AN HISTORIC DAY

 

Today is indeed an historic day.  After years of patient waiting the people of the UK have finally been promised a simple In/Out referendum on the EU once an extensive re-negotiation of our relationship and obligations has taken place.
 

There is one catch to this great news.  We will need a Conservative majority at the next General Election in 2015 if we are to achieve this goal.  Only the Conservatives promise first this re-negotiation and then the resulting arrangements to be put before the people of the UK for them to have their say.  Voting UKIP will only let Labour into power.  And Labour's position is perfectly clear, as set out by Milliband in Parliament this lunchtime:-
 

He simply cannot contemplate the idea of letting the people themselves have any say on this fundamental issue.  Big Brother knows best!

And the LibDems?  They seem fundamentally opposed to any re-negotiation with the EU.  They seem perfectly happy for us to march into an ever closer political union - with each star on the EU flag representing a subjugated region of the undemocratic, totalitarian EU empire ruled by unelected Brussels bureaucrats, officials and an European Parliament in which we have little influence or any power.

My personal preference would be to have had the referendum in this Parliament and I would have campaigned for an OUT vote.  To free ourselves as soon as possible from that monster - let them get on with their political union and all the concepts that their officials support (the latest frightening idea being to only allow journalists that support 'European Values' to register and work on newspapers).  We could use the vast amount of money we send to the EU to improve services, cut taxes or pay down the deficit.  However virtually every senior Conservative that I admire (Carswell, Hannan, Redwood, Fox, even Hague, to quickly name just five) accept that the arrangements set out by David Cameron in his speech today are the most realistic and workable in the situation.  Frankly they are better placed to understand both the politics and the logistics - I'm just a humble District Councillor.

However humble, I am still proud to say that here's a photo of me taken the day after the Where's My Referendum lobby of Parliament in March 2008.  I brought the placard home with me, first on the tube and then on the overground railway back to Ipswich. Its quite a conspicuous placard to carry on public transport!  I can however hold my head up and I will be able to tell any future grandchildren that I did my little part to secure their freedom just as previous generations of Britons did their bit against German Imperial expansion or Nazi aggression during the last century.

POLITICS IS SIMPLE

My sister has just sent me an article from a local newspaper ("Valley News").  The article has been forwarded from person to person (going viral is the computer lingo) using the subject matter heading "So very true".

And as I read it my thoughts became "Politics isn't complicated, it's actually very simple"

First, here's what the article said:-

IMPORTANCE OF TAX RETURN ACCURACY

HMRC has returned the tax return to a man in Evesham after he apparently answered one of the questions incorrectly.  In response to the question "Do you have anyone dependent on you?"the man wrote: "2.1million illegal immigrants, 1.1million crackheads, 4.4million unemployable Jeremy Kyle scroungers, 900,000 criminals in 85 prisons, plus 650 idiots in Parliament and the whole of the European Commission".  HMRC responded that the response he gave was unacceptable.  The man's response to HMRC was: "Who did I miss out?".

So how do I conclude from that article that politics is simple.  Well because politics fundamental boils down to this......

The sympathy with those on the Left in politics is with all the people mentioned in the article.

The sympathy with those on the Right in politics is with the person completing that tax return.

Just think on that simple but profound analysis the next time you're asked to cast your vote.  Who is your sympathy with?



(To be strictly accurate I would dispute the "650 idiots in Parliament" - there are a few sound people there but unfortunately a minority)

THE STATES AND THE KINGDOM - UNITED?

I feel a sense of depression today off the back of the American election result.  What struck me forcefully during the course of a previous US election result, the one where George Bush squeezed through based on a few hundred Florida votes out of the many million cast nationwide, came back equally strongly yesterday.  And the thing that struck me?  Just how equally divided the population were between two very different ideologies.  It seems remarkable to me, given two alternatives, that the results should come out so close - and in terms of the public vote, as opposed to the electoral college numbers, they were close, 49% plays 48%. 

One would normally think that between two choices in anything that one of those two choices would stand out as superior and thus be chosen by a substantial majority.  Yet the United States divided right down the middle, as near as damn it 50/50, when given the choice of Republican Romney and Democrat Obama.

