h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Otto - Tax Avoidance.

One of the biggest tax avoidance schemes is National Savings. These are tax-free products for savers who did not want to have to pay tax on the interest on their savings deposits or bonds. This is tax avoidance with a purpose – the purpose of paying more easily for excess government spending. All Governments are keen on this. Another form of tax avoidance is allowing companies to offset money invested into the business from profits against tax. Alastair Darling was very keen that such measures be exempted from cuts as these encourage business growth.

When Labour were in power, the figure bandied about for tax avoidance and evasion was around £40bn. Now that they've been out of power for all of three months, they're trumpeting figures of £120bn. Either they were lying when they were in power or they're lying now.

Lastly - the myth that the Tories are the friends of the rich whilst Labour are champions of the poor. The two parties are exactly the same. Mandelson and Osborne play revolving doors kissing the arses of Russian billionaires - sometimes hotbunking on the same luxury yachts. Big business owns our politicians - all of them. Trying to pretend that one lot aren't totally beholden to their paymasters is a bit rich.

Hi swl,

>Have you ever known a Labour administration to lower taxes?

Ah, but you weren't talking about taxes, you were talking about waste. Making a conscious decision, backed by the electorate, that it is better for the nation to give more funding to the NHS, schools, social services, etc is not the same thing as spending on head massages or putting money into the pockets of corrupt civil servants or fraudulent benefit claimants, or buraucratic form-filling. It's that kind of thing, that would never be used as justified party policy for a tax increase, that is usually what is meant by 'waste'.

I am deeply sceptical of the current administration's claims that it's possible to cut 25% from the budget of government departments without impacting frontline services - unless they mean something quite different than I by 'frontline'. These cuts will lead to reduced services - less frequent rubbish collections, cuts to BBC peripherals like h2g2 (though hopefully not actually including h2g2), fewer police, school-building, kids' playgrounds, etc. And that's on top of the increased taxes.

Gif

Gif - it was you who brought up taxes, as I quoted. Sorry, I may have been at cross purposes. I don't believe many civil servants are actually corrupt but I do think that there is a great deal of feather-bedding in the CS & Public Sector.

I agree that some front line services may go - but bear in mind that figures of 25% are actually comprised of 5% cuts pa over the next five years. The media latch onto this as "5 x 5 = 25 ah! 25% cuts". Do you think the average Govt dept can't make 5% of savings this year?

What I expect to see is Labour-controlled councils cutting high profile services and shouting that the nasty Tories made them do it. They'll be aided and abetted in this by the unions.

As I've already said - party politics first and sod the country.

Hi swl,

>When Labour were in power, the figure bandied about for tax avoidance and evasion was around £40bn. Now that they've been out of power for all of three months, they're trumpeting figures of £120bn. Either they were lying when they were in power or they're lying now.

As far as I can tell, the Treasury estimates were (and remain) around £40bn. The figure of £120bn comes not from Labour, but from the Tax Justice Network, a non-party organisation. They were attributed to the coalition (not Labour) not by any Labour source (as far as I can tell), but by John Redwood, a Conservative MP, after a Lib Dem MP used that figure as one end of a range of estimates, to highlight the problem.

I stand to be corrected on my facts if I have missed something, of course, but it seems that it is Redwood being a little 'economical with the truth' here.

Gif
PS: interesting graph:
http://www.leftfootforward.org/2010/08/camerons-one-sided-crusade-on-cheats/

Hi swl,

>Do you think the average Govt dept can't make 5% of savings this year?

Yes, I think they can't ( if you see what I mean).

When the DWP tried it 4 years ago, they were branded as 'in crisis', 2/3 of benefits payments were delayed, its IT systems began to fail and they were on the point of outsourcing their core functions overseas - and that's taken from a (Labour) government report into (Labour) government cost-reductions. They had to get management consultants in to sort the mess out.

Now they need to make savings of that scale every year for the next 5 years - *on top of* the cuts they already made under 'wasteful' Labour.

