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Monday, 26 September 2011

The Cold Custard Party: yellow and thick

Not a fan of the Lib Dems. Never have been and never will be. Too stupid and it's in their genes.

Last week I was in a discussion with one of the yellow peril about whether the taxes one private transport were more or less than the amount the government spent on roads.

"Ah, but", replied the bearded twit, "the cost to the country of congestion is £30 billion and the cost of road accidents is £20 billion".

 Which kind of misses the point. When we say that the cost of congestion is £30 billion we are not comparing the cost against life without cars, but lagainst life with cars, but without congestion. Most of that £309 billion is the value of the extra outputs we could produce if we weren't stuck in traffic, implying that the fact that we do travel has a far greater financial positive outcome than the opportunity cost created by congestion.

 Similarly, the fact that people die in car crashes with direct and indirect costs (loss of future earnings) which somebody puts at £20 billion overlooks the economic benefit of private motoring, and the fact that in any event the costs of death will arise eventually, so it is not the cost per se that we are interested in but the relative cost compared to the other likely ways of dying and losing future income.

Still as I said, it is in their genes, and as if to make the point at their party conference, the Lib Dems were adamant that they would stand up against Tory tax cuts for the rich and in favour of lifting the low paid out of the tax net altogether.

 Superficially it sounds good, but like much of their global warming theorising, it doesn't stand up to a lot of scrutiny. Raising the personal tax allowances increases everybody's tax allowances and reduces their taxable income, if any, by up to the amount of the increase.

The amount of tax saved depends on their marginal top rate of tax. For somebody well into the 50% tax band the extra cash in hand will be equal to half the amount of the increase in allowances, but for a very low earner paying only a few pounds in tax, the saving will only be those few pounds. Does that sound particularly "fair" or "egalitarian"?

 Nor to me either.

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