T
Theo van Gogh Martyrs Brigade
Guest
Interesting...looks like it's socialism for Britain no matter who wins.
http://thebusinessonline.com/edit/print.php?id=33505
Sleepwalking to social democracy
April 17, 2005 12:00 AM (GMT)
Foreign observers of the forthcoming British general election of 2005 must be wondering what all the fuss is about. For all the furious (though largely synthetic) disagreement over issues such as crime or immigration, the three main parties share the same, fundamental premises: government spending is good and there should be much more of it; consequently the tax burden (as a share of national income) will have to rise to pay for it; and anybody who says otherwise will incur the wrath of voters in the polling booths come 5 May.
All three assumptions, when enacted, will have the effect of propelling Great Britain back on to the path of economic decline, from which it escaped in the Eighties and Nineties but to which it has recently returned. But even that dire prospect cannot budge the comfortable consensus of the British political establishment that tax-and-spend is good. The irony of modern British politics is that, the more public opinion eschews joining the euro or adopting the European constitution, the more it embraces the big government and high tax approach of mainstream continental Europe, even though the glory days of the European social democratic model are long gone.
The most enthusiastic tax-and-spenders in this election (as they were in 2001) are the Liberal Democrats, who openly advocate punitive taxes not just on those who become affluent from their enterprise but also on the hard-working middle classes. Labour's Tony Blair and his Chancellor, Gordon Brown, are not far behind though (to use a good Scots word) they are more "sleekit" than the Lib Dems, preferring to deny they'd increase taxes during the election campaign then afterwards doing it in stealthy ways they think voters won't notice (which is exactly what happened before and after the elections of 1997 and 2001).
Michael Howard's Tories profess to disagree with this Labour-Lib Dem agenda but it is a disagreement only at the margins: they would increase public spending by 4% a year rather than Labour's 5%, which is hardly life-transforming for the British economy (or voter); and the tax burden would rise under them too, from 38.3% of gross domestic product (GDP) in 2004/5 to 40.1% in 2007/8 (which is only 0.3 percentage points less than Labour plans, a fact which has been clear for some time but which the Financial Times only managed to notice on Saturday). In other words the Tories are not going in the opposite direction from the other two parties - they are merely the slowest train in the same tax-and-spend convoy. Their pathetic failure last week to rule out increases in national insurance contributions if elected served only to underline their ludicrously timid position on the key issue of the election.
Slowly but surely, without proper debate and regardless of who wins the election, Britain's economy and society is relentlessly moving towards the standards of the sclerotic Eurozone and further away from the dynamic, job-and-wealth-creating economies of the New World. This is most clearly seen in the growth of public spending as a share of national wealth. The Organisation for Economic Co-Operation and Development (OECD) now expects total government spending in Britain to reach a massive 45% of GDP this year, 45.2% next year. The speed and scale of this transformation from market economy to social democracy can be seen from the fact that in 2000 public spending was only 37.5% of GDP.
No other OECD country has seen such a steep rise in public spending over the past five years (not even the big-spending Bush administration can match Blair/Brown). Indeed most of the OECD (bar France, see below) is moving in the opposite direction: Germany's public spending will drop from 47.2% of GDP this year to 46.1% next year, only 0.9 points of GDP higher than in Britain. Public spending as a share of GDP will average 47.7% in the Eurozone next year, only 2.5 points more than the UK, which is proof positive that the most fundamental shift of the Blair/Brown years has been to move Britain to European levels of public spending. Overall the OECD average will be 40.4% next year, far less than in Britain, which underlines the extent to which Britain is deserting the lower tax-and-spend policies of its other English-speaking members (such as Ireland, Australia and America).
Another crucial way in which Britain is becoming more like the Eurozone is its massive government recruitment binge, confirmed yet again last week in an official report that went almost completely unnoticed in the hurly-burly of the election campaign. The Labour Force Survey found that 24.4% of workers now say they work in the public sector, up from 22.7% when Tony Blair first became Prime Minister. Between the summer of 1997 and the end of 2004, total employment in Britain surged from 26.633m to 28.582m - a rise of 1.949m according to the poll of households, the source for the "2m new jobs under Labour" figure relentlessly trotted out by the government. But during the same time, the number of people saying they work for the public sector has soared from 6.046m to 6.974m, a rise of 928,000 under Labour - and 47.6% of all new jobs.
