Tuesday, January 09, 2007
TAX CUTS WOULD LEAD TO ECONOMIC GROWTH - HERALD LETTER
A letter in the Herald today:
This is also the first occasion when a newspaper has used the 9% Growth Party name in the address.
I am distinctly pleased with this letter since, with the exception of Yugoslavia, it touches most of my bases.
The CBI boss, Mr McMillan, has regularly appeared in letters opposing the question of corporation tax cuts & generally saying what a good job our traditional political leaders are doing. The problem with the CBI is that it is a group of established businessmen who enjoy a very cosy relationship with all governments. They quite actively do not rock the boat in a way which more entrepreneurial entrepreneurs would. This is unfortunate & a sign of something approaching crony capitalism.
Here is the original Herald article in which george lyon describes their conversion to liberalism.
I happen to know that, shortly before I was expelled, a Lib Dem MSP was putting around a paper on further devolution for Scotland which included devolution of almost all taxes WITH THE EXCEPTION of corporation tax. The justification for this was not given.
The reaction of Jim Mather, SNP enterprise spokesman to this deathbed conversion was
The letter from Iain McMillan of CBI Scotland delineating the constitutional powers of Scotland was interesting. I agree with him that Holyrood could do far more to help economic growth (over the last 8 years its "contribution" has been a massive increase in regulation, a masive increase in the state sector & increased business rates, the latter being very slowly removed)) without going for corporation tax cuts. Nonetheless in criticising George Lyon for calling for such cuts he gives no actual reason why they should not also be made. If small moves, such as business rate cuts, will do a little good surely big actions are likely to do a lot. Certainly the case in Ireland, which he does not mention, is that corporation tax & regulatory cuts have lead to 16 years of 7% growth transforming them into one of the wealthiest countries in the world even ahead of the USA. Mr McMillan gives no reason why we cannot do the same & neither, it appears, can anybody else. So lets do something.This is the first time any newspaper, except the Glasgow West End Times, has reported my expulsion. I did include references to the previous Herald letters & their role in my expulsion when sending in this letter. It will be interesting to see if anybody in the party is willing to write in & defend their position - from previous experience I suspect not.
It is also good to see a Lib Dem MSP calling for corporation tax cuts. Such a change of heart is welcome, if barely credible. It is only a year since I was expelled from the Lib Dems for the political incorrectness of having had letters published in Scottish newspapers, including the Herald, calling for such corporation tax cuts & also for replacing our aging nuclear reactors. before the lights go out. The party executive unanimously voted that such positions were "to right wing" to even be discussed & "illiberal". Could it be that there is an election coming up?
Yours Faithfully
Neil Craig
9% Growth Party
This is also the first occasion when a newspaper has used the 9% Growth Party name in the address.
I am distinctly pleased with this letter since, with the exception of Yugoslavia, it touches most of my bases.
The CBI boss, Mr McMillan, has regularly appeared in letters opposing the question of corporation tax cuts & generally saying what a good job our traditional political leaders are doing. The problem with the CBI is that it is a group of established businessmen who enjoy a very cosy relationship with all governments. They quite actively do not rock the boat in a way which more entrepreneurial entrepreneurs would. This is unfortunate & a sign of something approaching crony capitalism.
Here is the original Herald article in which george lyon describes their conversion to liberalism.
At present, Scottish ministers set just one tax - business rates. Council tax is set by local authorities, and everything else is set at Westminster.
The LibDems want Holyrood to set at least corporation tax, income tax and inheritance tax.
George Lyon, deputy finance minister, said the increasingly bitter war of words between Labour and the SNP presented a "false choice" to voters between separation and the status quo. "We believe there is a middle way: more fiscal and legis-lative powers for the parliament to allow us to become a strong federal state, enabling us to become the new California."
He said Scotland could learn how to boost the economy from Republican governor Arnold Schwarzenegger's Golden State. Rich in creative and hi-tech industries, its 36 million residents have made it the sixth-largest economy in the world but it has remained part of a larger union.
"While the SNP cite the Isle of Man as their ambition for the economic future of Scotland, the Scottish Liberal Democrats would cite California. Californians don't need independence from the US to deliver economic growth and neither does Scotland.
"Scottish business doesn't want the uncertainty of Alex Salmond's separate state. They do want a thriving, ambitious economy."
The LibDem MSP for Argyll & Bute intends to put the proposal for more fiscal powers in the LibDem election manifesto.
"Scotland clearly has the potential to learn from California in the kinds of industries we want to see growing and developing, and in becoming a sustainable, high-growth economy."
Scottish businesses could tap into the experience and ambition of American's west coast by twinning with firms through Chambers of Commerce.
I happen to know that, shortly before I was expelled, a Lib Dem MSP was putting around a paper on further devolution for Scotland which included devolution of almost all taxes WITH THE EXCEPTION of corporation tax. The justification for this was not given.
The reaction of Jim Mather, SNP enterprise spokesman to this deathbed conversion was
Jim Mather, the SNP Shadow Enterprise Minister, gave a wry welcome to Mr Lyon's acceptance of the need for new powers, but said it was a pity it had taken the LibDems eight years to be forced into a change of heart.Iain McMillan's letter is here.
"However, Mr Lyon prefers to create a fantasy that Scotland could readily emulate California, when it would be much easier and more rewarding to emulate Norway, Iceland or Ireland who are among the most successful, most prosperous and the best places to live in the world according to the United Nations.
"After eight years of rudderless government, Mr Lyon would better serve his cause by producing a credible alternative."
Thursday, June 18, 2009
CALMAN COMMISSION & CORPORATION TAX - P&J & SCOTSMAN LETTER
The Calman Commission came out with their report on new powers for the Scottish Parliament. They came out for changing our income tax varying powers from the 3P we have now to 10p downwards & unlimited upwards. Since at no time in the last 10 years has there been any real attempt by any party to use the 3p rate it hardly seems likely this is more likely to be used. They have also said we should get the power to regulate airguns! This letter was the lead one in the Aberdeen Press & Journal yesterday & is in the Scotsman today, alongside one by Tam Dalyell. Not chosen by my local paper, the Herald or any others or I could have got the hat trick but perhaps that will happen tomorrow.
Looking at the report [pdf p261) this is what it says about getting control of CT.
Firstly that any business moving to Scotland must be matched by an equal cut in England. They should study Milton Friedman who said "Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another." This is one such - for every job gained by transfer from England we should expect a minimum of 1 from other parts of the world & another minimum of 1 from companies who, or whose bankers, would otherwise have decided such an investment would not be worth making. On top of that a growing Scottish economy produces resources some of which will, in due course, be invested in the rest of the world as well as more money for the Chancellor. Economic growth is, fairly obviously, not a fixed pie scenario.
The second fallacy is that this report is supposed to be about what is best for Scotland. Apart from the argument being wrong, if it were right it would be proper for Westminster MPs to turn it down on those grounds. It is highly improper of the Scottish ends of parties, however Unionist, to restrict, in advance, their request for powers in the interests of the Westminster end of the dog.
Their position is not only ignoring Scotland's interests in a putative Unionist interest but is economically flawed & a parochial view of the Union in which the rest of the world doesn't exist.
NOTE Previous Labour & LibDem apparent approval of CT cutting
####################################
On an entirely different subject I was on the radio Scotland phone in this morning. Gary's sermon was about potholes in our roads & whether we should, in this time of financial stringency be fixing them. I was given a few seconds to say that this was typical of the BBC. That they are constantly doing programmes about how we should spend more on enforcing nanny state regulations (for example yesterday his sermon had been on banning smoking in cars with kids in them in case they all died of passive smoking) but that when it comes down to basic infrastructure vital for the country's prosperity they say we don't have the money.
I got just long enough to say that & he moved on.
The Calman report looks like a stitch up by the other 3 parties to give the illusion of change. I do not write of the refusal to give us a share of oil revenue since the argument against is reasonable. Oil prices fluctuate massively. Giving it to us would obviously be politically impossible without cutting the rest of the grant proportionately since, as English voters point out, we already spend more per head than them. That would simply make planning spending impossible.The Scotsman edited out the last 2 sentences of the first paragraph & both edited out the reference to airguns.
I write of the purely public relations call for us to get more of the income tax varying power which no government has come close to using. This is tokenism. The power we could & should get is to reduce Corporation Tax. Everybody knows it was the reduction in this that was the driver of the Ireland's 7% growth. This is why the SNP went into the last election promising to try & get us the power to reduce it. That was & still is the basis of their promise to produce a "Celtic Lion" economy matching Ireland's. It is also something then Labour leader McConnell promised to support (Scotsman 17/11/6) & that even the LibDems had been "looking at" cutting business taxes (Scotsman 3/7/6).
Whatever tokenism Calman has produced (airguns & extending a power we haven't used) if we actually want to grow Scotland's economy control of the levers which could most directly improve our competitiveness must be used & the most obvious of these is corporation tax. Everything else is smoke & mirrors.
Looking at the report [pdf p261) this is what it says about getting control of CT.
Devolving Corporation Tax would represent a shift in increasing the financial accountability of the Scottish Parliament, although other taxes have a closer connection to the electorate. We are not convinced that allowing the ScottishBy "economic inefficiencies" what they mean is that that entrepreneurs would base decisions on where to locate not merely on "conventional" business costs but on taxes. Of course all businesses everywhere in the world make their decisions taking into account government taxes & regulation. However note that by saying this THE CALMAN COMMISION ARE ADMITTING THAT CUTTING CORPORATION TAX WOULD BE HIGHLY EFFECTIVE. If they didn't think it would persuade companies to expand their Scottish employment then there would be no effect & no such "inefficiencies"! There are 2 further fallacies in their position.
Parliament to determine a Scottish rate of Corporation Tax would produce harmful tax
competition because the scope to vary the rate is, in effect, constrained. Divergent
rates of Corporation Tax across the UK would create economic inefficiencies as firms
react to tax considerations rather than commercial factors. If tax competition did
occur, it would have the potential to be harmful rather than efficient. The creation
of compliance costs to businesses operating on either side of the border, as well as
the increased collection costs to government, would be especially undesirable in the
present economic climate.
Firstly that any business moving to Scotland must be matched by an equal cut in England. They should study Milton Friedman who said "Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another." This is one such - for every job gained by transfer from England we should expect a minimum of 1 from other parts of the world & another minimum of 1 from companies who, or whose bankers, would otherwise have decided such an investment would not be worth making. On top of that a growing Scottish economy produces resources some of which will, in due course, be invested in the rest of the world as well as more money for the Chancellor. Economic growth is, fairly obviously, not a fixed pie scenario.
The second fallacy is that this report is supposed to be about what is best for Scotland. Apart from the argument being wrong, if it were right it would be proper for Westminster MPs to turn it down on those grounds. It is highly improper of the Scottish ends of parties, however Unionist, to restrict, in advance, their request for powers in the interests of the Westminster end of the dog.
Their position is not only ignoring Scotland's interests in a putative Unionist interest but is economically flawed & a parochial view of the Union in which the rest of the world doesn't exist.
NOTE Previous Labour & LibDem apparent approval of CT cutting
####################################
On an entirely different subject I was on the radio Scotland phone in this morning. Gary's sermon was about potholes in our roads & whether we should, in this time of financial stringency be fixing them. I was given a few seconds to say that this was typical of the BBC. That they are constantly doing programmes about how we should spend more on enforcing nanny state regulations (for example yesterday his sermon had been on banning smoking in cars with kids in them in case they all died of passive smoking) but that when it comes down to basic infrastructure vital for the country's prosperity they say we don't have the money.
I got just long enough to say that & he moved on.
Labels: letters, Scottish politics
Sunday, April 23, 2006
THE CASE FOR FISCAL AUTONOMY
Last week I was invited to a lecture on the case for fiscal autonomy in Scotland by Professor MacDonald & sponsored by the Policy Institute & Jim Mather SNP MSP.
The paper he was reading from is here though it is pdf format.
Fiscal autonomy means that we raise our own taxes in Scotland & spend them here. One problem, as raised in a question by David McLetchie is that it is a somewhat slippery term. There is fiscal federalism (ie that some taxes are our responsibility, which, in terms of council tax & the 3p income tax variation we have a bit of already), through to "full fiscal autonomy" (ie we raise all our own money & give an agreed amount for such things as, perhaps, the army & our ambassador to the UN Security Council - which is near as dammit independence). As he pointed out fiscal autonomy can be used to describe anything between the 2. Politics is full of terms like this whose meanings change, indeed I did a letter on 24th Feb here on the subject.
The main point Professor MacDonald made for autonomy is that it provides discipline to Holyrood not to waste money. Currently they have little incentive to hold back government spending or real economic incentive to grow the economy (though it is my opinion that the voters would reward it since they certainly have an incentive to be wealthier) & thus the tax base. The main points against are the practical rather than ethical one that gains of the Barnett formula (which as the report acknowledges has been "so generous") would be lost & that a relatively small economy, particularly one dependent on one commodity, is more susceptible to economic swings (this applies particularly to oil whose price has recently gone from $20 to $70 a barrel).
The Professor did, credibly, suggest that bringing tax raising closer to spending is inherently more efficient (that studies in the US relating to cities more than states show that growth improves one standard deviation with levels of financial devolution). He also pointed out that if we achieved growth we would eventually pull ahead of UK wealth levels & therefore we would no longer need to benefit from Barnett.