Let's not kid ourselves that there isn't a vast gap between the competing ideologies. When I was younger I always understood in American politics that the Republicans were right-wing and the Democrats were central-left but that there were no significant socialists in the USA.  Obama has certainly moved the Democrats to the left with his European model of big government, high spending, high taxation and nationalised healthcare.  Class warfare, "soak the rich" and an ever intrusive government seem so far adrift of the "American Dream" of hard work, self-reliance, sound money and small government which made the USA such a great and successful nation.  Yet the country collectively hasn't moved it's vision - just half the nation.  One half has gone down that route but the other half still voted for the short-term pain required to create a sound economic environment that would create long-term growth and lasting prosperity.  Truly the states of America are no longer "United" and the ideological differences between some of these "united" states are truly profound.

That brings me be back to our United Kingdom.  At the last election England voted for a Conservative government. Scotland wanted nothing to do with that and the vast majority of their votes went either to a British socialist party or an even more left-wing Scottish socialist party.  Again a nation which calls itself "United" in name is in fact truly divided. 

Logically the time must come when amicable divorces are needed in both countries.  In 'America' some states could join together to go down the European EU model - with job destroying regulation, high taxes, disincentives to work and economic stagnation whilst other states could stay with their "American Dream" and prosperity.  In the UK a small part of the population will actually have a referendum in 2014 to choose whether Scotland goes alone in a Scottish Socialist Utopia.  The tragedy is that the English have no say in that referendum - one party in a potential divorce that is disinfranchised from the decision that could be a major factor in the future prosperity of the English.  The 2014 referendum should ask the views of the entire UK.  And sorry Mr Cameron, I know which way I would vote!

DEBT AND DEFICITS

There is a great deal of confusion spoken and published in the media in respect of the national debt and deficit. Apparently only about 10% of the population clearly understand the difference between debt and deficit although the matter is at the very heart of understanding our present financial situation.

There is a fundamental difference between cutting debt and cutting the deficit and I do wonder whether some professional commentators as well as some politicians purposefully add to the confusion.  I will try in the next few paragraphs to set out clearly the difference between debt and deficit and hopefully by doing this it will become clear why understanding the difference is important.

Let's start with deficit.  All governments have income and expenditure.  The income will come from the various taxestheyt raise and collect - income tax, VAT, stamp duty, national insurance etc.  The expenditure is the outgoings on benefits and welfare, schools and hospitals, defence etc.  If a government's annual incomings and outgoings are equal then they are in balance, whereas if the incomings are greater than the outgoings then they are in surplus, or, if outgoings are greater than incomings then they are said to be in deficit.

Most countries plan to run their affairs at a modest deficit, so unlike an individual household who might sensibly try not to spend more than they receive as income, governments start with the intention to spend more than bring in.  This deficit has be financed by borrowing.  Governments borrow by issuing government bonds and pay interest on these loans.  If deficits continue year after year, these borrowings grow. The interest that is paid out on these bonds is another outgoing and in the case of governments who borrow a lot, these interest payments can be a significant level and have to keep being paid, year after year.

In the paragraph above, I used the phrase "a modest deficit" and this is generally around 2% to 3%.  So if income is £100 and expenditure is £103 that deficit of £3 is 3/100 or 3%.  As there is always the opportunity to increase tax rates slightly these modest deficits don't seem particularly scary and hence governments can find lenders who are willing to lend to them. Deficits can be reduced by increasing income (raising taxes) or decreasing outgoings (cutting spending), or a combination of the two.

So why all the fuss about deficits and debt?  Well in recent times governments of most developed countries (US, UK, and many in western Europe) have increased their annual deficits so they are now far from modest. Deficits rates (percentages) have grown to be 10% or more.

The deficits are financed by borrowing.  Just like for an individual, a government who borrows is getting into debt. Debt is defined as the size (amount) outstanding. If a government runs it finances in deficit then the amount it is borrowing - its debt - continues to grow.