This surge in public-sector employment has a profound political implication: it explains why public opinion in Britain has become friendlier towards big government: far more families depend on the state for their jobs while the Chancellor's tax credits, which reach far up the income scale, have dragged even top-rate taxpayers into the welfare state, further bolstering the inclination of those dependent on the state for jobs or largess to vote Labour or Lib Dem. In Sweden this process has gone so far that the Social Democrats and their left-wing allies are now the permanent government; the same transformation is now underway in Britain.
The "Europeanisation" of the British economy has already had a devastating effect on the competitiveness of the British economy (see page 12 for details): since 1998, the UK has dropped down the respected league tables published annually by the World Economic Forum, the International Institute for Management Development, the Heritage Foundation, the Economist Intelligence Unit and AT Kearney/Foreign Policy. In opposition Mr Brown used to berate the Tory government for Britain's performance in these tables. But by the mid-Nineties Britain was at least in the top quarter of the Premier League; since such matters came under Mr Brown's tender care the country has been demoted to the bottom of the Premier League and is now heading for relegation.
That would certainly happen if the Liberal Democrats got their way. Anybody on more than £100,000 a year - about 1.3% of earners - would be hit by a new upper rate tax of 50%, a nine-point increase since the effective top rate is now 41%, thanks to the way Mr Brown structured his national insurance contribution rise. At a time when everybody else is cutting income tax, especially the incentive-destroying top rates, and eight Eastern European countries have already introduced a flat tax (this weekend we welcome The Economist magazine's conversion to this newspaper's espousal of the idea), such a plan would have terrible long-term consequences for the British economy, sending the worst possible message to those aspiring to build a better life for themselves through hard work. It would mean that Britain would have a higher top tax rate than the United States, even after state income taxes and employee payroll taxes are added to the top 35% federal tax; Britain would even have a higher top rate than many European social democracies, including Germany and Italy.
The Lib Dem enterprise-sapping damage would not stop there: the party also proposes a local income tax to replace the current property-linked council tax; the new tax would piggyback on to the existing 10p, 22p and 40p rates (41p including national insurance) but would not apply on incomes above £100,000. Had their proposals been implemented for 2004-05, the average local income tax rate would have been 3.74%. As the Lib Dems have been forced to admit, the worst hit would be the 25% of the workforce that earns the most - a direct assault on that part of Middle Britain which puts lead in the pencil of the British economy. Anybody who makes more than £37,295 a year, hardly a princely sum but the level at which the current top rate of tax kicks in, would face a marginal tax rate of at least 45%, higher than the highest rate in most of Europe.
The backbone of professional white-collar Britain, as well as many skilled tradesmen and blue-collar workers, would be hammered and lose close to half their income - before indirect taxes, stamp duty and other levies take their toll on the remaing 50% of their income. Not even Mr Brown proposes to go that far and it is a measure of Tory inadequacy that the party has failed to expose Lib Dem policies for the middle-class wealth grab that they are - a failure all the more inexplicable because it is middle-class Tory votes that the Lib Dems are targeting in key constituencies where they are a close second to the Tories.
It illustrates the Conservatives' collective loss of nerve which, though matters have improved under the leadership of Mr Howard, remains the party's defining characteristic. Ever since Margaret Thatcher was unceremoniously given her P45 by her own party in 1990, they have offered only a faltering, unconvincing voice in favour of the market economy, lower taxes, smaller government and greater individual responsibility. There was a time when Mr Blair sounded as if he might champion a credible post-Thatcher strategy which built on her successes and mitigated her excesses; but that was quickly ditched once tax-and-spend Mr Brown got his way. It should be the natural agenda for a radical Liberal party; but the Lib Dems under Scottish social democrat Charles Kennedy have swallowed the collectivist agenda hook, line and sinker. Thus does Britain sleep walk to social democracy, failed European-style, without voters even being offered an alternative by any of the major parties.
http://thebusinessonline.com/edit/print.php?id=33505
Sleepwalking to social democracy
April 17, 2005 12:00 AM (GMT)
Foreign observers of the forthcoming British general election of 2005 must be wondering what all the fuss is about. For all the furious (though largely synthetic) disagreement over issues such as crime or immigration, the three main parties share the same, fundamental premises: government spending is good and there should be much more of it; consequently the tax burden (as a share of national income) will have to rise to pay for it; and anybody who says otherwise will incur the wrath of voters in the polling booths come 5 May.