He was very firmly in favour of cutting corporation tax (currently a reserved matter) & income taxes saying that each 10% cut in corporation tax leads to a 1-2% increase in growth. As regulars here will know this is very very much what I believe though it is good to have somebody who knows more than me confirm it. Thus if Scottish corporation tax were cut from 30% to 12% we could expect our growth to increase about 3% to at least the 4% predicted by the SNP. Clearly the cutting of regulation, business rates, cheap nuclear power, lower income tax, improved infrastructure (ie roads), planning restrictions on housebuilding removed etc. could be expected to bring us up to or indeed significantly above the Irish rate. The vital thing to remember about growth is that it is a permanent & compound function so that if increase we our national income 9% in one year we not only keep that increase next year but it would be 19% next year & our national income would double in 8 years (check it out). Thus Jack McConnell is not overstating it when he says growth should be our "number one priority", it is merely unfortunate that he has done nothing. When I asked Professor MacDonald, after the talk, which particular taxes were most important to growth he said, in order, that corporation tax & income tax were the ones.
Afterwards we had nosh & generally got to meet people. I met Jim Mather (I have emailed him in the past supporting some letters he has had in the Scotsman) & he said he was pleased to have a face to go with the emails. 2 people separately asked me if I was an economist which I found flattering but maybe just means I am opinionated. In discussing the future of UK Federalism, in which I believe, somebody pointed out that while the English have refused regional devolution if we were to get our economy growing faster than the UK as a whole then federalism as such would be much more attractive. Currently Holyrood appears more in terms of an 'orrible warning than a good example. We could change that. My opinion is that if Scotland achieved growth either Westminster would follow our example & we would become the most advanced part of a particularly rich & successful federal state, or they wouldn't & the ever growing divergence would make separation inevitable. I think this is a position any Scots patriot could work towards.
I hope that the debate will resolve itself not so much along the lines of whether we are for or against "fiscal autonomy" & what that means as which particular elements of fiscal policy it would be economically beneficial to devolve. Personally I would like to see a groundswell in favour of devolving corporation tax & possibly some use of the 3p income tax reduction. Anything further before we have used the income tax varying powers would be grandstanding. Eventually I would like to see a federal UK settlement which produces a number of similarly sized units. One historic advantage of federation is that the different federal units to try different solutions & all learn from the good examples (& even more from the 'orrible warnings).
The paper he was reading from is here though it is pdf format.
Fiscal autonomy means that we raise our own taxes in Scotland & spend them here. One problem, as raised in a question by David McLetchie is that it is a somewhat slippery term. There is fiscal federalism (ie that some taxes are our responsibility, which, in terms of council tax & the 3p income tax variation we have a bit of already), through to "full fiscal autonomy" (ie we raise all our own money & give an agreed amount for such things as, perhaps, the army & our ambassador to the UN Security Council - which is near as dammit independence). As he pointed out fiscal autonomy can be used to describe anything between the 2. Politics is full of terms like this whose meanings change, indeed I did a letter on 24th Feb here on the subject.
The main point Professor MacDonald made for autonomy is that it provides discipline to Holyrood not to waste money. Currently they have little incentive to hold back government spending or real economic incentive to grow the economy (though it is my opinion that the voters would reward it since they certainly have an incentive to be wealthier) & thus the tax base. The main points against are the practical rather than ethical one that gains of the Barnett formula (which as the report acknowledges has been "so generous") would be lost & that a relatively small economy, particularly one dependent on one commodity, is more susceptible to economic swings (this applies particularly to oil whose price has recently gone from $20 to $70 a barrel).
The Professor did, credibly, suggest that bringing tax raising closer to spending is inherently more efficient (that studies in the US relating to cities more than states show that growth improves one standard deviation with levels of financial devolution). He also pointed out that if we achieved growth we would eventually pull ahead of UK wealth levels & therefore we would no longer need to benefit from Barnett.
He was very firmly in favour of cutting corporation tax (currently a reserved matter) & income taxes saying that each 10% cut in corporation tax leads to a 1-2% increase in growth. As regulars here will know this is very very much what I believe though it is good to have somebody who knows more than me confirm it. Thus if Scottish corporation tax were cut from 30% to 12% we could expect our growth to increase about 3% to at least the 4% predicted by the SNP. Clearly the cutting of regulation, business rates, cheap nuclear power, lower income tax, improved infrastructure (ie roads), planning restrictions on housebuilding removed etc. could be expected to bring us up to or indeed significantly above the Irish rate. The vital thing to remember about growth is that it is a permanent & compound function so that if increase we our national income 9% in one year we not only keep that increase next year but it would be 19% next year & our national income would double in 8 years (check it out). Thus Jack McConnell is not overstating it when he says growth should be our "number one priority", it is merely unfortunate that he has done nothing. When I asked Professor MacDonald, after the talk, which particular taxes were most important to growth he said, in order, that corporation tax & income tax were the ones.
Afterwards we had nosh & generally got to meet people. I met Jim Mather (I have emailed him in the past supporting some letters he has had in the Scotsman) & he said he was pleased to have a face to go with the emails. 2 people separately asked me if I was an economist which I found flattering but maybe just means I am opinionated. In discussing the future of UK Federalism, in which I believe, somebody pointed out that while the English have refused regional devolution if we were to get our economy growing faster than the UK as a whole then federalism as such would be much more attractive. Currently Holyrood appears more in terms of an 'orrible warning than a good example. We could change that. My opinion is that if Scotland achieved growth either Westminster would follow our example & we would become the most advanced part of a particularly rich & successful federal state, or they wouldn't & the ever growing divergence would make separation inevitable. I think this is a position any Scots patriot could work towards.
I hope that the debate will resolve itself not so much along the lines of whether we are for or against "fiscal autonomy" & what that means as which particular elements of fiscal policy it would be economically beneficial to devolve. Personally I would like to see a groundswell in favour of devolving corporation tax & possibly some use of the 3p income tax reduction. Anything further before we have used the income tax varying powers would be grandstanding. Eventually I would like to see a federal UK settlement which produces a number of similarly sized units. One historic advantage of federation is that the different federal units to try different solutions & all learn from the good examples (& even more from the 'orrible warnings).
Tuesday, January 10, 2006
A MESSAGE FROM DAVID CAMERON
3 weeks ago I sent this email to David Cameron cc Annabelle Goldie
I have just got back
I was really hoping for was to say that just as the Tories are leaving it up to the Scots party to decide on income tax cuts they wouldn't stand in the way of a corporation tax cut & am therefore not disappointed to find that there is, at least, no specific objection to it - it would seem likely that if the Scots Tories were to push firmly for this there would be no resistance.
There are almost certainly going to be some things in the next 18 months on which Mr Cameron will have to express an opinion.
Dear Mr Cameron,(this was drafted before finding that my Enterprise motion was again not to be called or that the Lib Dems were expelling me)
I see that in your vist to Scotland you have stated that you would be willing to support the Scottish Conservatives in a decision to use the income tax reduction option available to the Scottish Parliament.
I would be very interested to hear whether you would also support putting the same investment into a reduction of corporation tax in Scotland. This would require either an alteration to the Scotland Act, since corporation tax is a reserved matter, or for Westminster to pass this in the same way that heretofore Westminster would put alterations in Scots law into Westminster Bills.
I don't know if you are aware that reducing corporation tax is a major plank of SNP policy although they have expressed the opinion that Westminster would never allow it (this may be part of the attraction). You will almost certainly not be aware that I have tried, several times under the previous leader, to introduce a motion supporting a corporation tax reduction for debate at the Scottish Liberal Democrat conference.
Since Nicol Stephen has taken over & publicly committed himself to reducing business rates below the UK level & is unlikely to oppose increased powers for the Scottish Parliament I have considerable hope that this will, in time, be adopted.
The example of Ireland strongly suggests that reduced corporation tax would, together with a favourable regulatory regime, greatly encourage free market economic growth. Such success would, I think, be very popular & reflect well on the parties that supported it. A few years ago Reform did a survey of political opinion & found that while Scots are about 2 points to the "left" on most issues they were, by a large majority, of the opinion that business tax reduction would be an important ingredient of growth.
A Holyrood government which, under proportional representation, was able to achieve economic success by agreement among market free market orientated parties would also be a good example to the UK.
I look forward to hearing from you.
Respectfully
Neil Craig
I have just got back
Dear Mr Craig,Now lets be fair - I have no right, as a single private citizen, to expect the Tory party to make policy on the hoof purely on my say so & at least we know that the economy is the 4th of 6 items on their to do list. On the other hand isn't it reasonable to expect either the Central or Scottish party to have some opinions on the matter or to have something somebody has said on the subject to hand? What
Thank you for writing to David Cameron – he’s asked me to thank you and to say that he appreciated what you had to say. Thank you for pointing out your blog too.
David Cameron has set up six policy groups to examine key areas of concern and challenges we face. These challenges are complex, interconnected and require serious long-term thinking; we want to make sure we get the solutions to these challenges right.
There are six policy groups, which includes social justice, national and international security, quality of life, improvement of public services, economic competitiveness and globalisation and global poverty. Each group will engage expertise from outside politics, and over the next 18 months carry out detailed work to identify all of the issues and relevant facts surrounding each challenge and look at creative ideas. They will not set party policy. But once that process is complete, the information they have gathered will be used to help inform a policy development process.
Many thanks again for writing.
I was really hoping for was to say that just as the Tories are leaving it up to the Scots party to decide on income tax cuts they wouldn't stand in the way of a corporation tax cut & am therefore not disappointed to find that there is, at least, no specific objection to it - it would seem likely that if the Scots Tories were to push firmly for this there would be no resistance.
There are almost certainly going to be some things in the next 18 months on which Mr Cameron will have to express an opinion.
Thursday, June 15, 2006
THE CAUSE OF IRELAND'S GROWTH - AGAIN
The Times has a piece on why ireland's economy is growing. Guess what - they think it is corporation tax too.
the key passage refers to tax. O’Reilly’s view is that the main reason for the Irish economic “miracle” has been the low level of corporate tax in Ireland. He is working to persuade the UK Government to reduce the rate of corporation tax in Northern Ireland to that of the south; that is, from the UK’s 30 per cent to the Republic’s 12.5 per cent. He comments that the Irish miracle is not “because the pubs are great, the golf is great and the climate is, well . . . the fact is, its tax.”Also the major cause of wetness is the presence of water.
This is, indeed, one of the political truths that politicians ignore at their peril. O’Reilly’s “the fact is, its tax,” is just as valid as Bill Clinton’s “it’s the economy, stupid”. Of course, from the British point of view, there can be no question of cutting the Northern Ireland rate of corporation tax without cutting the UK level. If 12.5 per cent is good for the Republic — and it is — then indeed it would also be good for Northern Ireland. If it would be good for Northern Ireland it would be equally good for England, Wales and Scotland. Not only good, but essential.
Most politicians have little understanding of tax. They think it is easier to tax business because global businesses do not have votes. They do not realise that Ireland has found that lower tax rates produce higher yields. The result is that Conservative tax policies are inadequate, Liberal Democrat policies are self-defeating, and Labour’s are complex and perverse.
.......
Obviously, a 30 per cent tax rate is less attractive to international business than 12.5 per cent. London has therefore become less attractive than Dublin. Like water running downhill, companies will move from London to Dublin, or to other low-tax countries.
There are numerous alternative locations, and it is impossible to prevent this drift abroad.
Sunday, November 01, 2009
TAXING DRUGS, OTHER WORTHWHILE TAXES & CUTTING GOVERNMENT DOWN TO SIZE
Not being a complete libertarian I do accept the desirability of some taxation. The destructive effects of various taxes vary. Corporation tax is the single most damaging one because it directly cuts into & deters new investment money.
Mark Wadsworth on his own blog & here has gone on at length about how tax on land value does not hurt the economy because the tax is on the inherent value not the buildings on it so that tax is irrespective of the development of the land & hence doesn't discourage it. Indeed it has a positive effect since it discourages land hoarding & thus keeps the land in use.
I also approve of taxes on things we know to be harmful to us - eg smoking, alcohol & drugs. I blogged yesterday on legalising drugs but do support taxing them. Tax is a method of pressure which does not deprive us of the freedom of choice that criminalisation does. That it makes a profit is not something to be despised.
I have previously done a poll on what proportion of the economy should be government spending & the result came out at under 20%. I am happy with that & would see 10% (historically a tithe in the days when the social services were a branch of the Church) going for welfare. I would wish that to come from income tax/national insurance ring fenced to particular welfare programmes. That means they are effectively a form of insurance but, unlike private insurance, when everybody is charged a flat rate the administration costs are very low - this is one area where the state can be more efficient than free enterprise.
Currently we raise taxes like this
The total of alcohol, tobacco & custom duties comes t0 18.7 billion Taking VAT on top of that comes to £22 bn. The world drugs business was estimated in 2003 as $322 bn. Change that to pounds, update it for 2009 & take the UK portion as 1/20th (higher than our share of world GNP but we have a more serious problem than most of Europe & richer countries can afford more than their proportion) gives about £18 bn. So taken together is about £40 bn.
10% of national GNP is £140 billion. Council tax comes to £24.9 bn. Add the same again for land value tax (I am not going to include business rates because, though there is a good theoretical basis for them I don't want to include anything that hurts growth. Lets keep half of fuel duties to pay for transport infrastructure - £13 bn. Betting tax £1.5bn. Despite the Tories I rather approve of inheritance tax at £3.2 bn - after all the beneficiaries haven't worked for it. Lets keep capital gains tax which is largely a way of filling an inheritance loophole - £5 bn. Total £109 bn. Lets keep some of the stamp duty, vehicle excise etc simply because registering ownership is a valuable service government provides.