Next time you're in a civil service building, have a look round. Look at the decor. Ask people about their salaries. Look at the staff canteen. Then go to an accountancy firm and do the same thing. Tell me which has space to cut its budget.

And that's without mentioning how much accountancy firms spend on sponsoring the arts - not because they think it will bring business in, but to keep their employees happy.

Gif

Ah ok - I heard it getting used by some Labour supporters. My bad.

Incidentally, tax avoidance? http://www.bbc.co.uk/news/uk-politics-10991832

The first thing I noticed about that report, swl, is the photo - the eyes belie the smile, eh what?

For the avoidance of doubt, I'm not making party political points. Or at least I'm not defending Labour. I'm not a Labour party member, and I didn't vote for them at the last election. Labour did plenty of gazillionaire appeasing and plenty of attacking the poor - see the abolition of the 10% income tax band for example. Though in fairness, they did introduce it in the first place.

I will defend Labour to the extent of saying that even at their worst, they were better than the Tories. Protecting the interests of the rich and powerful against everyone else is pretty much their raison d'etre and has been more or less consistency throughout their history. Labour, on the other hand, have betrayed their history and their principles.

On tax avoidance, well, schemes that are deliberately established by the government to encourage saving (ISAs are a better example that National Insurance) are clearly a different matter to the deliberate and artificial exploitation of tax rules by individuals and companies in ways that were not intended. It's also worth noting that ISAs and the like are open to pretty much everyone who has £1 to save.

Again, schemes such as R&D tax credit and other similar schemes for business are set up deliberately for a specific policy purpose. So it's okay for a company to claim tax credits for legitimate R&D, but it's not okay to class expenditure that's not R&D as R&D, or to fake R&D, or to create artificial schemes to pretend that it's going on. The difference is pretty clear.

"And I stand corrected on available jobs not meeting the number of people on the dole. But let's be honest and admit that many people on benefits aren't actually interested in working."

You don't have to be an Bonobo-style Marxist to realise that capitalism *depends upon* there being more unemployed than there are jobs. That's what keeps wages down, and at various times in our history, large increases in unemployment have been deliberately engineered as a matter of economic policy. Capitalism is a pyramid structure, with a few people at the top, and a lot of people at the bottom. Different systems give slightly different shaped pyramids, but the fact remains that some people are going to be at the bottom of the pile. Not everyone can succeed. The success of some *requires* the failure of others.

Agree absolutely with your last para. Which is why the Tories opened the door to economic migrants in the early 90s. In a rare convergence of capitalism and international socialism, Labour took the doors off their hinges and threw them away to encourage mass immigration. Both administrations turned their back on the existing unemployed in favour of cheap foreign labour.

I have yet to come across a convincing argument that shows how millions of low-paid immigrant workers doesn't depress wages or limit opportunities.

Part of the 'openign of the flood gates' as regards people emigrating into teh UK, was to fill the 'sills shortage', whic is a loverly horrible phrase, only it was at teh time, and to some extent still is true, we didn't hav ethe skills we needed for the jobs we neede dto fill in the market palce; and we're dead set on ensuing this contihjues by the lack of funding for universitys this year ensuring that a huge proportion of very able students (two A's adn a B at A level won't any logner guarentee a university palce), its so short sighted... but then again, most of the policies now seem very short sighted; lets make unemployed huge percetnages of government workers... why?: because its better to pay them dole than to pay them a wage? i dun't gettit...

swl,

>> Saying that £1bn isn't a lot compared to x, y or z is a bit disingenious though. It's like saying cot deaths only account for a small percentage of the mortality rate so let's not bother.

On the other hand, going on and on about benefit scroungers and hardly mentioning tax evaders/avoiders at all is a little bit... inconsistent.

It's also interesting to note (according to that article I linked to) that 10.5bn of benefits are unclaimed - meaning that if everyone got what they were due and no more or less, it would actually be costing more than it is now. The problems in the system, overall, actually end up saving money for the government (and therefore tax payers).

