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Sunday, 21 October 2012

Don't send me your bill

The world of politics seems to have been detached from reality, largely since the Blair/Mandelson era with the obviously non-existent WMD, triangulation of policies and the bare-faced misrepresentation by that government, but some might say it started before that. But recently it has got much worse.

Yesterday we had a TUC led demonstration to complain about the "cuts in government spending".  Only there have been no cuts in spending.  Spending and borrowing is higher than ever, although possibly smaller as a proportion of GDP.  But nobody gets paid in proportions of GDP.  They get paid in pounds, and the number of pounds being spent goes up ever year.  What the unions are complaining about is that some public sector jobs have been disappearing.  Why? To pay for the pay increases that their colleagues have been getting, which have been rising faster than inflation and faster than the rise in government spending.  But how can that be if government pa is frozen?  Simple.  Pay isn't frozen.  It is pay scales that are frozen, but public sector pay has continued to grow nicely with annual increments by shifting staff up pay grades and giving promotions.

But the position of the government isn't much better. Although they talk about reducing the deficit the last thing the do is to actually cut spending. Government spending is actually growing, when what should be done is to cut spending back to the levels of the pre-Brown era.  It's easy to do.  Every penny that is spent has to be authorised.  Just sign fewer cheques. It isn't that hard to do.

But the position of the Labour Party is even more ridiculous.  They insist to the unions that they would have to make cuts but not as much as the Conservatives, which is funny for the same reason, the Conservatives are not making cuts.  But then to give themselves some credibility with the workers they engage in some economic class war. The problem they imply is all the fault of billionaires who aren't paying enough tax.

Which doesn't make any sense either.  Take all the assets of the billionaires in the country and you would come up with something like £400 billion.  Assume that was put to work and produced taxable income at a rate of say 5% - the actual amount would usually be less because they would usually invest for capital growth, but that is enough.  5% return on £400 billion gives £20 billion of taxable income.  The difference in tax take between Labour's 50% income tax rate and the Coalition's 45% tax rate is only £1 billion. 

Taking it further and assume for argument's sake that that income was taxed at 100%.  That would only produce an extra £10 billion - assuming that the all hung around to pay the tax.  Now compare that with the £150 billion deficit, the £209 billion social security bill or the £125 billion bill for the NHS and it is clear that Labour and the unions don't have any answers.

The reality for all this is that today's politicians are just kicking the problem into the long grass, so that the little kid in the photo can pay for it.

1 comment:

Demetrius said...

Another nice one. One particular point is about pay scales being frozen but not the automatic rise that they allow. And also the "promotion" or the "reorganisation" ploys which can really rack up spending.