That is about £120 bn. If anything more than that is needed we can let tobacco/alcohol/drug taxes rise. Letting them rise at 9% would bring in another £20 bn in 5 years & if the country achieved 9% growth which I have long said would be easily achievable with a truly free market economy, would merely maintain the current cost as a proportion of pre tax income (quite a lot less in post tax income :-)
That means the abolition, or in a few cases large reduction in the aggregates levy, climate change levy, landfill tax, petrol revenue tax, air passenger duty (a lot of small eco-fascist taxes which don't come directly from us so we don't notice them) insurance premium tax, much of vehicle, stamp & "other taxes", business rates, corporation tax & VAT. Taking 10% for the welfare state paid out of income tax & national insurance which currently raises £260 bn we save £120 bn or £4,000 more in the average wage packet.
None of this is complicated it simply requires making the decision to cut the state down to its non-parasitic function.
UPDATE In comments Mark has said that "other taxes & royalties" is licencing of licences on monopolies (like airport landing slots, radio spectrum etc) & presumably licences for oil exploration. As such they are a useful state function & like LVT are dealing witrh a fixed quantity so taxation is not economically destructive. That means another £15.7bn. Hmmm - that means government can clearly reach 10% of GNPharmlessly. The troll is looking rather easy to feed.
Mark Wadsworth on his own blog & here has gone on at length about how tax on land value does not hurt the economy because the tax is on the inherent value not the buildings on it so that tax is irrespective of the development of the land & hence doesn't discourage it. Indeed it has a positive effect since it discourages land hoarding & thus keeps the land in use.
I also approve of taxes on things we know to be harmful to us - eg smoking, alcohol & drugs. I blogged yesterday on legalising drugs but do support taxing them. Tax is a method of pressure which does not deprive us of the freedom of choice that criminalisation does. That it makes a profit is not something to be despised.
I have previously done a poll on what proportion of the economy should be government spending & the result came out at under 20%. I am happy with that & would see 10% (historically a tithe in the days when the social services were a branch of the Church) going for welfare. I would wish that to come from income tax/national insurance ring fenced to particular welfare programmes. That means they are effectively a form of insurance but, unlike private insurance, when everybody is charged a flat rate the administration costs are very low - this is one area where the state can be more efficient than free enterprise.
Currently we raise taxes like this
The total of alcohol, tobacco & custom duties comes t0 18.7 billion Taking VAT on top of that comes to £22 bn. The world drugs business was estimated in 2003 as $322 bn. Change that to pounds, update it for 2009 & take the UK portion as 1/20th (higher than our share of world GNP but we have a more serious problem than most of Europe & richer countries can afford more than their proportion) gives about £18 bn. So taken together is about £40 bn.
10% of national GNP is £140 billion. Council tax comes to £24.9 bn. Add the same again for land value tax (I am not going to include business rates because, though there is a good theoretical basis for them I don't want to include anything that hurts growth. Lets keep half of fuel duties to pay for transport infrastructure - £13 bn. Betting tax £1.5bn. Despite the Tories I rather approve of inheritance tax at £3.2 bn - after all the beneficiaries haven't worked for it. Lets keep capital gains tax which is largely a way of filling an inheritance loophole - £5 bn. Total £109 bn. Lets keep some of the stamp duty, vehicle excise etc simply because registering ownership is a valuable service government provides.
That is about £120 bn. If anything more than that is needed we can let tobacco/alcohol/drug taxes rise. Letting them rise at 9% would bring in another £20 bn in 5 years & if the country achieved 9% growth which I have long said would be easily achievable with a truly free market economy, would merely maintain the current cost as a proportion of pre tax income (quite a lot less in post tax income :-)
That means the abolition, or in a few cases large reduction in the aggregates levy, climate change levy, landfill tax, petrol revenue tax, air passenger duty (a lot of small eco-fascist taxes which don't come directly from us so we don't notice them) insurance premium tax, much of vehicle, stamp & "other taxes", business rates, corporation tax & VAT. Taking 10% for the welfare state paid out of income tax & national insurance which currently raises £260 bn we save £120 bn or £4,000 more in the average wage packet.
None of this is complicated it simply requires making the decision to cut the state down to its non-parasitic function.
UPDATE In comments Mark has said that "other taxes & royalties" is licencing of licences on monopolies (like airport landing slots, radio spectrum etc) & presumably licences for oil exploration. As such they are a useful state function & like LVT are dealing witrh a fixed quantity so taxation is not economically destructive. That means another £15.7bn. Hmmm - that means government can clearly reach 10% of GNPharmlessly. The troll is looking rather easy to feed.
Labels: Fixing the economy, Government parasitism, Social
Wednesday, August 17, 2011
SNP Policy on Corporation Tax Conflicting with Their Policy of "Independence in Europe"
BBC Newsnight Scotland's Gordon Brewer quite often asks perceptive questions, particularly economic ones about Scotland.
Last night he came up with one for John Swinney about regarding a new paper the Scottish government have produced calling for the power to cut corporation tax.
He pointed out that Angela Merkel and Nick Sarkozy have just announced an agreement to harmonise their corporation tax rates and that this is almost certainly going to be a prelude to them trying to force CT harmonisation on others, particularly Ireland.
Europe's two most-powerful politicians, German Chancellor Angela Merkel and French President Nicolas Sarkozy, met in Paris to try to ease the euro's slide...
Worryingly for Ireland, they also put the issue of corporation tax back on the table.They said their two countries were preparing proposals to introduce a common tax on companies from the beginning of 2013.
And while for now it looks like this common tax rate will only apply to France and Germany, the danger is that it could mark the start of a fresh initiative to harmonise the rate that applies to companies in every European economy.
This would be disastrous for the Irish economy, which uses a low rate of corporation tax as a key attraction for multinationals to open new businesses here. ctd
Brewer pointed out that if that is the case, while Germany/France may not be able to prevent current members of the EU having low CT there is no way they would sign up a new member without fixing that. Cutting CT is pretty well the only policy the SNP have to improve our economy (this being one more than the others) while being committed to deepening the recession by putting the lights out.
Yet the SNP are committed to ensuring Scotland, unlike Norway, is an EU member. So Brewer asked them what they would do and Swinney didn't answer.
But it is a good question.
What are the options:
1) Negotiate EU membership as a new country, seeking terms slightly different from what the UK has - for example getting some control over our own fishing grounds and having more EU Parliament members (a bonus given to all the small countries). This would mean giving up the control of CT which has been the only economically progressive policy they have.
2) Claim that as part of the previous UK state they already have membership without renegotiation (the reverse of East Germany becoming part of the EU when it united with the West). This would mean keeping the same rights over CT they now have but mean there would be no renegotiation.
3) Scotland quitting the EU while England and Ireland remain inside. This would put us in the same position as Norway and Switzerland, not coincidentally the 2 richest European countries (excluding Luxembourg which is an accounting invention). Both are strongly linked to EU countries both economically (Switzerland is surrounded by the EU) and culturally (Norway used to be united with Sweden) - perhaps not fully matching Scotland's link with England but not that far short either. However much of the reason why independence doesn't scare us, even though it can be a cold world out there, is because it is a wee pretendy independence in which we are not independent of the EU.
The independence argument just got more complicated, assuming the big pro-union parties are smart enough to notice. In general, because it makes a nonsense of SNP policy it should discourage a separatist vote. On the other hand could UKIP decide that full independence from both Britain and the EU was preferable to remaining part of both? Whatever happens it could lead to a more grown up debate about the real costs and benefits.
Labels: British politics, Fixing the economy, Scottish politics
Thursday, October 02, 2008
CAMERON GOES FOR CORPORATION TAX CUTS
Long time readers will know that I have been calling for a substantial cutting of corporation tax as they did in Ireland thereby achieving 7% growth.
The SNP have been formally in support of this for 3 years though the fact that CT is currently reserved to Westminster means they have not had to make good on it & though they have cut business rates they had to be pushed by the Scottish Conservatives to do it quickly.
I believe that CT, closely followed by business rates, is the most economically damaging of all taxes since they impinge directly on discouraging wealth creation & growth, CT slightly more because the amount paid rises directly with profits not assets which hurts the most efficient producers most.
Therefore I was very pleased to see in David Cameron's speech yesterday:
So here's what we're going to do. We'll start by dealing with the nightmare complexity of our business taxes. We'll get rid of those complex reliefs and allowances and use the savings to cut corporation tax by three pence.
Very good indeed. That cuts it to 25%. A very long way from Ireland's 12.5% & all taken from promised cuts in exemptions but no more could reasonably be expected bearing in mind his repeated statements that the economy has been brought to such a state that that tax cuts generally are impossible. Cameron has decided that the first such cut should be on business taxes. He must know that a cut in income tax would be more popular (as Nick Clegg has cynically shown he knows reversing the previous "LiB Dem" position that tax cuts are "illiberal" & too right wing" to discuss) but that the long term interest is far better, if in a more difficult to explain way, served by the bonus of a permanent increase in growth than a one off tax cut.
I have not previously been a great supporter of Cameron, thinking him more spin than substance & having seen his ridiculous "conversion" to Greenery. However recently the Conservatives have come out for what is is pretty much the free choice educational voucher system that worked in Sweden. The idea that parents get to choose whether to go to a bad school or a good one upsets the educational mafia, but is a long overdue reform. During the Glasgow East by election Cameron also made a well thought out speech against dependency culture which didn't improve the chances of his candidate winning, though nothing but a snowstorm in the infernal regions would have. Certainly the Conservatives have a lot of good ideas see John Redwood's Economic Competitiveness Policy Group & Iain Douglas Smith's report on inner cities but I had been worried Cameron was too much the PR man. On the other hand Machiavelli said that the way to tell if a prince was intelligent was to look at the ministers he chose - that only a capable prince would consistently choose people of ability & there seems little argument that the Conservative front bench holds more people of ability than the Labour one.
Now having endorsed a 10% cut in CT the best thing for Cameron to do would be to undertake not to increase the tax take on CT & business rates during his government. This would allow the Laffer curve to work & give confidence to industries considering long term investment while not exposing him to an accusation of taking money from the poor. The tax money cut, would be from a virtuous circle of new wealth & would, assuming increasing growth probably allow further year on year cuts of 3-6p getting it down to the Irish rate in 4 years.
Tuesday, April 05, 2005
SNP POLICY ON GROWTH - SCOTSMAN LETTER
I had this published in the Scotsman on 1st April. The bits marked <> were edited (it was quite a long letter) but I think readers here should see the whole thing. I believe there is some genuine movement going on:
< The report on the SNP's policy of cutting corporation tax to kick-start economic growth (Mon front-page & Tues. 29th) by > Professor Midwinter is misinformed.
The case that all the SNP's policies, specifically independence & the concomitant use of oil revenues, could cost 10 billion is arguable either way. However it is unreasonable to use this figure in an argument about cutting corporation tax < & rates >. As he states later since our total corporation tax receipts are 2.1 billion a cut of 1/3rd would be 700 million. Scottish Enterprise already costs us 500 million, for less obvious effect & Holyrood has regularly had an underspend of 500 million. This is therefore clearly affordable.
The argument over whether independence <, requiring the SNP to win both a Parliamentary & referendum majority, is feasible > is a different issue. < As has happened in Quebec,> it is quite possible the SNP could become the leading party < in government > without persuading the electorate to secede.
The Professor is also in error in saying that Ireland's growth preceded the tax cut. Ireland decided on reform in 1989, including cutting business taxes & instituted it within a year. They immediately came out of stagflation. It is true that in face of this success they repeatedly cut corporation tax < further > to it's present level of 12.5% (& that the rate of growth further increased), which is what he is referring to in saying that some tax cuts came after success, but the initial cut came first - the relationship between reform & success is so close that it is not reasonable to deny that the one led to the other. Independence & EU membership, < which are > sometimes credited with responsibility for Ireland's achievement, both came decades earlier & immigration (actually the return of generations of emmigrants), not surprisingly, followed growth.
A point he misses is that the lesson the SNP have learnt from Ireland is twofold. Not just cutting business taxes but also cutting regulation. < It is understandable but unfortunate that Holyrood has made it's presence felt more by increasing regulation than by cutting it. The former is easy for government to do while the latter requires considerable self examination, but for the sake of the nation our MSPs must do it.>
Turning round our economy cannot be done purely by writing a cheque but it can be done by a government willing to make the effort, which includes writing that cheque & backing it. Since each per cent increase in growth means a continuing extra billion of national wealth each & every year the gains to be made exceed the cost many times over. < I may be accused of naivety but > I do not believe < that, with this visible example,> the Scots electorate are either to stupid or to shortsighted to understand this.
< The report on the SNP's policy of cutting corporation tax to kick-start economic growth (Mon front-page & Tues. 29th) by > Professor Midwinter is misinformed.
The case that all the SNP's policies, specifically independence & the concomitant use of oil revenues, could cost 10 billion is arguable either way. However it is unreasonable to use this figure in an argument about cutting corporation tax < & rates >. As he states later since our total corporation tax receipts are 2.1 billion a cut of 1/3rd would be 700 million. Scottish Enterprise already costs us 500 million, for less obvious effect & Holyrood has regularly had an underspend of 500 million. This is therefore clearly affordable.
The argument over whether independence <, requiring the SNP to win both a Parliamentary & referendum majority, is feasible > is a different issue. < As has happened in Quebec,> it is quite possible the SNP could become the leading party < in government > without persuading the electorate to secede.
