social security administration which is much less needed and can be downsized allowing VAT to drop to zero)
PENSION (£31 bn)
For pensions, most pensioners have lower incomes than the average although this is changing, so the best option is to privatise pensions now and then wait for the long term. In other words guarantee the pensions of existing pensioners and of those retiring 5 years from now but declare that those under a certain age will only get a certain % of what people get today on a sliding scale, in other words withdrawing from the market. It would be a good idea to give an income tax cut of so much at the same time as announcing this in order to give people more than you take away. Income tax cuts usually produce more revenue than before they were made so there is little economic risk here of creating debt by giving away more than you are taking back immediately.
HEALTH ( 36 billion)
The structure of health payments is that the older you are the more you pay. Incomes also tend to go up with age, people are poorer at the beginning of their life than at the end.. In this area then the most appropriate way to match new costs with new benefits is to reduce the rate of income tax . This means the older people who earn more will be paying more for their healthcare ( or healthcare insurance) but they will also be getting greater reductions on their income tax than do poorer younger people whose insurance costs much less. Wipe out community charge (8.5 bn) which is loosely tied to increase income by house value and that leaves an elimination of higher rate tax to zero (8.8 bn) and increasing the old age band of income tax by £5000 (£2billion) effectively taking many out of it altogether ( eliminating for some a constant source of worry) and lower the basic rate of income tax by 12p to 11p in the pound.
The figures for each section above are each independent of each other. That is to say that once you'd done the figures for the others would change.
This is just a brief look at possible strategies for bringing down taxes . These proposals above would reduce the governments share of GDP to about 14% , it would put £ 160 billion back into the private sector. It would give the average earner an extra £8000 a year to spend on educating his family, paying for healthcare and helping his neighbour. That's £800 per year per tithe paying member in extra income for the church. Hmm maybe we'll see the mainstream churches back CR yet ......
Cost /yield in the UK in 1997 of (£mil)
Change lower rate of income tax by 1p 1200
Change basic rate by 1p 1300
Change higher rate by 1p 260
Change person allowance by £100 430
Change age related personal allowance by £100 40
Change married couples allowance by £100 110
Change age related married couples allowance 11
Change all personal allowances by 1% 180
Change all personal allowances by 10% 1800
Increase lower rate band by 10% 230
Change basic rate limit by 1% 55
Change basic rate limit by 10% up 490
Corp tax change full rate by 1% 630
Change small co rate by 1% 90
Income CGT exempt amount by £500 for ind,£250 for trustees 5
IHT : change rate by 1% 19
Increase threshold by £5000 15
Number of income tax payers paying more than £4000 per year in income tax, more than £8000 per year
( 6300 lower rate tax payers , 17300 basic rate and 2000 higher rate ( thousands)
From Family Spending survey (sample)( Government stat service) : seems that of 6797 households- 555 have one child( 485) , 732 have two (516) , 258 have 3 (507) , 86 have more (406) (that's of two parent families) , with households with more than 2 adults there are 218 with one or more children( 670), and there are 191 single parent families with one child (157) and 250 with two or more.(176) Weekly gross household wages are in brackets
Retired 2 person households dependent mainly on state pensions are 238 ( 139) and other retired households are 439 (312)
There are 1339 couples with no children and 1821 one person households of which 508 are retired dependent on state (84) , 418 are retired otherwise (189) and 895 are non retired ( 251)
1995 government spending : 285,000 ,
government revenue: 263,000 -income tax 90 bil, expend 103 bil, social sec 44.council tax 8.9 bil, rent and oil and gas 5.6 bil, interest and dividends 5.1 bil
spend : 25 bil on debt interest, local authorities get 50 bil of which 22 is for education,
NHS is 40 , defense is 22
Spending of Households (lowest decile to highest) £87.80pw - 623.42pw , av 289pw
Housing 14.1% - 16.5% peaking at 17.1 in the middle
Fuel and power 10% down to 2.8% average 4.5
Food and non-alc drinks 25, 15 ,18
Alcohol 2.7 , 4 ,3.9
Tobacco 4.3, 0.8,2
Clothing 4.5 ,6.5, 5.9
Household goods 8.8 , 7.8, 8.1 (especially furniture and floor coverings)
Household services 6 ,6 ,5.2 , nadir at 4.4 in 7th decile (especially phone, domestic serv/childcare,ins,prof fees)
Personal goods and service 3.9 constant (especially medical,cosm,hairdress, leather, watches)
Motoring 6.5, 13.3,12.8 ( mostly car costs and petrol)
Fares 2.5, 2.5 ,2,1 nadir in middle
Leisure goods 3.5 -5.2 ,4.7 (mostly TVs, hi fis ,videos, computers)
Leisure services 7.5 - 14.7, 11.1 ( mostly holidays, then gifts and then training)
Motoring is av pounds per week
13.89 purchase, 10.73 petrol, 6 ins and taxation, 3.28 repairs, 1.36 spares and access, other1.72 total 36.99
Older people spend less on housing 19.6 down to 14 as % of expenditure
52 down to 19 as £pw
Exactly the same on fuel and power is cash but 3.6 % - 7.6% (over 75) of income
Higher % of income on food
lower on alcohol , tobacco and clothes
lower on goods , higher on services
lower on motoring , higher on personal
Expenditure for under 30s , 30s -50s, 50-65, 65-75, 75+
260,360,310,200,140 £pw
Countries that adopt very good policies are usually the ones that have had the biggest problems in the past. Germany on low inflation since Weimar, New Zealand on Central bank independence since having one of the highest rates on inflation before.
A large part of the challenge over the next few years is communicating to the electorate IN FIGURES what they stand to gain from our programme.