>> Tax avoidance is huge because of Gordon Brown's hideously complex Tax Code that encourages avoidance and evasion.

Any evidence for this? Couldn't it be rather that what encourages people to dodge taxes is the fact that they get richer if they do?

>> Whether any party will do anything about it is doubtful tbh. These are the very same people who fund the political parties and who pays the piper calls the tune.

I agree, and I also agree that the Labour party is as much in the hands of the rich as the Tories are. Or at least, they have been of late, historically that's not true and perhaps won't always be true in future (we can but hope).

But... why is it that when you discuss politics here, you tend to talk a lot more about benefit scroungers and a lot less about reforming the tax system even though there's enormously more money to be saved in the latter?

<>

Because I don't know many millionaires (the ones I do know are quite possibly the hardest working, most driven people I've ever met), but I do know a lot of benefit scroungers - my sister and two brothers in law for a start.

All politics is local. Talking about billionaires and millionaire lifestyles, you might as well be talking about bacteria on Mars. Millionaires don't shop in my local supermarket, they don't stand beside me on the terracing, I don't bump into them in my nearby hospital, I don't see them when I pick up the kid from school. I do live amongst people who have never worked and yet own cars and have 2 foreign holidays a year. When I drove taxis as a student, the number of unemployed using my cab was incredible. *My* personal experience is that there is an entire underclass who do very nicely thank-you-very-much and it's schmucks like me who finance it.

This scapegoating of bankers and the ephemeral rich smacks of the Left trying to stir up class hatreds and strife all over again.

Kuzushi,
That may just be you who probably has a university education etc.

My partner was made redunant in January and has been trying to find a job since. He is trained as a mechanic but due to changes in the law cant work as one due to him having no driving license due to his eplispy. So he has been applying for every job going around 15 a week and has only had 2 interviews. Even my job in a call centre which just hired 400 people whouldnt give him an interview. We have paid good money to check his CV and worked on interview skills and nothing.

On top of all this he stopped recieving his job seekers in March and when he went to query it, they couldnt find his details. They lost them! and has been trying ever since to get them back.
So in the mean time I am trying to provide for both of us on a wage of just £700 a month. Its not easy.

I wouldnt put everyone in the same bracket, a lot of people have lost their jobs and are trying to get one with no luck.

<< we didn't hav ethe skills we needed for the jobs we neede dto fill in the market palce; and we're dead set on ensuing this contihjues by the lack of funding for universitys this year ensuring that a huge proportion of very able students (two A's adn a B at A level won't any logner guarentee a university palce)>>

i believe the skills shortage is in the skills they do not teach at university

plumbers, electricians, brick layers, kitchen fitters, gas installers

so we end up importing them because all the people who used to go into these jobs now have passed in media studies and Mc degrees

"This scapegoating of bankers and the ephemeral rich smacks of the Left trying to stir up class hatreds and strife all over again"

So the scapegoating of people who claim benefits is not an attempt to stir up hatred and strife? Is it a "class" war? I think so - it depends on your notion of class. There are good arguments for saying that what's going on is a series of attempts to make the "underclass" the hated enemy while those who are cheating the honest and hard working out of vastly greater sums are not only out of sight (as swl rightly says) but out of mind. Divide and rule. Always divide and rule.

I'm not clear why criticising tax cheats is "scapegoating" or attempting to stir up strife. All it's saying is, you're loaded, you're loaded because the state and civil society establishes and maintains the circumstances in which you can make a lot of money, therefore you should pay your fair share towards the costs of maintaining that state. And if it is causing "strife", well, perhaps sometimes "strife" is necessary for change.

As for hatred, well, I think there's something uniquely despicable about the wealthy cheating their way out of their obligations that I don't think applies in quite the same way to the poor. However, I don't hate people. Or at least I try very hard not to.