The Professor is also in error in saying that Ireland's growth preceded the tax cut. Ireland decided on reform in 1989, including cutting business taxes & instituted it within a year. They immediately came out of stagflation. It is true that in face of this success they repeatedly cut corporation tax < further > to it's present level of 12.5% (& that the rate of growth further increased), which is what he is referring to in saying that some tax cuts came after success, but the initial cut came first - the relationship between reform & success is so close that it is not reasonable to deny that the one led to the other. Independence & EU membership, < which are > sometimes credited with responsibility for Ireland's achievement, both came decades earlier & immigration (actually the return of generations of emmigrants), not surprisingly, followed growth.
A point he misses is that the lesson the SNP have learnt from Ireland is twofold. Not just cutting business taxes but also cutting regulation. < It is understandable but unfortunate that Holyrood has made it's presence felt more by increasing regulation than by cutting it. The former is easy for government to do while the latter requires considerable self examination, but for the sake of the nation our MSPs must do it.>
Turning round our economy cannot be done purely by writing a cheque but it can be done by a government willing to make the effort, which includes writing that cheque & backing it. Since each per cent increase in growth means a continuing extra billion of national wealth each & every year the gains to be made exceed the cost many times over. < I may be accused of naivety but > I do not believe < that, with this visible example,> the Scots electorate are either to stupid or to shortsighted to understand this.
Wednesday, June 22, 2011
More Powers for Scotland - What Should be Supported and What Shouldn't
This is my latest article from the ThinkScotland site (somewhat improved by Brian editing it into equal sized paragraphs). Please put any comments there.
---------------------------------------------------------
THE NEW SNP government has said that its priority is to change the new Scotland Act to include, gaining control of the Crown Estates; enhanced borrowing powers; and control of corporation tax.
Westminster has said it can only have the borrowing powers – what should it have done? Let’s deal with the ideas one by one.
The Crown Estate stuff is to get control of the foreshore and the "profits" to be made from setting up lots of sea turbines there and making cheap electricity.
Good luck on that one. The SNP's insane attachment to renewables has been discussed by me before (1) and though the party remains unpersuaded by me, neither has anybody in the party disputed any of my facts.
“Renewables” is a subsidy generating industry more than an electricity producing one. The only “profits” that will ever be made from them will be from the subsidy put into them. Diverting some of the profits into the Scots treasury so that they can increase the subsidy is a perfectly fair way of letting Salmond dig a deeper hole for himself.
To be fair, the SNP's procedure of putting up an X-Prize of £10 million for whoever can produce a "commercial" sea turbine design is an intelligent and innovative way of doing this really stupid thing. Prizes for achievement are provably a far more effective (about 60 times more per £ invested) way of developing new technology than the traditional handing of grants to “preferred bidders” and government employees.
If a truly commercial sea turbine is possible that is the way to develop it, but because renewable power is so dilute the laws of physics strongly suggest it isn't.
Still, the SNP should get credit for proposing a method more progressive than any other government in the world has (though John McCain wanted to use such a prize to develop improved batteries and Newt Gingrich has long been on record as proposing to use X-Prizes on a whole range of projects, all of them more sensible than windmillery).
But giving this power to Holyrood to tax something useless will be no skin off Westminster's nose so what’s the problem?
The borrowing power might be little skin off its nose either but it should not be given. The problem with letting governments borrow money is that they tend to do it and leave repayment to the next generation. We have seen far too much of that lately.
If Holyrood gets that power the pressure to “spend its way out of recession” will be enormous. We could find ourselves in the situation of Greece even before we might become independent. Maybe from the Westminster point of view that looks useful, preventing us choosing independence, but it would also reduce our constructive role in the union. If the union is really to have a future, as I hope, it will be because both parties benefit from it. Independence is only an issue because the British state has failed so abysmally over the past century and a lot of that is because we, particularly but not exclusively Labour governments, have been able to pay for more government than is good for us – out of borrowing.
The only way this could work would be if Westminster was and was seen to be absolutely not guaranteeing the borrowing, in which case it might be instructive to see Holyrood having to pay a higher interest rate than the UK government.
But the big issue is corporation tax.
Cutting corporation tax, along with cutting regulations, particularly building regulations, have been the prime causes of Ireland's spectacular growth (2) from 60% of our per capita GNP in 1989 to what is still, despite its banking crash, significantly higher than the UK's. This has been recognised for some years in Scotland, where we are more attuned to the Celtic fringe than in Westminster (though not as much as in Northern Ireland). Leaders of all parties here have suggested cutting CT here and it is the most noticeable issue on which the Scots, normally considered to be left leaning, are noticeably to the right of the UK average (3).
The SNP first promised to promote cutting CT before the 2007 election and I believe it was a significant factor in its popularity in a very close election. After it came to power Salmond did nothing noticeable to redeem this pledge
This is explainable because it is a power in Westminster's gift. With a little more gumption, however, the SNP could have used the power to give grants matching a proportion of CT thereby circumventing the limits as described in Bruce, A. and T. Miers (2003) Scotland's Hidden Tax Cutting Powers, Policy Institute (4).
Perhaps the reason for not doing so was a lack of gumption or perhaps it was the SNP's vested interests. It is, after all, officially a socialist party. Nor did the SNP get any pushing from the other parties who, united in the Calman Commission, determined to give us almost any power except CT on the grounds that “Divergent rates of Corporation Tax across the UK would create economic inefficiencies as firms react to tax consideration” (5). I.E. don't do it because it would work. The description of reacting to price as an “inefficiency” would not have earned the approval of Adam Smith.
The argument for Westminster parties here is that if Scotland (& Northern Ireland, which is even more determined to get the same power as its neighbour) gets this power they will “steal” jobs from the rest of the UK. I think that is a bad argument for 3 reasons.
Firstly it is openly claiming to sacrifice Scots interests to English ones, and in a way that an independent Scotland could rectify. That is hardly likely to inspire anybody to maintain the union.
Secondly it is an example of Milton Friedman's remark – “Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another”.
Certainly some industries that might choose Scotland might have otherwise gone to England. Some would have gone to Ireland, or France, or Germany, or the USA, or Dubai. It’s a big world out there. And many investments simply wouldn't have been made, the investors spending it on wine women and amateur dramatics. That's how free enterprise works. Moreover, over time successful investments spill over borders. A growing Scottish economy is thus good for the Westminster Exchequer and for English workers.
Thirdly, and more subtly for those who want a successful economy south of Berwick, is the example it would give. Just as Ireland has been a good example for Scotland, leading Scots to appreciate the benefit of pro-growth policies a successful Scotland would encourage the same understanding in England. If Scotland was cutting CT successfully voters, particularly in the north of England would be receptive, indeed clamouring for, similar cuts there.
George Osborne has made a small CT cut and I am certain would like to make a bigger one if it was a priority with the voters. Tax competition, between very similar economic areas in a beneficial direction is unequivocally a good thing. The fact that different states in the USA compete over taxes is one of the reasons why its economy has historically been so successful and a strong argument against both a unitary state and full separation.
Calman’s complaint against tax competition only makes sense if the purpose of government is to get away with as much taxation as possible. Free market radicals, as Scots once were and the present Westminster government claims to be, should welcome Holyrood getting the power to cut the single most destructive tax on economic growth.
There is also the effect on the SNP of them getting what they ask for. The SNP is a strange party with outright libertarians all the way through to Marxists and “environmental” technophobes in its tent. I have suggested that many of them may have been happy not to have been called on to fulfill their free market “Celtic lion” promise (and to have been able to blame the English into the bargain). If they get the power to cut CT they have painted themselves into the corner of having to use it.
If George Osborne were then to use his power to do the same they would have to do it again no matter how many sacred cows had to be sacrificed. The voters would insist on it.
And in due course, with improved growth, both sides of the border would prosper.
(1) Renewable lunacy http://www.thinkscotland.org/change-scotland/articles.html?read_full=10872&article=www.thinkScotland.org
(2) Celtic Tiger: Secret of Success http://www.ideasinactiontv.com/tcs_daily/2005/03/the-celtic-tiger-secret-of-success-unveiled.html
(3) 74% of Scots support business tax cut http://a-place-to-stand.blogspot.com/2007/01/if-taxes-are-cut-we-will-get-growth.html
(4) Scotland's hidden tax cutting powers http://policyinstitute.info/resource/2007/10/bruceoct03.pdf
(5) Blog on Calman Report on CT and the leaders who have called for the power to cut it http://a-place-to-stand.blogspot.com/2008/12/calman-report.html
---------------------------------------------------------
THE NEW SNP government has said that its priority is to change the new Scotland Act to include, gaining control of the Crown Estates; enhanced borrowing powers; and control of corporation tax.
Westminster has said it can only have the borrowing powers – what should it have done? Let’s deal with the ideas one by one.
The Crown Estate stuff is to get control of the foreshore and the "profits" to be made from setting up lots of sea turbines there and making cheap electricity.
Good luck on that one. The SNP's insane attachment to renewables has been discussed by me before (1) and though the party remains unpersuaded by me, neither has anybody in the party disputed any of my facts.
“Renewables” is a subsidy generating industry more than an electricity producing one. The only “profits” that will ever be made from them will be from the subsidy put into them. Diverting some of the profits into the Scots treasury so that they can increase the subsidy is a perfectly fair way of letting Salmond dig a deeper hole for himself.
To be fair, the SNP's procedure of putting up an X-Prize of £10 million for whoever can produce a "commercial" sea turbine design is an intelligent and innovative way of doing this really stupid thing. Prizes for achievement are provably a far more effective (about 60 times more per £ invested) way of developing new technology than the traditional handing of grants to “preferred bidders” and government employees.
If a truly commercial sea turbine is possible that is the way to develop it, but because renewable power is so dilute the laws of physics strongly suggest it isn't.
Still, the SNP should get credit for proposing a method more progressive than any other government in the world has (though John McCain wanted to use such a prize to develop improved batteries and Newt Gingrich has long been on record as proposing to use X-Prizes on a whole range of projects, all of them more sensible than windmillery).
But giving this power to Holyrood to tax something useless will be no skin off Westminster's nose so what’s the problem?
The borrowing power might be little skin off its nose either but it should not be given. The problem with letting governments borrow money is that they tend to do it and leave repayment to the next generation. We have seen far too much of that lately.
If Holyrood gets that power the pressure to “spend its way out of recession” will be enormous. We could find ourselves in the situation of Greece even before we might become independent. Maybe from the Westminster point of view that looks useful, preventing us choosing independence, but it would also reduce our constructive role in the union. If the union is really to have a future, as I hope, it will be because both parties benefit from it. Independence is only an issue because the British state has failed so abysmally over the past century and a lot of that is because we, particularly but not exclusively Labour governments, have been able to pay for more government than is good for us – out of borrowing.
The only way this could work would be if Westminster was and was seen to be absolutely not guaranteeing the borrowing, in which case it might be instructive to see Holyrood having to pay a higher interest rate than the UK government.
But the big issue is corporation tax.
Cutting corporation tax, along with cutting regulations, particularly building regulations, have been the prime causes of Ireland's spectacular growth (2) from 60% of our per capita GNP in 1989 to what is still, despite its banking crash, significantly higher than the UK's. This has been recognised for some years in Scotland, where we are more attuned to the Celtic fringe than in Westminster (though not as much as in Northern Ireland). Leaders of all parties here have suggested cutting CT here and it is the most noticeable issue on which the Scots, normally considered to be left leaning, are noticeably to the right of the UK average (3).
The SNP first promised to promote cutting CT before the 2007 election and I believe it was a significant factor in its popularity in a very close election. After it came to power Salmond did nothing noticeable to redeem this pledge
This is explainable because it is a power in Westminster's gift. With a little more gumption, however, the SNP could have used the power to give grants matching a proportion of CT thereby circumventing the limits as described in Bruce, A. and T. Miers (2003) Scotland's Hidden Tax Cutting Powers, Policy Institute (4).
Perhaps the reason for not doing so was a lack of gumption or perhaps it was the SNP's vested interests. It is, after all, officially a socialist party. Nor did the SNP get any pushing from the other parties who, united in the Calman Commission, determined to give us almost any power except CT on the grounds that “Divergent rates of Corporation Tax across the UK would create economic inefficiencies as firms react to tax consideration” (5). I.E. don't do it because it would work. The description of reacting to price as an “inefficiency” would not have earned the approval of Adam Smith.
The argument for Westminster parties here is that if Scotland (& Northern Ireland, which is even more determined to get the same power as its neighbour) gets this power they will “steal” jobs from the rest of the UK. I think that is a bad argument for 3 reasons.
Firstly it is openly claiming to sacrifice Scots interests to English ones, and in a way that an independent Scotland could rectify. That is hardly likely to inspire anybody to maintain the union.
Secondly it is an example of Milton Friedman's remark – “Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another”.
Certainly some industries that might choose Scotland might have otherwise gone to England. Some would have gone to Ireland, or France, or Germany, or the USA, or Dubai. It’s a big world out there. And many investments simply wouldn't have been made, the investors spending it on wine women and amateur dramatics. That's how free enterprise works. Moreover, over time successful investments spill over borders. A growing Scottish economy is thus good for the Westminster Exchequer and for English workers.
Thirdly, and more subtly for those who want a successful economy south of Berwick, is the example it would give. Just as Ireland has been a good example for Scotland, leading Scots to appreciate the benefit of pro-growth policies a successful Scotland would encourage the same understanding in England. If Scotland was cutting CT successfully voters, particularly in the north of England would be receptive, indeed clamouring for, similar cuts there.
George Osborne has made a small CT cut and I am certain would like to make a bigger one if it was a priority with the voters. Tax competition, between very similar economic areas in a beneficial direction is unequivocally a good thing. The fact that different states in the USA compete over taxes is one of the reasons why its economy has historically been so successful and a strong argument against both a unitary state and full separation.