So what about all these "savage cuts" that the unions and Labour (and disgracefully the BBC and left-wing newspapers) talk about on a virtually daily basis?  Aren't these just efforts to reduce our debt levels?  The answer sadly is NO!  All the "savage cuts" made to date by the Coalition Government (aka the Evil Tories aided by the LibDems) are merely well-meaning attempts to reduce the deficit.  Attempts to reduce our levels of expenditure but only to the extent that the deficit of outgoings less income narrows but is still run at a deficit.  And by any rational or objective analysis all the cuts to date have been modest.  In fact the government (apparently at the insistence of the LibDems) increased welfare and benefit payments last April by 5.2% so increasing this major expenditure when incomes (and hence income taxes) hardly changed year-on-year.  So as a nation we have had to borrow more to increase our benefit payments.  Total lunacy!

As things stand, our annual deficit which is presently running well in excess of £100billion a year will only reduce to £95billion a year by 2016.  Each year we will continue to run high annual deficits which will continue to add, year after year, to our borrowings - pushing up our high levels of debt to a yet greater and greater level.  By 2016 we will owe as a country over £1.5trillion.  This is several times more than our debt in 1997 when Labour took over running the country for the following 13 years. And running it in such a reckless fashion so that by 2010 a note was left in the Treasury to the incoming Conservative/LibDem coalition saying "sorry there is no money left".  Even then, they couldn't tell the whole truth - what they did in fact leave was an enormous debt level and a welfare and benefits system out of control thus creating further large annual deficits going forward.

Hopefully you are still with me. Its easy just to close your eyes, cover your ears, start humming and hope this awful problem will just go away. If you've got this far then next time you hear a union leader or Labour politician (or their BBC mouthpiece) talk about the cuts as something done by a nasty "evil" government you will realise that these cuts are a neccessary and vital part of getting our out-of-control national finances back, if not into some semblance of balance, at least some first steps towards that goal.

We are leaving our children and grand-children a truly appalling level of debt. Collectively we should all feel ashamed although only that relatively small percentage of the population who voted for, and continue to support Labour are the truly guilty.  Because of their actions our children will have to continue servicing the debt (paying the interest) with high taxes and thus a lower standard of living (reduced house ownership and pension provision) than ourselves.

Glossary:
Deficit - excess of expenditure over income (ie. an annual measure)
Debt - amount of borrowings outstanding (ie. at any one point in time)
Reducing the deficit - reducing the gap between expenditure outgoings and income BUT still running at a deficit and therefore still increasing the level of debt
Eliminating the deficit - bringing annual expenditure levels back into line with annual incomings but still the level of debt doesn't decrease.
Reducing debt levels - can only be done by running the nation's finances in annual surplus which frankly is politically impossible given the size of the public sector.

HOW MUCH DO THE LIBDEMS WANT FROM YOU?

There's quite a lot of talk from the LibDems about a wealth tax over these last few weeks.  That would need people to sit down each year and work out the value of all their assets to which a percentage tax would then be applied to the total.  Not easy for the taxman to audit - will he come round to check if money is being kept under the mattress?  So a few days after raising that stupidity there appears to have been a shift in emphasis.  In today's newspaper the direction seems to have changed to 'just' a new property tax.  To quote directly from the paper "Some Lib Dems are pushing for the annual charge to be levied at as much as 1.5 per cent of the property's value". 

That's an easy tax for anyone to work out - just get an estate agent to value the house then multiply the result by 1.5%.  "A house worth £200,000? - that'll be £3,000 in tax please!"  Maybe they'll let you pay it in monthly installments at £250 to make it easy for you.  Well easy if you have a spare £250 a month to add to your existing tax bill (income tax, national insurance, VAT, petrol duties, road fund licence, the charge to watch the BBC etc. etc.).

How many of you out there are cheering on the Lib Dems for suggesting this new tax?  I mean be fair, don't we need more tax revenues because the only alternative would be to reduce our public spending?  It's not like we are overspending is it?

£12billion a year in overseas aid is £1billion a month - surely you wouldn't want to cut the amount we send to India and Pakistan (their arms race doesn't come cheap) or to various African dictators (have you seen the price of top of the range Mercedes these days)? 

