Wednesday, 25 April 2012

On No, Not Again....

Witht he latest figures from the ONS showing a further contraction in the UK economy and the ensuing use of the "R word", today could be going better for the UK Government. Half of their critics will say that they have cut 'too far and too fast'and the rest feel more bold autserity packages are necessary. It's true that everyone will have their own view, driven largely by their own ideology, but amost all will agree that this is not where we want to find ourselves - again.

I heard one informed commentator saying today that we should follow the example set recently by Estonia, where they made breathtaking cuts to their Pubic Sector and as a result are now enjoying 8% GDP growth. On the face of it that seems like a great idea, but can you imagine the collective pain there would be having made such cuts, while we sat waiting for their expected beneficial outcome? Bravery is most definitely required from here on in, but will Democracy allow any government, of any colour, to do what is required and to stick at it for long enough for the desired result to emerge out of the gloom?

It is times such as these when a benign dictatorship (has there ever been such a thing, anywhere?) might allow policy makers the time to see their policies through to conclusion. That is never going to happen, when we seem if anything to be moving toward an even less well-defined political era where the colours have run in the wash and where blue, red and orange have become a pastel-shade messy purple.

Inflation will, over time ease the size of the debt mountain, as it always does. Though we may not have actively been seeking such an outcome, I think it hard to imagine our turning it down!

Tuesday, 17 April 2012

Is Gratitude dead and burried?

The recent debate over charitable giving and how it should be viewed by the State has set me thinking. Like most of these subjects that we try to simplify, this one proves to have more to consider than immediately meets the eye. I found myself motivated to put pen to paper on this when I found myself watching Tony Blair on the BBC’s NewsNight and for the first time ever, agreeing with what he said!

George Osborne was apparently horrified when he discovered that some of our wealthiest were only paying 10% tax (although why this was such a shock to him is beyond me). However, if this reduction in their tax-paying activity is brought about solely by charitable giving then we might well ask why this anything other than a good thing.

After all, if your income is a cool million and out of the goodness of your heart you choose to give away 90% of that to good causes, leaving yourself ‘only’ £100,000 a year to live on, there’s a strong case for asking why you should pay any more tax than another who earns a straight £100,000. You would have no more money to spend on yourself than he does and it could be argued that you have done a great deal more good than he has. With this in mind, it seems rather churlish for the Government to be suggesting that in such circumstances, you should not only give away the £900,000, but then be required to pay a further £402,500 in tax, leaving yourself over £300,000 in deficit for the year.

The other side of the argument seems to be that why should you, one of society’s most fortunate, be able to pick and choose whom your money benefits when ordinary tax-payers just have to make do with the choices made for them by the Treasury? When you put it this way, it seems less clear cut than at first impressions, but I do think we need to take a slightly more grown-up view of this and look at things in the round. If a wealthy philanthropist decides to endow a particular University with wads of money for instance, then surely this organisation is subsequently less needy when it comes to demands made on the public purse?

Clearly, a distinction needs to be drawn between genuine and absolute gifts, made to genuine charities and cynical, contrived arrangements that some might seek to make in such a way as to recover the money on the other side of the transaction once they have avoided the tax.

As ever, it seems that you cannot have your cake and eat it. If the Government believes in the Big Society then it is going to have to come to terms with the fact that wealthy people might just make personal choices that don’t replicate Government spending plans. As the ones writing the cheques, why shouldn’t they?