Calman’s complaint against tax competition only makes sense if the purpose of government is to get away with as much taxation as possible. Free market radicals, as Scots once were and the present Westminster government claims to be, should welcome Holyrood getting the power to cut the single most destructive tax on economic growth.
There is also the effect on the SNP of them getting what they ask for. The SNP is a strange party with outright libertarians all the way through to Marxists and “environmental” technophobes in its tent. I have suggested that many of them may have been happy not to have been called on to fulfill their free market “Celtic lion” promise (and to have been able to blame the English into the bargain). If they get the power to cut CT they have painted themselves into the corner of having to use it.
If George Osborne were then to use his power to do the same they would have to do it again no matter how many sacred cows had to be sacrificed. The voters would insist on it.
And in due course, with improved growth, both sides of the border would prosper.
(1) Renewable lunacy http://www.thinkscotland.org/change-scotland/articles.html?read_full=10872&article=www.thinkScotland.org
(2) Celtic Tiger: Secret of Success http://www.ideasinactiontv.com/tcs_daily/2005/03/the-celtic-tiger-secret-of-success-unveiled.html
(3) 74% of Scots support business tax cut http://a-place-to-stand.blogspot.com/2007/01/if-taxes-are-cut-we-will-get-growth.html
(4) Scotland's hidden tax cutting powers http://policyinstitute.info/resource/2007/10/bruceoct03.pdf
(5) Blog on Calman Report on CT and the leaders who have called for the power to cut it http://a-place-to-stand.blogspot.com/2008/12/calman-report.html
Labels: Fixing the economy, Scottish politics, scottish progress
Thursday, September 03, 2009
CORPORATION TAX AROUND THE WORLD & THE RELATIONSIP TO ECONOMIC GROWTH
The reason for Ireland's quite explicable economic "miracle" is known to be their cut of corporation tax & cutting of regulation, particularly building regulations. Here is Wikipedia's listing of corporation tax around the world:
Country/Corporate Rate
Algeria 30%+3%
Angola 35%
Argentina 35%
Australia 30%
Austria 25%
Azerbaijan 22%
Bangladesh 0-40%
Barbados 40%
Belarus 24%
Belgium 33.99%
Benin 35%
Bosnia and Herzegovina 10%
Botswana 15% (plus 10% surcharge)
Brazil 34%
Bulgaria 10%
Burkina Faso 10-45%
Burundi 35%
Cameroon 38.5%
Canada 29.5-35.5%
Chile 17%
China 25%
Colombia 35%
Croatia 20%
Cuba 30%
Cyprus 10%
Czech Republic 21%
Denmark 25%
Egypt 20%
El Salvador 25%
Estonia 21%
Finland 26%
France 33.33%
Gabon 35%
Germany 29.8%
Georgia 15%
Gibraltar 33%
Greece 22/25%
Guatemala 31%
Guyana 35%/45%
Hong Kong 16.5%
Hungary 16%
Iceland 18/26%
India 30-40%
Indonesia 28%
Iran 25%
Ireland 12.5%
Israel 27%
Italy 31.4%
Jamaica 33.3%
Japan 30%
Jordan 15/25/35%
Kazakhstan 20%
South Korea 13/25%
Latvia 15%
Lebanon 15/4-21%
Lithuania 20%
Luxembourg 29.63%
Malaysia 26%
Malta 35%
Mexico 28%
Monaco 33.33%
Montenegro 9%
Morocco 35%
Netherlands 20/25.5%
New Zealand 30%
Norway 28%
Pakistan 35%
Panama 30%
Peru 27%
Philippines 35%
Poland 19%
Portugal 12.5-27.5%
Romania 16%
Russia 20%
Saudi Arabia 20%-85%
Senegal 33%
Serbia 10%
Singapore 18%
Slovakia 19%
Slovenia 22%
South Africa 28%
Spain 25-30%
Sweden 26.3%
Switzerland[2] 13-25%
Syria 10-45%
Taiwan/Republic of China 25%
Tanzania 30%
Thailand 30%
Tunisia 30%
Turkey 20%
Ukraine 25%
United Kingdom 21-28%
United States 15-39%
US CT is slightly weirder than appears since the ultimate federal rate is 35%, the 39% & 38% rates being sandwiched between other lots but also there are state rates of 0-10.75%. That can add an average of 5% to the federal US rate making it 40%.
Uruguay 30%
Uzbekistan 12%
Venezuela 15/22/34%
Vietnam 28%
Zambia 35%
Now a lot of these are not closely comparable since the various bands will vary a lot. Nonetheless we have a clear trend. Average looks around the mid 20s slightly lower than Britain is. Countries under 20% are Bosnia, Botswana, Bulgaria, Chile, Cyrus, Georgia, Hong Kong, Hungary, Ireland, Latvia, Montenegro, Poland, Rumania, Serbia, Singapore, Slovakia & Uzbekistan. Most of these, at least the stable ones are growing well, even if often from a low base. Countries above 35% are Bangladesh, Barbados, Burkina Faso, Cameroon, Canada, Guyana, India, Saudi Arabia & the USA of whom India is the spectacularly fast growing exception.
So not a simple & absolute rule that cutting CT solves all growth ills but a clear trend.
There is a relationship between tax rates generally & growth "one percentage point increase in tax burden is associated with ... future five-year growth rates are estimated to be lower by 1.56 percent" which is 0.31% less per year.
Since CT is the particular tax that most closely affects business investment it should have a disproportionate effect compared to cutting taxes on other areas, even though it is a small portion of total taxes (9% in the UK). The Irish cut of 20% (from 32% to 12.5%) has led to growth going from British rates to 7% on average which implies a 4% cut in CT would roughly relate to a 1% increase in growth. Ireland also cut building regulations & some other taxes but on the other hand at the time it was in zero growth rather than matching the UK's. I think we can be confident of at least a 5-1 relationship between CT & growth.
On that basis cutting Britain's 28% CT to Ireland's 12.5% would increase our growth rate by at least 3% a year. Cutting the USA's 40% to the same should produce an least an extra 5.5% annual growth. To draw out the example that means that that reform alone will double the expected wealth of everybody in Britain from what it would have been in 23 years & in the USA in 12.7.
I must admit before researching this I still held some belief in the USA being a beacon of free enterprise/run by bloated capitalists according to preference. Clearly with one of the highest Corporation Tax rates in the world that is not so, and they lose heavily because of it.
Assuming a relationship between CT & investment that (1) people invest in proportion to the returns they expect, (2) most dividends get reinvested & (3) most reinvested dividends get reinvested we should expect the long term investment rate to be the cube of the non-taxed portion of money theoretically available. In the UK (1-0.28^3) that is 37%, for Ireland it is 67% & in the USA investment is 22.7%. International investment, where investors have a wide choice of where to invest will probably have a considerably wider diveregence in where they choose to invest than that.
Country/Corporate Rate
Algeria 30%+3%
Angola 35%
Argentina 35%
Australia 30%
Austria 25%
Azerbaijan 22%
Bangladesh 0-40%
Barbados 40%
Belarus 24%
Belgium 33.99%
Benin 35%
Bosnia and Herzegovina 10%
Botswana 15% (plus 10% surcharge)
Brazil 34%
Bulgaria 10%
Burkina Faso 10-45%
Burundi 35%
Cameroon 38.5%
Canada 29.5-35.5%
Chile 17%
China 25%
Colombia 35%
Croatia 20%
Cuba 30%
Cyprus 10%
Czech Republic 21%
Denmark 25%
Egypt 20%
El Salvador 25%
Estonia 21%
Finland 26%
France 33.33%
Gabon 35%
Germany 29.8%
Georgia 15%
Gibraltar 33%
Greece 22/25%
Guatemala 31%
Guyana 35%/45%
Hong Kong 16.5%
Hungary 16%
Iceland 18/26%
India 30-40%
Indonesia 28%
Iran 25%
Ireland 12.5%
Israel 27%
Italy 31.4%
Jamaica 33.3%
Japan 30%
Jordan 15/25/35%
Kazakhstan 20%
South Korea 13/25%
Latvia 15%
Lebanon 15/4-21%
Lithuania 20%
Luxembourg 29.63%
Malaysia 26%
Malta 35%
Mexico 28%
Monaco 33.33%
Montenegro 9%
Morocco 35%
Netherlands 20/25.5%
New Zealand 30%
Norway 28%
Pakistan 35%
Panama 30%
Peru 27%
Philippines 35%
Poland 19%
Portugal 12.5-27.5%
Romania 16%
Russia 20%
Saudi Arabia 20%-85%
Senegal 33%
Serbia 10%
Singapore 18%
Slovakia 19%
Slovenia 22%
South Africa 28%
Spain 25-30%
Sweden 26.3%
Switzerland[2] 13-25%
Syria 10-45%
Taiwan/Republic of China 25%
Tanzania 30%
Thailand 30%
Tunisia 30%
Turkey 20%
Ukraine 25%
United Kingdom 21-28%
United States 15-39%
US CT is slightly weirder than appears since the ultimate federal rate is 35%, the 39% & 38% rates being sandwiched between other lots but also there are state rates of 0-10.75%. That can add an average of 5% to the federal US rate making it 40%.
Uruguay 30%
Uzbekistan 12%
Venezuela 15/22/34%
Vietnam 28%
Zambia 35%
Now a lot of these are not closely comparable since the various bands will vary a lot. Nonetheless we have a clear trend. Average looks around the mid 20s slightly lower than Britain is. Countries under 20% are Bosnia, Botswana, Bulgaria, Chile, Cyrus, Georgia, Hong Kong, Hungary, Ireland, Latvia, Montenegro, Poland, Rumania, Serbia, Singapore, Slovakia & Uzbekistan. Most of these, at least the stable ones are growing well, even if often from a low base. Countries above 35% are Bangladesh, Barbados, Burkina Faso, Cameroon, Canada, Guyana, India, Saudi Arabia & the USA of whom India is the spectacularly fast growing exception.
So not a simple & absolute rule that cutting CT solves all growth ills but a clear trend.
There is a relationship between tax rates generally & growth "one percentage point increase in tax burden is associated with ... future five-year growth rates are estimated to be lower by 1.56 percent" which is 0.31% less per year.
Since CT is the particular tax that most closely affects business investment it should have a disproportionate effect compared to cutting taxes on other areas, even though it is a small portion of total taxes (9% in the UK). The Irish cut of 20% (from 32% to 12.5%) has led to growth going from British rates to 7% on average which implies a 4% cut in CT would roughly relate to a 1% increase in growth. Ireland also cut building regulations & some other taxes but on the other hand at the time it was in zero growth rather than matching the UK's. I think we can be confident of at least a 5-1 relationship between CT & growth.
On that basis cutting Britain's 28% CT to Ireland's 12.5% would increase our growth rate by at least 3% a year. Cutting the USA's 40% to the same should produce an least an extra 5.5% annual growth. To draw out the example that means that that reform alone will double the expected wealth of everybody in Britain from what it would have been in 23 years & in the USA in 12.7.
I must admit before researching this I still held some belief in the USA being a beacon of free enterprise/run by bloated capitalists according to preference. Clearly with one of the highest Corporation Tax rates in the world that is not so, and they lose heavily because of it.
Assuming a relationship between CT & investment that (1) people invest in proportion to the returns they expect, (2) most dividends get reinvested & (3) most reinvested dividends get reinvested we should expect the long term investment rate to be the cube of the non-taxed portion of money theoretically available. In the UK (1-0.28^3) that is 37%, for Ireland it is 67% & in the USA investment is 22.7%. International investment, where investors have a wide choice of where to invest will probably have a considerably wider diveregence in where they choose to invest than that.
Labels: economics, Fixing the economy
Friday, September 05, 2008
CORPORATION TAX CUTS BECOME THE CONSENSUS - WILL ANYBODY DO IT?
From Gordon Brown's speech to the Scottish CBI
"First of all," he told Scottish business leaders, "devolution has worked but I do see one problem. While there have been good reasons why this is so, the Scottish Parliament is wholly unaccountable for the budget it spends but not for the size of its budget. And that budget is not linked to the success of the Scottish economy. That is why we asked the commission to look carefully at the financial accountability of the Scottish Parliament and this is a critical part of Calman's remit."
In other words increased fiscal autonomy. This would require the Scottish government to have control of corporation tax.
That is very good. Cutting corporation tax was the main plank in Ireland achieving 7% growth but has not been within the powers of Scotland. It has been SNP policy for over 2 years. If Labour UK propose us having the power to cut CT it is impossible that Scottish Labour would not endorse this which in turn means they would be likely to say they want to use it. Raising it is understood by almost everybody to be very damaging to the economy & nobody more sensible than Sheriden is going to call for that. While the Conservatives have not officially called for cutting CT (allegedly because it might jog Cameron's elbow) most Tory MSPs like the idea & they were responsible for the SNP keeping to their promise of an early cut to business rates. Even Tavish Scott, whose LibDems expelled me in 2005 because I had been trying to get the party to at least debate such cuts, recently brought up, unprompted, this possibility (officially it remains "too right wing" to be discussed & holding such views "incompatible with membership of the LDs).
This brings us to the next problem. Once we have such power & all the main parties committed to cutting CT how do we make sure they do so? Throughout Jack McConnell's rule as Labour leader he was officially committed to making growing the economy his "number 1 priority" yet he did virtually nothing. The SNP have promised a "Celtic Lion" economy matching or bettering Ireland's but all they have done is a small cut in business rates & even there they had to be pushed by the Conservatives. The LD's promises are even less trustworthy in light of their eagerness to expel anybody who says they should be kept. Corporation Tax raises £2 billion in Scotland. We could afford most, or even all, of that but it would annoy a lot of special interests.