Public sector guaranteed benefit pension plans get more expensive each year - rather than put money aside for your own pension isn't it fairer instead to pay that money over in tax to fund the public sector pension deficit and ensure at least they can live in relative luxury when they retire?

And don't forget that the EU needs billions from the UK.  Remember only the UK and Germany are net contributors so the other 25 'nations' need your money.  It easier for several of them than bothering to collect all their own taxes.

Actually, I forgot to ask you if you own your house?  The tax will only hit you if you do.  If you are in a social or council owned property you don't need to worry.  As well as having subsidised rent you won't have to pay a penny of this property tax.  In this case its an easy calculation how much the Lib Dems want from you.  Its a big FAT ZERO.  A vote for them will cost you nothing directly.

But if you do own your home - even if you've just struggled to buy it with a small deposit or if you are in negative equity and in fear of repossession - the calculation is easy.... the Lib Dems would want 1.5% of the house value from you this year (and next year, and next year......). 

Here's a ready reckoner for you:-

£100,000 = £1,500 a year in new tax.   
£150,000 = £2,250 a year in new tax
£200,000 = £3,000 a year in new tax    
£250,000 = £3,750 a year in new tax
£300,000 = £4,500 a year in new tax    
£400,000 = £6,000 a year in new tax.

Or even easier - whenever there is an election play safe and avoid the Lib Dems!

NAUSEATINGLY IMMATURE

The immaturity of Nick Clegg and his party is very apparent in their tit-for-tat response to the failure of their constitutional vandalism of the House of Lords. The Coalition Agreement included a clear trade-off between the Conservatives and the Libdems. They would get a referendum on the Alternative Voting system and the Conservatives would have a chance to create a level field voting system. At present the system is heavily biased towards the Labour Party. When Tony Blair got 36% of the national votes that gave him a majority in parliament of 20 seats - whereas when David Cameron won 36% of the national votes he fell significantly short of a working majority. Where is the famous British sense of fair play in such a system? The boundary changes proposed within the Coalition Agreement would have righted that wrong. So does Clegg now believe that Labour should have a built in advantage when it comes to national elections? Doesn't he desire a level playing field when it comes to deciding which party wins? He has previously been on record as saying that the system is unfair and should be changed but now in a childlike fit of pique he has changed his mind. How petty! How nauseatingly immature!

LOOSE MONEY

I can't believe how free and easy some people are with public money. Today both the newspapers and the TV news are full of LibDem former leader, Lord Ashdown, talking about voting against the proposed benefit cap of £26,000pa. For a person prepared to work and support themselves and their family, they need to bring in about £35,000 a year before tax to have the same standard of living as a family at the proposed benefit cap. Half the population don't make that sort of money. What incentive to work is there for some one of only modest earning capacity when they can rake in £26,000 just sitting on their sofas watching their mates on the Jeremy Kyle show? But even that cap is too low for Lord Ashdown. Labour were obviously happy for families to get £50,000 or even significantly higher in overall benefits. Indeed they set up the system to disguise the total by creating a plethora of individual benefits and an ever increasing army of public sector employees to administer all the handouts.

Give Nick Clegg his due - he's woken up and smelt the coffee. He realises the present benefit system is both unfit for purpose and financially ruinous for the country. But how many of his rank and file are behind him and how many are cheering on Lord Ashdown? How many commuters travelling into London long to live in places like Kensington and Chelsea but instead have to buy homes outside London then endure an hour or more each way to get to work. Meanwhile the combined taxes of several of these hardworking families are needed to pay the housing benefit to let one family, making no contribution to the public purse, live in Central London.

UPDATE: On the above theme, Iain Duncan Smith is quoted in Monday's London Evening Stardard saying "The purpose of this is not to punish people but it is to give fairness to people who are paying tax, who are commuting large distances because they can only afford to live in the houses that they have chosen". (Click on the word "saying" above for a link to the article, which also includes "some households have been living on benefits of more than £100,000 a year in affluent areas of London" [New Labour, New Excesses?]).