All three assumptions, when enacted, will have the effect of propelling Great Britain back on to the path of economic decline, from which it escaped in the Eighties and Nineties but to which it has recently returned. But even that dire prospect cannot budge the comfortable consensus of the British political establishment that tax-and-spend is good. The irony of modern British politics is that, the more public opinion eschews joining the euro or adopting the European constitution, the more it embraces the big government and high tax approach of mainstream continental Europe, even though the glory days of the European social democratic model are long gone.
The most enthusiastic tax-and-spenders in this election (as they were in 2001) are the Liberal Democrats, who openly advocate punitive taxes not just on those who become affluent from their enterprise but also on the hard-working middle classes. Labour's Tony Blair and his Chancellor, Gordon Brown, are not far behind though (to use a good Scots word) they are more "sleekit" than the Lib Dems, preferring to deny they'd increase taxes during the election campaign then afterwards doing it in stealthy ways they think voters won't notice (which is exactly what happened before and after the elections of 1997 and 2001).
Michael Howard's Tories profess to disagree with this Labour-Lib Dem agenda but it is a disagreement only at the margins: they would increase public spending by 4% a year rather than Labour's 5%, which is hardly life-transforming for the British economy (or voter); and the tax burden would rise under them too, from 38.3% of gross domestic product (GDP) in 2004/5 to 40.1% in 2007/8 (which is only 0.3 percentage points less than Labour plans, a fact which has been clear for some time but which the Financial Times only managed to notice on Saturday). In other words the Tories are not going in the opposite direction from the other two parties - they are merely the slowest train in the same tax-and-spend convoy. Their pathetic failure last week to rule out increases in national insurance contributions if elected served only to underline their ludicrously timid position on the key issue of the election.
Slowly but surely, without proper debate and regardless of who wins the election, Britain's economy and society is relentlessly moving towards the standards of the sclerotic Eurozone and further away from the dynamic, job-and-wealth-creating economies of the New World. This is most clearly seen in the growth of public spending as a share of national wealth. The Organisation for Economic Co-Operation and Development (OECD) now expects total government spending in Britain to reach a massive 45% of GDP this year, 45.2% next year. The speed and scale of this transformation from market economy to social democracy can be seen from the fact that in 2000 public spending was only 37.5% of GDP.
No other OECD country has seen such a steep rise in public spending over the past five years (not even the big-spending Bush administration can match Blair/Brown). Indeed most of the OECD (bar France, see below) is moving in the opposite direction: Germany's public spending will drop from 47.2% of GDP this year to 46.1% next year, only 0.9 points of GDP higher than in Britain. Public spending as a share of GDP will average 47.7% in the Eurozone next year, only 2.5 points more than the UK, which is proof positive that the most fundamental shift of the Blair/Brown years has been to move Britain to European levels of public spending. Overall the OECD average will be 40.4% next year, far less than in Britain, which underlines the extent to which Britain is deserting the lower tax-and-spend policies of its other English-speaking members (such as Ireland, Australia and America).
Another crucial way in which Britain is becoming more like the Eurozone is its massive government recruitment binge, confirmed yet again last week in an official report that went almost completely unnoticed in the hurly-burly of the election campaign. The Labour Force Survey found that 24.4% of workers now say they work in the public sector, up from 22.7% when Tony Blair first became Prime Minister. Between the summer of 1997 and the end of 2004, total employment in Britain surged from 26.633m to 28.582m - a rise of 1.949m according to the poll of households, the source for the "2m new jobs under Labour" figure relentlessly trotted out by the government. But during the same time, the number of people saying they work for the public sector has soared from 6.046m to 6.974m, a rise of 928,000 under Labour - and 47.6% of all new jobs.