It may seem strange that if the entire political establishment & large majority of voters are agreed on a policy it doesn't get followed. However this is a more particular example of a general rule. All these parties have always been committed to a successful economy. All that has changed is that they are now pretty much agreed on what needs doing.
The problem is that while economic success is very much in the interest of the public as a whole, parties are made up of special interest groups (some of them pretty weird because the satisfied are less likely to become political activists). When given the choice between pleasing everybody a bit by cutting taxes & letting the economy grow, or pleasing one of their own interests by spending more money on Ludditism desired by activists they tend to find paying the Danegeld the easier option in the short term. Most politics is about the short term on the assumption that the public & even more the media, has only short term memory. The example of Labour enforcing the smoking ban shows that parties will even ignore their core vote to please the activists special interest groups.
My own opinion is that the public do not have such a short term memory but that it would require a party to keep plugging about something & to make specific promises as to amounts & dates of CT cuts & the sort of specific promise that this would take priority over specific other measures, to convince voters. A rule of advertising is that when people say they are getting bored with an advert is when it has sunk into their consciousness & is working. I think any of the 4 parties could take advantage of getting really boring on the subject that Irish growth is achievable & that they, alone, can be entirely trusted to do it.
---------------------------
In this light I would like to point out that in the same speech Brown has ruled out a !windfall" tax on petrol (with the alleged intent to reduce its cost) which would damage confidence in the entire economy & ensure nobody invested in the energy sector (but most of the bad results would be in the long term). I had high hopes of him because I was convinced he knew what needed to be done to achieve economic success. I still think he knows & wish he would just do it. By comparison, last night, all 3 candidates for Labour leadership in Holyrood said the wanted such a tax. However badly Gordon is doing it is clear he is head & shoulders above any other possible Labour replacement.
Saturday, September 17, 2005
HERALD LETTER : REACTION TO BUSINESS RATE REDUCTION
Letter in today's Glasgow Herald (Sat 17th). I have put in my full draft letter. Pieces marked << >> were removed by me to shorten it, marked < > by the Herald. It still ended up the longest letter being 2 lines longer than the one on cricket.
-----------------------------------------------------------------------------------------------------------
Congratulations to the Executive on their decision to reduce business
rates to the English level < (which since it is longer here since a rating
revaluation means, in practice, that we are now more competitive).>
This is the best, arguably the first, good news for the Scots economy since
devolution. it is particularly remarkable since it was Jack McConnell,
in his previous post, who was responsible for increasing rates in the
first place. While the doctrine of collective cabinet responsibility
prevents us knowing for sure, it seems likely that the accession of Nicol
Stephen, who, while running for Lib Dem leader, pledged support for
business tax cuts, may have played a part in this.
< The first step is always the most difficult & > there are other steps
which should be taken to change from a proportionately declining to a
growing economy. It is proposed that the rates reduction take place in
2007, though paradoxically there may be a partial reduction next year.
Surely, if it accepted that this will help grow the economy we would be
as well to start growing as quickly as possible.
The question of a reduction in corporation tax, the main plank in Ireland's
success should be faced. Per £ invested this should be more beneficial
because it particularly helps highly profitable companies which, by definition,
have most growth potential & encourages investment in mobile assets,
<< where we are in direct competition with other nations.>>
Corporation tax is currently a reserved matter, < a fact of
which the SNP have made play. However it is clear that it was reserved, not
as a matter of principle but > because it was thought, even by most Scots
that we were an intrinsically socialistic, << big-government,>> anti-business
nation who would increase taxes. This was always largely an illusion caused by the appalling Westminster FPTP electoral system but such feeling as there was (eg the initial decision to increase business rates) has been blown away by the
growth in political maturity Scotland is achieving by the act of running
our own affairs. This, despite all the disenchantment & the scandal of the
building, is ultimately the achievement of devolution. Thus I
do not believe Westminster would stand in the way of reducing corporation
tax or that even normally Unionist Scots, like myself, would let them.
<
political virility, not by making regulations but by removing them. Holyrood
has been busy passing laws preventing altering a Victorian building, smoking,
hunting etc. Most of these have costs in jobs & all,
like all well meaning government actions, are subject to the law of unintended
consequences. Some loosening of the corsets of our nanny state would be
a relief.>> *
Thirdly MSPs should stop proving their political virility by producing more
laws. All new regulation requires more regulators, almost all destroy jobs &
all are subject to the Law of Unintended Consequences <(ie that everything has
unintended consequences)> .
<< 2 years ago it proved impossible to get Nicol Stephen's party to debate
Irish style growth policy. I year ago you** published a letter of mine expressing
surprise that, at a European hustings in Glasgow. only the SNP & Lib
Dem candidates had not opposed growth. Today we have a pro-growth concessus
that crosses party lines with only the Green's saying that this reform "focusses to much on growing the economy". >> There is now a real chance that Scots may again be able to build a future worthy of our past.
Neil Craig
-----------------------------------------------------------------------------------------------
* Fairly obviously this is a longer version of the next paragraph but I have kept in both drafts.
** Actually the letter was in the Scotsman.
I do believe that Westminster will be prepared to make Corporation Tax a devolved matter (or at the very least make the right to CUT this tax a devolved matter, which would actually be better since almost any limitation on the power of government to increase taxes is no bad thing).
The SNP think they would refuse. This actually means we can work together since ultimately it will be proven one way or another. People only fight over what cannot be proven. If Westminster refused I would be prepared to work for independence because I believe national wealth is that important & because I don't like being pushed.
-----------------------------------------------------------------------------------------------------------
Congratulations to the Executive on their decision to reduce business
rates to the English level < (which since it is longer here since a rating
revaluation means, in practice, that we are now more competitive).>
This is the best, arguably the first, good news for the Scots economy since
devolution. it is particularly remarkable since it was Jack McConnell,
in his previous post, who was responsible for increasing rates in the
first place. While the doctrine of collective cabinet responsibility
prevents us knowing for sure, it seems likely that the accession of Nicol
Stephen, who, while running for Lib Dem leader, pledged support for
business tax cuts, may have played a part in this.
< The first step is always the most difficult & > there are other steps
which should be taken to change from a proportionately declining to a
growing economy. It is proposed that the rates reduction take place in
2007, though paradoxically there may be a partial reduction next year.
Surely, if it accepted that this will help grow the economy we would be
as well to start growing as quickly as possible.
The question of a reduction in corporation tax, the main plank in Ireland's
success should be faced. Per £ invested this should be more beneficial
because it particularly helps highly profitable companies which, by definition,
have most growth potential & encourages investment in mobile assets,
<< where we are in direct competition with other nations.>>
Corporation tax is currently a reserved matter, < a fact of
which the SNP have made play. However it is clear that it was reserved, not
as a matter of principle but > because it was thought, even by most Scots
that we were an intrinsically socialistic, << big-government,>> anti-business
nation who would increase taxes. This was always largely an illusion caused by the appalling Westminster FPTP electoral system but such feeling as there was (eg the initial decision to increase business rates) has been blown away by the
growth in political maturity Scotland is achieving by the act of running
our own affairs. This, despite all the disenchantment & the scandal of the
building, is ultimately the achievement of devolution. Thus I
do not believe Westminster would stand in the way of reducing corporation
tax or that even normally Unionist Scots, like myself, would let them.
<
political virility, not by making regulations but by removing them. Holyrood
has been busy passing laws preventing altering a Victorian building, smoking,
hunting etc. Most of these have costs in jobs & all,
like all well meaning government actions, are subject to the law of unintended
consequences. Some loosening of the corsets of our nanny state would be
a relief.>> *
Thirdly MSPs should stop proving their political virility by producing more
laws. All new regulation requires more regulators, almost all destroy jobs &
all are subject to the Law of Unintended Consequences <(ie that everything has
unintended consequences)> .
<< 2 years ago it proved impossible to get Nicol Stephen's party to debate
Irish style growth policy. I year ago you** published a letter of mine expressing
surprise that, at a European hustings in Glasgow. only the SNP & Lib
Dem candidates had not opposed growth. Today we have a pro-growth concessus
that crosses party lines with only the Green's saying that this reform "focusses to much on growing the economy". >> There is now a real chance that Scots may again be able to build a future worthy of our past.
Neil Craig
-----------------------------------------------------------------------------------------------
* Fairly obviously this is a longer version of the next paragraph but I have kept in both drafts.
** Actually the letter was in the Scotsman.
I do believe that Westminster will be prepared to make Corporation Tax a devolved matter (or at the very least make the right to CUT this tax a devolved matter, which would actually be better since almost any limitation on the power of government to increase taxes is no bad thing).
The SNP think they would refuse. This actually means we can work together since ultimately it will be proven one way or another. People only fight over what cannot be proven. If Westminster refused I would be prepared to work for independence because I believe national wealth is that important & because I don't like being pushed.
Sunday, November 21, 2004
ENTERPRISE MOTION
Creating a favourable environment for business & recapturing Scotland's spirit of enterprise & innovation were central aims in the Party's 2003 Election Manifesto.
Conference notes:
1 the importance of creating an environment favourable to business in Scotland.
2 the key long term role that sustainable economic growth must play in ending poverty.
Conference therefore calls on the Scottish Executive to
(i) set up a Parliamentary Committee charged with actively reducing the burden of legislation on business, particularly small businesses
(ii) provide special assistance to individuals & small businesses seeking to register international patents & copyright
(iii) ease building & zoning regulations outside conservation areas
(iv) make a substantial reduction to corporation tax in Scotland
(v) target skills training on areas of high unemployment
(vi) benchmarking growth in Scotland against growth in the UK as a whole & in other OECD countries
(vii) undertaking not to increase the real tax take on business by more than 1% per annum until growth has exceeded the average of the UK & OECD
Scotland's economy is in serious trouble. We are consistently growing at at least 1% less than the UK as a whole. Currently we are marginally poorer than Spain which makes us the 2nd poorest western European country after Portugal & if either we discount the receipts & multiplier effect from the Barnet formula or wait a few years we will be the poorest. On the other hand Ireland which was in a not much better position in 1989 is now per capita the world's 4th wealthiest sizeable country.
What happened is that in 1989 they started liberalizing the economy - reducing business tax substantially & cutting regulation. This has received an undeservedly slight amount of coverage in our media & is often claimed to be put down to Ireland's independence (1921) or joining the EEC (1974) or having citizens abroad sending back money (19th Century). Since their spectacular growth of up to 9% per annum was first measured in 1991 I think the cause is fairly obvious. Note that this achievement has not been made by 5 year plans or starving the peasantry to buy machine tools or building nuclear power stations or any major sacrifice (although the politically correct brigade are now sacrificing their pubs).
This motion was designed to gently start things here going in the same direction.
(i) is designed to put cutting red tape on every MSP's agenda. I am not one of those who believe MSPs are lazy or in it for themselves - it might be better if they were not so hard working. Those who enter Holyrood want to achieve things & the traditional way of doing so is to pass a law or regulation. Unfortunately all such have side effects & when taken together can produce an impenetrable hedge of regulation. Setting up a commission to cut regulation is handing the MSPs pruning shears & giving them a job to do.
(ii) Small companies are far more innovative than large ones - this has been proven time & again. On the other hand they don't have as large legal depts. By taking on the legal burden of securing patents worldwide we could encourage innovative small businesses here & in the long term it would be repaid manyfold.
(iii) See the building motion for arguments.
(iv) Corporation tax is actually a reserved matter but I have no doubt that if we went to Westminster & offered to pay Scotland's share of this out of our current grant (& the Treasury experts were to assure Gordon Brown that this would have a net positive effect on our & therefore 8% of the UK economy) he would accept. Assuming that our corporation tax is, like our income tax, 7% of the UK's a 50% cut would cost a bit over 1 billion. This would cause some pain but without it the programme is just waffle. This is the only part that costs serious money, cutting regulations actually saves it.
(v) Obvious
(vi) Basically Jim would have to stand up in Parliament & accept plaudits or brickbats on how we are matching our targets. Concentrates the mind wonderfully.
(vii) This is a self denying ordinance not to kill the goose after it starts laying. Currently an undertaking not to increase industry taxes by more than 1% costs us nothing. With the economy growing at roughly that rate, we can't anyway. While such a party promise cannot be legally enforced parties do not like to be seen to openly lying. This would help to create an air of business confidence in our long term future & a justified confidence if it was kept.
Conference notes:
1 the importance of creating an environment favourable to business in Scotland.
2 the key long term role that sustainable economic growth must play in ending poverty.
Conference therefore calls on the Scottish Executive to
(i) set up a Parliamentary Committee charged with actively reducing the burden of legislation on business, particularly small businesses
(ii) provide special assistance to individuals & small businesses seeking to register international patents & copyright
(iii) ease building & zoning regulations outside conservation areas
(iv) make a substantial reduction to corporation tax in Scotland
(v) target skills training on areas of high unemployment
(vi) benchmarking growth in Scotland against growth in the UK as a whole & in other OECD countries
(vii) undertaking not to increase the real tax take on business by more than 1% per annum until growth has exceeded the average of the UK & OECD
Scotland's economy is in serious trouble. We are consistently growing at at least 1% less than the UK as a whole. Currently we are marginally poorer than Spain which makes us the 2nd poorest western European country after Portugal & if either we discount the receipts & multiplier effect from the Barnet formula or wait a few years we will be the poorest. On the other hand Ireland which was in a not much better position in 1989 is now per capita the world's 4th wealthiest sizeable country.