The difference is, nobody is blaming thieves and fraudsters in the underclass for the mess the economy is in. The Left are trying to pin that on a few bankers and billionaires, glossing over Labour's atrocious spending and borrowing record that created a huge structural deficit. That's scapegoating - making one group of people responsible for the actions of others.

swl,

>> Because I don't know many millionaires ... but I do know a lot of benefit scroungers

I feel that's not really a very good reason. Yes, maybe that explains why many people who don't know the extent to which the rich are stealing from the poor get angry with the wrong people, but it doesn't explain why you do. You can't pretend to be that naive, not any more.

>> This scapegoating of bankers and the ephemeral rich smacks of the Left trying to stir up class hatreds and strife all over again.

Whoah! That's an incredibly loaded sentence. First of all, when you talk about 'scapegoating of bankers' what do you mean? At the moment many bankers are vilified because their reckless gambling and short term profit seeking caused a financial crisis, the negative effects of which impact them much less than it impacts ordinary people. How is that scapegoating? Secondly, what is this talk about 'the ephemeral rich'? Wealth is not very ephemeral - there are some people who lose their wealth, and some people who go from poverty to wealth, but generally rich people stay rich and poor people stay poor, and this lasts from generation to generation. Thirdly, as Otto said, the targeting of 'benefit scroungers' is at least as much a form of class hatred as anything directed at the rich.

swl, as I understand it, the financial crisis was not caused by Labour's spending but by the credit crunch caused by pyramid lending schemes by big banks (particularly in mortgages). We know it isn't to do with Labour because the same problems affected lots of countries around the world (and, if memory serves me, affected those which enforced stricter conditions on lending money less than those with a more laissez faire attitude).

Is this following paragraph inaccurate?

"In New Labour’s first term, a priority was to establish credibility with financial markets by reducing the public debt. The debt was reduced by a total of £34bn in the last year of the first time - a larger total reduction than all the cumulative debt reduction of previous governments for fifty years. Capital expenditure in most departments of government fell precipitously for the first years of the New Labour administration, and overall public spending fell from over 40% of GDP in 1997 to 38.1% in 2001. Even with successive fiscal problems in the ensuing years and a subsequent need to borrow to plug black holes, by 2004 Gordon Brown had reduced the debt from 44% of national income to 34%. By 2005, the combined spending on debt interest and unemployment benefits had fallen by a half. In the latter half of the 2000s, public spending rose to above 40% again, reaching 41.1% in 2007-08. Only with the credit crunch and following recession did it return to levels last seen in Thatcher’s first two terms, rising to 47.5% of GDP for 2009-10. This has been the result of a combination of two factors: stimulus spending, and the sudden contraction in the private sector. The deficit that arose resulted from the reduction in the tax base as unemployment soared and the economy shrank, and the massive bail-outs for the financial sector."

From http://www.newleftproject.org/index.php/site/article_comments/the_axemans_jazz_why_cuts_why_now_and_how_to_stop_them/

No it's class hatred from the Left. I've see Tommy Sheridan and his ilk play this card again and again. "Ephemeral" was the wrong word - what I was trying to get at was activists try to pin the blame for the poor being poor and the current economic mess on a faceless few. All that's missing from the rhetoric is to add a religious rider and it's the 20's and 30's all over again. What the extreme Right do with foreigners, the extreme Left do with the rich.

The targeting of benefit scroungers is important because they directly take services from the genuinely needy. For example, Hardship Funds are run by some councils. There's a limited budget and once it's gone that's it for the year. My council gave out their last grant 8 months into the last financial year yet I met people who knew how to work the system and had successfully claimed for new "washing machines" three or four times. The voluntary work I do brings me into contact with a great many of these people and believe you me, they see fraud as their right - it's widespread and blatant.

These services are largely funded by Council Tax and the greatest proportion of Council Tax comes from the working class who are rightly angry to see their taxes abused in such a way by their neighbours.