This surge in public-sector employment has a profound political implication: it explains why public opinion in Britain has become friendlier towards big government: far more families depend on the state for their jobs while the Chancellor's tax credits, which reach far up the income scale, have dragged even top-rate taxpayers into the welfare state, further bolstering the inclination of those dependent on the state for jobs or largess to vote Labour or Lib Dem. In Sweden this process has gone so far that the Social Democrats and their left-wing allies are now the permanent government; the same transformation is now underway in Britain.
The "Europeanisation" of the British economy has already had a devastating effect on the competitiveness of the British economy (see page 12 for details): since 1998, the UK has dropped down the respected league tables published annually by the World Economic Forum, the International Institute for Management Development, the Heritage Foundation, the Economist Intelligence Unit and AT Kearney/Foreign Policy. In opposition Mr Brown used to berate the Tory government for Britain's performance in these tables. But by the mid-Nineties Britain was at least in the top quarter of the Premier League; since such matters came under Mr Brown's tender care the country has been demoted to the bottom of the Premier League and is now heading for relegation.
That would certainly happen if the Liberal Democrats got their way. Anybody on more than £100,000 a year - about 1.3% of earners - would be hit by a new upper rate tax of 50%, a nine-point increase since the effective top rate is now 41%, thanks to the way Mr Brown structured his national insurance contribution rise. At a time when everybody else is cutting income tax, especially the incentive-destroying top rates, and eight Eastern European countries have already introduced a flat tax (this weekend we welcome The Economist magazine's conversion to this newspaper's espousal of the idea), such a plan would have terrible long-term consequences for the British economy, sending the worst possible message to those aspiring to build a better life for themselves through hard work. It would mean that Britain would have a higher top tax rate than the United States, even after state income taxes and employee payroll taxes are added to the top 35% federal tax; Britain would even have a higher top rate than many European social democracies, including Germany and Italy.
The Lib Dem enterprise-sapping damage would not stop there: the party also proposes a local income tax to replace the current property-linked council tax; the new tax would piggyback on to the existing 10p, 22p and 40p rates (41p including national insurance) but would not apply on incomes above £100,000. Had their proposals been implemented for 2004-05, the average local income tax rate would have been 3.74%. As the Lib Dems have been forced to admit, the worst hit would be the 25% of the workforce that earns the most - a direct assault on that part of Middle Britain which puts lead in the pencil of the British economy. Anybody who makes more than £37,295 a year, hardly a princely sum but the level at which the current top rate of tax kicks in, would face a marginal tax rate of at least 45%, higher than the highest rate in most of Europe.
The backbone of professional white-collar Britain, as well as many skilled tradesmen and blue-collar workers, would be hammered and lose close to half their income - before indirect taxes, stamp duty and other levies take their toll on the remaing 50% of their income. Not even Mr Brown proposes to go that far and it is a measure of Tory inadequacy that the party has failed to expose Lib Dem policies for the middle-class wealth grab that they are - a failure all the more inexplicable because it is middle-class Tory votes that the Lib Dems are targeting in key constituencies where they are a close second to the Tories.
It illustrates the Conservatives' collective loss of nerve which, though matters have improved under the leadership of Mr Howard, remains the party's defining characteristic. Ever since Margaret Thatcher was unceremoniously given her P45 by her own party in 1990, they have offered only a faltering, unconvincing voice in favour of the market economy, lower taxes, smaller government and greater individual responsibility. There was a time when Mr Blair sounded as if he might champion a credible post-Thatcher strategy which built on her successes and mitigated her excesses; but that was quickly ditched once tax-and-spend Mr Brown got his way. It should be the natural agenda for a radical Liberal party; but the Lib Dems under Scottish social democrat Charles Kennedy have swallowed the collectivist agenda hook, line and sinker. Thus does Britain sleep walk to social democracy, failed European-style, without voters even being offered an alternative by any of the major parties.