What happened is that in 1989 they started liberalizing the economy - reducing business tax substantially & cutting regulation. This has received an undeservedly slight amount of coverage in our media & is often claimed to be put down to Ireland's independence (1921) or joining the EEC (1974) or having citizens abroad sending back money (19th Century). Since their spectacular growth of up to 9% per annum was first measured in 1991 I think the cause is fairly obvious. Note that this achievement has not been made by 5 year plans or starving the peasantry to buy machine tools or building nuclear power stations or any major sacrifice (although the politically correct brigade are now sacrificing their pubs).
This motion was designed to gently start things here going in the same direction.
(i) is designed to put cutting red tape on every MSP's agenda. I am not one of those who believe MSPs are lazy or in it for themselves - it might be better if they were not so hard working. Those who enter Holyrood want to achieve things & the traditional way of doing so is to pass a law or regulation. Unfortunately all such have side effects & when taken together can produce an impenetrable hedge of regulation. Setting up a commission to cut regulation is handing the MSPs pruning shears & giving them a job to do.
(ii) Small companies are far more innovative than large ones - this has been proven time & again. On the other hand they don't have as large legal depts. By taking on the legal burden of securing patents worldwide we could encourage innovative small businesses here & in the long term it would be repaid manyfold.
(iii) See the building motion for arguments.
(iv) Corporation tax is actually a reserved matter but I have no doubt that if we went to Westminster & offered to pay Scotland's share of this out of our current grant (& the Treasury experts were to assure Gordon Brown that this would have a net positive effect on our & therefore 8% of the UK economy) he would accept. Assuming that our corporation tax is, like our income tax, 7% of the UK's a 50% cut would cost a bit over 1 billion. This would cause some pain but without it the programme is just waffle. This is the only part that costs serious money, cutting regulations actually saves it.
(v) Obvious
(vi) Basically Jim would have to stand up in Parliament & accept plaudits or brickbats on how we are matching our targets. Concentrates the mind wonderfully.
(vii) This is a self denying ordinance not to kill the goose after it starts laying. Currently an undertaking not to increase industry taxes by more than 1% costs us nothing. With the economy growing at roughly that rate, we can't anyway. While such a party promise cannot be legally enforced parties do not like to be seen to openly lying. This would help to create an air of business confidence in our long term future & a justified confidence if it was kept.
Thursday, June 19, 2014
Going Beyond Maurice Saatchi's Cutting Corporation Tax Idea
Maurice Saatchi has produced for the Centre For Policy Studies (and implicitly for the Tory Party) a proposal to abolish Corporation Tax for all but the 10% of largest companies and also abolish Capital Gains Tax for the same people. Saying
"The Policy outlined in this document will:
abolish Corporation Tax for 90% of UK companies
reduce the deficit faster than predicted by the OBR
expand employment faster than predicted by the OBR
increase competition and challenge Cartel Capitalism
let millions of people grow tall.
These millions of individuals will enjoy:
the opportunity to say “I am the captain of my ship”
more money
more freedom
the first step on The Road from Serfdom.
The nation as a whole will benefit from:
a change in culture as big as “Own your own Home” in the 1980s
greater economic growth and lower unemployment than forecast by the OBR
more competitive market places
more freedom and independence from Big Government and Big Companies."
I have been pushing for CT cuts since before I started this blog in 2004. Basically following the example of Ireland where they cut CT, in a series of steps to 12.5%, and reduced regulation, particularly on housebuilding and achieved a 7% average growth rate.
So what do I think of Saatchi's slightly different proposal? It is an improvement. His is costed at £10.5 bn. Mine of cutting all CT by slightly more than half would cost just over a billion more. Not much difference. However by concentrating it all on smaller companies he gets some advantages - smaller companies provide more employment growth; smaller companies tend to be more innovative, until they grow into bigger companies; smaller companies have more difficulty borrowing so profits are more important for expansion.
He also has the advantage of being able to run it through an economic model. Lets take advantage of that.
The conclusion is that this £10.5 bn cut would increase growth by about 0.8%, though not in the first year because the investment has to work through. That means that by the end of a 5 year Parliament that growth would have replaced all that tax cut. Saatchi says that this 0.8% estimate is "conservative" and I agree. Indeed that is 1 of 3 reasons I believe the position is much better than he offers:
1 - Irish growth was 7% - 4.5% better than ours. Even if we assume more than half was due to the regulatory cuts (not the common feeling but probably true) and that, because Ireland is so much smaller than us, having lower taxes opened them up to proportionately more investment than us we still come out with the growth potential being around twice the 0.8% given. Also Irish growth did not take a year to take off and this is reasonable if investors see an improved investment opportunity - they will not wait, but start investing immediately, if they can.
2 - Increased national debt is only a problem in relation to the size of the economy. If we have growth of an extra 0.8% in the economy, debt can increase the same without making payment more difficult. Indeed if the size of government is unaltered there is actually proportionately more uncommitted money in the economy, though this is only a marginal effect.
Our current national debt is £1.4 trillion so 0.8% is £11.2 bn, just slightly above initial and maximum borrowing.
3 - If you have a growing economy you need to increase the money supply to keep prices stable. Money in UK circulation is rather larger than 1 year's gdp. In fact it was £2,200 bn in 2010 - presumably about £2,400 bn now. So an extra unexpected 0.8% growth means we can and should print £19 billion extra.
--------------------
This is not estimating conservatively but it is the realistic best estimate and if we don't do it there is no reason to believe reality will be conservative either.
So clearly we should go with this asap.
I would go further - promise that the take on CT and other business taxes will not be allowed to rise - if the economy grows, as it will, increasing the tax take, we will raise the level at which CT comes in (and when it is fully abolished, business rated and other such taxes). This means investors can look forward to a stable profitable investment, which is all they need.
--------------------
But I would like to see this as merely the start.
The formula for economic growth is: Economic Freedom + Cheap Energy
Low business tax is only part, the smaller part, of economic freedom. The greater part is not having parasitic state regulation. At least tax money goes back into the economy, albeit in less efficient ways and excluding the cost of government taxing and returning it. Wealth destroyed by regulation, for example 98% of the cost of electricity, is gone forever.
So we should should cut regulations wherever possible. As a minor effect that also cuts government spending a bit - it costs government all of 1/20th, to regulate, of what it costs the productive economy to be regulated.
75% of housing cost is regulatory - 34% X 75% = 25.5%
(I assume this includes heating it)
The EU regulations come to another 5%
(assuming the cost is equally borne by the people as by the government sector which is an optimistic assumption)
Remaining portion of income that goes to the value of what we actually choose
That 69.5% is, in turn reduced proportionately by all the other factors. Take off commercial building costs (est 2.5%), electricity charges through the rest of the economy (est 2%),accountancy (7.5%), child care (est 2.5%), assorted other (est 10%)
Therefore percentage of income we nominally get to spend which we actually get in our pockets & spent on the product not the surrounding regulation
But if the regulatory part of economic freedom costs us more than the tax part the other side of the equation, cheap energy has even more potential. Roger Helmer has written of the advantages of letting decisions on electricity be made on economic not ideological grounds.
The correlation between growth in energy use and in gdp is undisputable.
It has been calculated and indeed is undisputed that app 98% of the cost of producing electricity here is governmental parasitism.
Nuclear is currently 40% of the average cost of our power basket.
China is building at 0.27 our costs.
Because China is building in three years and us in ten we have seven years foregone income while paying interest – assuming the normal 10% return that is 1.10^7 = 1.95
Assume China is not entirely without state parasitism – say 10%
VAT and carbon levies 20%
How much could cost be reduced if it was allowed to mass produce reactors - three fold seems a conservative estimate.
60% X 0.27 X 1/1.95 X 90% X 1/1.20% X 1/3 = 0.0208 or 2.08% of current costs.
97.92% parasitism.
Major reductions, not quite as major, could be done by allowing the market to produce shale gas. Any reduction on electricity costs, not just one as major as this, if the laws of supply and demand work, would produce a many fold increase in energy use and therefore a many fold increase in gdp.
Indeed I have previously proposed a 24 point programme to the world's fastest growth, which includes my original CT cutting proposal, and it would work. Theoretically we might expect most of the proposals to increase growth by about an average of 2% a year, Some more, some less.
In practice we might be limited to a bit above the 20% growth Guandong province in China managed for years. Certainly the theoretical maximum, if we make growth our "Number one priority" (Scottish labour leader Jack McConnell promising at 2 elections - he knew what people want even if he lied about giving it) cannot be lower than the actually achieved maximum.
=================================
Saatchi's proposal is a very good one, well thought out and verified. It is a small fraction of our potential.
"The Policy outlined in this document will:
abolish Corporation Tax for 90% of UK companies
reduce the deficit faster than predicted by the OBR
expand employment faster than predicted by the OBR
increase competition and challenge Cartel Capitalism
let millions of people grow tall.
These millions of individuals will enjoy:
the opportunity to say “I am the captain of my ship”
more money
more freedom
the first step on The Road from Serfdom.
The nation as a whole will benefit from:
a change in culture as big as “Own your own Home” in the 1980s
greater economic growth and lower unemployment than forecast by the OBR
more competitive market places
more freedom and independence from Big Government and Big Companies."
I have been pushing for CT cuts since before I started this blog in 2004. Basically following the example of Ireland where they cut CT, in a series of steps to 12.5%, and reduced regulation, particularly on housebuilding and achieved a 7% average growth rate.
So what do I think of Saatchi's slightly different proposal? It is an improvement. His is costed at £10.5 bn. Mine of cutting all CT by slightly more than half would cost just over a billion more. Not much difference. However by concentrating it all on smaller companies he gets some advantages - smaller companies provide more employment growth; smaller companies tend to be more innovative, until they grow into bigger companies; smaller companies have more difficulty borrowing so profits are more important for expansion.
He also has the advantage of being able to run it through an economic model. Lets take advantage of that.
The conclusion is that this £10.5 bn cut would increase growth by about 0.8%, though not in the first year because the investment has to work through. That means that by the end of a 5 year Parliament that growth would have replaced all that tax cut. Saatchi says that this 0.8% estimate is "conservative" and I agree. Indeed that is 1 of 3 reasons I believe the position is much better than he offers:
1 - Irish growth was 7% - 4.5% better than ours. Even if we assume more than half was due to the regulatory cuts (not the common feeling but probably true) and that, because Ireland is so much smaller than us, having lower taxes opened them up to proportionately more investment than us we still come out with the growth potential being around twice the 0.8% given. Also Irish growth did not take a year to take off and this is reasonable if investors see an improved investment opportunity - they will not wait, but start investing immediately, if they can.
2 - Increased national debt is only a problem in relation to the size of the economy. If we have growth of an extra 0.8% in the economy, debt can increase the same without making payment more difficult. Indeed if the size of government is unaltered there is actually proportionately more uncommitted money in the economy, though this is only a marginal effect.
Our current national debt is £1.4 trillion so 0.8% is £11.2 bn, just slightly above initial and maximum borrowing.
3 - If you have a growing economy you need to increase the money supply to keep prices stable. Money in UK circulation is rather larger than 1 year's gdp. In fact it was £2,200 bn in 2010 - presumably about £2,400 bn now. So an extra unexpected 0.8% growth means we can and should print £19 billion extra.
--------------------
This is not estimating conservatively but it is the realistic best estimate and if we don't do it there is no reason to believe reality will be conservative either.
So clearly we should go with this asap.
I would go further - promise that the take on CT and other business taxes will not be allowed to rise - if the economy grows, as it will, increasing the tax take, we will raise the level at which CT comes in (and when it is fully abolished, business rated and other such taxes). This means investors can look forward to a stable profitable investment, which is all they need.
--------------------
But I would like to see this as merely the start.
The formula for economic growth is: Economic Freedom + Cheap Energy
Low business tax is only part, the smaller part, of economic freedom. The greater part is not having parasitic state regulation. At least tax money goes back into the economy, albeit in less efficient ways and excluding the cost of government taxing and returning it. Wealth destroyed by regulation, for example 98% of the cost of electricity, is gone forever.
So we should should cut regulations wherever possible. As a minor effect that also cuts government spending a bit - it costs government all of 1/20th, to regulate, of what it costs the productive economy to be regulated.
75% of housing cost is regulatory - 34% X 75% = 25.5%
(I assume this includes heating it)
The EU regulations come to another 5%
(assuming the cost is equally borne by the people as by the government sector which is an optimistic assumption)
Remaining portion of income that goes to the value of what we actually choose
100% - 25.5% - 5% =69.5%
That 69.5% is, in turn reduced proportionately by all the other factors. Take off commercial building costs (est 2.5%), electricity charges through the rest of the economy (est 2%),accountancy (7.5%), child care (est 2.5%), assorted other (est 10%)
Total 24.5%
Therefore percentage of income we nominally get to spend which we actually get in our pockets & spent on the product not the surrounding regulation
69.5% X (100% - 24.5% = 52.5%
But if the regulatory part of economic freedom costs us more than the tax part the other side of the equation, cheap energy has even more potential. Roger Helmer has written of the advantages of letting decisions on electricity be made on economic not ideological grounds.
The correlation between growth in energy use and in gdp is undisputable.
It has been calculated and indeed is undisputed that app 98% of the cost of producing electricity here is governmental parasitism.
Nuclear is currently 40% of the average cost of our power basket.
China is building at 0.27 our costs.
Because China is building in three years and us in ten we have seven years foregone income while paying interest – assuming the normal 10% return that is 1.10^7 = 1.95
Assume China is not entirely without state parasitism – say 10%
VAT and carbon levies 20%
How much could cost be reduced if it was allowed to mass produce reactors - three fold seems a conservative estimate.
60% X 0.27 X 1/1.95 X 90% X 1/1.20% X 1/3 = 0.0208 or 2.08% of current costs.
97.92% parasitism.
Major reductions, not quite as major, could be done by allowing the market to produce shale gas. Any reduction on electricity costs, not just one as major as this, if the laws of supply and demand work, would produce a many fold increase in energy use and therefore a many fold increase in gdp.
Indeed I have previously proposed a 24 point programme to the world's fastest growth, which includes my original CT cutting proposal, and it would work. Theoretically we might expect most of the proposals to increase growth by about an average of 2% a year, Some more, some less.
In practice we might be limited to a bit above the 20% growth Guandong province in China managed for years. Certainly the theoretical maximum, if we make growth our "Number one priority" (Scottish labour leader Jack McConnell promising at 2 elections - he knew what people want even if he lied about giving it) cannot be lower than the actually achieved maximum.
=================================
Saatchi's proposal is a very good one, well thought out and verified. It is a small fraction of our potential.
Labels: British politics, economics, UKIP, UKIP Policy papers
Wednesday, April 14, 2010
UKIP MANIFESTO - SHORTENED
Some quotes from UKIP's Manifesto since you wont be seeing much MSM coverage:
"Britain now gives £16.4bn gross p.a in cash to Brussels (£45m a day). Our net
contribution amounts to £6.4bn p.a., which will rise to more than £10bn with the loss of our rebate. Including indirect costs such as red tape, the true cost of the EU to the UK is estimated at up to £120 billion a year...(1)
-A BBC Politics Show poll in 2009 showed 55% want out of the EU. In 2008 an ITV Luton referendum showed 54% wanting to leave." p2
"· Introduce a flat tax which will make all taxpayers better off and take a further
4.5 million lower paid workers out of income tax altogether. The flat tax will merge existing income tax bands and Employees’ National Insurance contributions into a single rate of31%, starting at that £11,500 threshold....
· Stimulate job creation by phasing out Employers’ National Insurance (the ‘tax on
jobs’) over a five-year period (20% reduction p.a.). The revenue will be recouped either as PAYE tax, corporation tax (2), sales tax revenue, or by the reduced need for State welfare
· Recognise the dangerous levels of national debt and accept there is no alternative to major cuts in government spending."
-Aim to reduce the public sector to the size it was in 1997, cutting many unnecessary
quangos and non-jobs over five years. The goal is to exchange two million public sector jobs for one million new skilled jobs in manufacturing and related services and at least one million additional jobs created as a result lower personal taxes and reduced business taxation and regulation,
· Stop the tax and welfare system penalising married and unmarried couples
- Require the BoE to enforce a rigid division between retail banks and investment banks (where much instability has occurred) based" p3 & 4
"A 25-year programme of building nuclear power stations that will provide Britain with 50% of its future electricity demand. This will cost on average of £3.5 billion p.a. (3)...
A prison building programme with a particular emphasis on modern off-site manufacture (4)" p4
"· End mass, uncontrolled immigration. UKIP calls for an immediate five-year freeze on immigration for permanent settlement. We aspire to ensuring any future immigration does not exceed 50,000 people p.a.
· Regain control of UK borders. This can only be done by leaving the European Union ... There can be no question of an amnesty for illegal immigrants." p5
"end the scandal of early releases and weak sentencing. This will cost approximately £2bn p.a. in contrast to the cost of crime, estimated by the Home Office at £45bn p.a.
· Rebalance the law to protect residents who seek to defend their own homes, families or property against intruders
· Introduce a ‘three strikes and you’re out’ policy
· Allow binding national referenda on controversial public law and order issues" p6
"· Spend an extra 40% on defence annually, another 1% of GDP
· Expand the Army by 25% to 125,000 personnel and double the size of the Territorial Army
· Reappraise our operations in Afghanistan to create a single, clear and achievable
mission or seek to negotiate a withdrawal
· Cut MOD bureaucracy, which has one civil servant for every two military personnel (5)" p7
"· Put medical staff back at the heart of the NHS, replacing bureaucrats and managers. Franchises will require clinically-trained Matrons to run hospitals, taking a dominant role on wards and primary responsibility for hospital cleanliness" p7
"offering all parents ‘School Vouchers’. The vouchers will be equivalent to the average cost of State schooling and follow the child to the school of the family’s choice, transferable to State, private or faith schools" p8
"Bring generous unfunded public sector final salary pensions back into line with typical private pension provision" p9
"The UK’s current welfare system is ridiculously complicated and requires an army of bureaucrats to administer. There are more than 70 separate benefits, each requiring masses of forms and helping to entrench dependency...
· Roll the mass of existing benefits into simpler categories, while ensuring every UK citizen receives a simple, non-means tested ‘Basic Cash Benefit' ...until their wages reach UKIP’s proposed £11,500 personal allowance so they can take jobs without being heavily penalised by the system" p10
"UKIP will seek to establish a Commonwealth Free Trade Area ... a CFTA would account for more than 20% of all international trade and investment, facilitating annual trade exchanges worth more than $1.8 trillion and direct foreign investment worth about $100 billion." p10
"We called for a rational, balanced approach to the climate debate in 2008, before the extensive manipulation of scientific data first became clear.
· Increase nuclear power generation to provide up to 50% of our electricity needs. Because Britain’s domestic energy plants are ageing and renewable energy sources have been shown to be unreliable, UKIP will pass hybrid Acts of Parliament to accelerate the planning process and allow old reactors to be replaced (3)
· Reduce environmental bureaucracy to a minimum - consistent with good practice and international standards" p11
"· Invest an extra £3 billion p.a. in the UK’s transport infrastructure ...
· Invest in three new 200mph plus high-speed rail lines" p11
"· Introduce ‘Direct Democracy’ whereby 5% of the national or local electorate can demand a binding referendum on any issue...
· Introduce an element of proportional representation in national and local elections. UKIP favours an electoral system based on Alternative Vote Plus so that constituency MPs have to earn at least 50% of the vote (as in Scottish Parliament and Welsh Assembly elections)...
· Retain devolved national assemblies but replace the representatives with Westminster MPs from the same nation. (6)
· Require UK schools to teach Britain’s
contribution to the world, including British inventions"
· Tackle extremist Islam by banning the burqa or veiled niqab in public buildings and certain private buildings(7)"p13
"· Support GM foods research and require all imported produce to be labelled so consumers can make informed choices. In the meantime, we will continue to oppose production of GM foods and be open to evolving scientific advice (8)...
· Reassert our territorial rights, reclaim our fishing grounds, restore our fishing fleet and support our fishing industry for future generations" p14
"the smoking ban. UKIP supports designated smoking rooms in pubs, clubs and public buildings" p15
This is a radical programme which would certainly get us not just out of recession but into growth. Particular comments:
1 - The EU Enterprise Commissioner has said EU regulations cost 5.5% of GNP (£80 bn) add the £10bn paid & not returned comes to £90. I assume they believe The Commissioner is underestimating & that the returned money is mainly wasted. I think it should have been phrased "between £90 & £120 bn, all governments having refused to make a precise calculation"
2 - I regret this is the only mention of corporation tax (though in context if they make the promised cuts they will not have to raise it). Cutting CT is what got the Irish economy 7% growth & similar cuts in the UK would have a similar effect on growth.
3 - They could do this for less. If allowed & given a sensible regulatory framework the market would happily build them without charging. For that cost we could build a reactor manufacturing centre which could mass produce turnkey operation nuclear plants which would not only produce most of our power very cheaply but establish a massive export market. Westinghouse's AP100 is already available in quantity at under £1 bn each so £87.5 billion could provide more than all of our current usage. This commitment, while very radical by the standards of other parties is technically timid.
4 - The only mention of off off site (ie mass produced) building. By comparison their official housing policy is unadventurous - this may be because UKIP members vary between libertarians & old conservatives.
5 - Defence spending should be aimed much more at technological innovation - this policy is to much fighting the last war. However having more soldiers than MoD clerks is radical, if only by the standards of the others. I a, not happy about leaving Afghanistan quickly but UKIP is quite right to say that the mission nmust be clear. We went in originally to get bin Laden, who I believe is dead & stop al Quaeda & that should be our only purpose.
6 - This is not ending devolution & should not be described by the media as such. It is rolling all 160 MSPs & MPs into 50 odd jobs getting rid of most of them (oh dear, too bad, never mind) but all elected by the Scottish Parliament system & leaving them perfectly capable of doing their jobs in both Holyrood & Westminster. Indeed Holyrood is notoriously underworked giving great incentive for idle hands to come up with new things to ban). As a long time supporter of devolution I have no problem with this.
7 - This has had a lot of media coverage about it being a total ban but it is no moreso than the smoking ban having made all smoking illegal
8 - I regret the partial bowing to unjustifiable scaremongering against GM foods. Oh well they are still much more rational than their competitors.
Labels: British politics, election, Fixing the economy
Saturday, June 06, 2009
ISLAY DEVELOPMENT CORPORATION CO-OPERATIVE
Scottish island, known as "The Queen of the Hebrides" (Banrìgh nan Eilean), is the southernmost island of the Inner Hebrides. It lies in Argyll just to the west of Jura and around 25 miles (40 km) north of the Irish coast, which can be seen on a clear day.
Islay is the fifth largest Scottish island and the sixth largest island surrounding Britain.
Islay has just over three thousand inhabitants. It has a total area of just over 600 square kilometres (239 square miles).
Long long ago Islay was the capital of the Lordship of the Isles. It is 8% larger than the Isle of Man whose, prosperous, population is 76,000, so clearly there is wasted potential.
I have previously proposed the Scottish Tunnel Project similar to the Norwegian activity. This would mean cutting road tunnels to the larger of the Scottish islands & other needed links & if done at Norwegian costs should be far less expensive than the single new Forth bridge proposed. This would make it an 80 mile drive rather than a 200 mile ship voyage from Glasgow. One way to fund this would be by a levy on land sales in places where improved access means land prices rise.
I want to propose using this as an opportunity to do much more. Potentially at least not quite the Hong Kong (427 sq mi) of Europe but certainly a centre of human progress. Set up a Development Corporation as has been done successfully in Scotland before. Give it a charter like a normal commercial shareholding company owned 10% by the current population & 90% by government which shall sell off not more than 5% & not less than 2% on the open market annually. To stop it being simply a commercial company there should be a 10% dividend bonus & a 3 times voting share to residents up to 0.1% of the total. Government should be forbidden to use its voting share except to veto asset stripping or non-commercial decisions. Getting the first CEO right is vital - I suggest headhunting the youngest engineer on the board of Exxon, Richard Rogers, Disney or Singapore's government, with share options.
The corporation should also be responsible for maintaining local authority infrastructure & should have not only the right to create by-laws but to veto many central government regulations. It should also be given a 25 year holiday from corporation tax & capital gains/death duties. Though this would require Westminster as well as Holyrood legislation it would cost them nothing since corporation tax on Islay is not large currently. The corporation should be able to buy all agricultural & absentee owned land at the current market rate & on selling it include a requirement for continued payment of a Land Value Tax. The LVT requirement would also apply to non-agricultural land so long as the owners agree - any that don't would not have to pay LVT but would not receive shares in the corporation. This would also allow the ending of any council tax. Finally the corporation would have a duty to invest 10% of its profits, year on year, in scientific research & a University with 1/3rd of that research having to be for research attempting to break current scientific paradigms. It would also have to pay off the cost of the tunnel from the Kintyre peninsula.
Certainly not a libertarian society because the governing body has a lot of control. Nor a warm body democracy but a mixture of a corporation, a wealth creating concept that has worked since the Swedish King chartered the first one in 1347. & a Co-Operative in which electors can opt out of responsibility by selling their shares (or get more by buying more). This last element would weaken one great problem of democracies - that people have an incentive to use the government to take from the creators to provide circuses for the voters. I would not like this introduced now everywhere but think it is a useful social experiment that can be tried here, particularly since, if the community grows as I think it could, it would have a population which had voluntarily chosen to move to such a society.
If it worked we would see the speedy building of holiday communities, probably by prefabricated means & certainly without the 75% of UK housing cost that is regulatory. That would mean land values climbing which is what would get the Development Co-operative out of the red. The island's land area comes to 150,000 acres so land prices would only have to go up by £6,000 an acre to raise £1 billion. The lack of taxes & the extra voting power would encourage rich settlers. The money put into research & a university would encourage high tech start ups. While, even with the tunnel, it would be more isolated than most of Britain this also has the advantage that, combined with the power to create local by-laws, it could keep out the eco-terrorists who are making life hell for so many scientists. That plus the pure physical beauty of the place should make it very attractive to a significant number of the world's best & brightest.
I would like see this having similarities to Walt Disney's original concept of Epcot as a Community of Tomorrow. See also. After he died the suits turned it into just another roller coaster. Lets see it as a place where the likes of Peter Duesberg & the cold fusion scientists are be able to do the scientific testing which would prove or disprove their theories without interference from politicians - that is why I put in the bit about 1/3rd of scientific grants having to go to contrarian science - that is actually how all science is supposed to be done but rarely is. Probably more would be disproven than proven but "proving" originally meant testing (still used for "gun proving") & the name change shows the inevitable social movement from "testing" to "finding evidence to support". Such change is the death of science. Also if you want to build a world class scientific centre you have to do something nobody else is (& some of it has to work) & not having a reputation to lose may be an positive benefit.
Walt Disney's original EPCOT 
