That's fucking stupid

Posts Tagged ‘tax’

Roberton Williams of US thinktank the Tax Policy Center, on fines for those not covered by health insurance under the proposed US healthcare system:

“The fact that it is imposed on people and they have no choice in paying it, and the fact that it’s administered through the tax system all make it look like a tax”

This is being said, without a hint of irony, in a country where car insurance is compulsory but health insurance isn’t.

It’s no big deal, it’s natures way.

Some twat in Scotland has proposed that a tax should be levied on chocolate; the BBC HYS forum is currently red hot. It’s not a bad idea to do something about obesity but we are attacking it from the wrong angle, the current thinking is to tax everyone in order to waste money telling fatties that they should eat less and exercise more, all the while the fatty food companies are spending more money getting the fatties through the door and plying them with lard. We are now considering taxing everyone for eating crap in the same way that we tax smokers and drinkers, something which the tobacco industry fought by making smokes a luxury and desirable product and something the booze industry fought by lowering production costs, lowering margins and increasing volume.

So if we know that these things don’t work why are we doing them? We tax booze and fags not to lower demand but to line the coffers of the treasury so that they can offset the cost of booze and smoke related illnesses. So why not attack the costs head on rather than trying to scrabble around for the cash to pay for it? Why not just withdraw free NHS treatment for smokers, drinkers and fatties. Not only does it provide a real incentive for people to stop smoking, drinking or cramming junk down the gullets, it means that those who don’t can continue to make that choice without impacting on the rest of society. Sure a few fatties will die but they are going to die anyway and prolonging their lives is a pointles waste of time. Parents who allow their kids to become fatties can of course be prosecuted for child abuse and the kids rehomed with parents who are actually going to take care of them.

The term ‘credit crunch’ has been one of the most overused alliterations of 2008 and it would seem that after the turbulence of the last year we should be ready for the promised financial appocalypse. There is a little confusion in some parts about what it is and what it means and endless high brow discussions or dumbed down newsbeat descriptions don’t seem to have helped so here’s a really simple guide to what the credit crunch is, what it means and how long it will be bothering us for.

First off, what’s a credit crunch? Put simply it’s a lack of available credit. A little over a year and a half ago a number of large investment banks realised that the money that they had been lending wasn’t going to be recovered, this was due to a bunch of bad decisions made by a whole lot of people throughout the banking and sub prime lending industry. It’s probably the easiest bit to understand because a lot of banks lent money on mortgages to people who were never going to pay the loan back and they secured it on property that then fell in value. You’d think it would stop there with a few banks reporting losses, city bonuses being slashed but everyone else pretty much getting on with their lives.

Fast forward a few months and the big banks are still shitting themselves about their lack of cash (having lost billions) and their inability to get loans from other banks. Northern Rock did the sensible thing and asked the Treasury for a line of credit in case they needed to borrow some cash in the event that they had to pay out a lot of deposits. News of this broke thanks to the BBC and confidence in Northern Rock evaporated as customers scrambled to get their money out. This ‘run’ on the bank contributed to the collapse and analysts are still convinced that if the news had not been broken then Northern Rock would still be trading independantly.

After the collapse of Northern Rock and a similar crash in the value and confidence in Bear Stearns the banks all battoned down their hatches even more firmly; by the beginning of this year more losses were being announced by the banks and redundancies were being made. Because the banks were reluctant to lend the housing market stalled and house prices began to fall. We are still at the stage where the banks are shitting their pants worried that if they lend their millions to another bank they might not ever see it again.

By spring of 2008 the dip in the housing market and the lack of available credit is putting the stoppers on a lot of building work. Many industries rely on cheap credit rather than holding reserves of cash to invest in new projects. The mentality is that there is no point in a construction company holding millions in the bank to use to build an office block when they can borrow the money, build the office, pay back the loan with interest once the building is completed and sold. By April Persimmon, one of the largest new house builders, effectively stopped work on new projects because housing demand had slumped and credit lines had dried up.

Trouble continued over the summer and then in the autumn there were some high profile collapses of banks, all due to a lack of cash in the system.

So how did banks holding on to their money cause such a problem? The financial system is a great big merry go round. Finance has been modeled in the past using water (for example the Phillips Machine) with pipes to represent the flow of cash and chambers for the banks and institutions. Throughout the system there are leaks which represent payroll, bonuses, tax and operational costs. Money is poured in the top of the machine and it flows around between the chambers with some coming back out at the bottom for customers. When the pipes get clogged up the flow is disrupted but the leaks are still there so individual chambers which rely on a fast flow of water coming in to them may dry up very quickly.

The knock on effect of the lack of credit has been quite startling but not entirely surprising when you consider how many industries rely almost entirely on credit. Over the last few decades the mantra has been that companies should be asset and investment rich and cash poor. Why hold millions in the bank when you can invest that money and get a good return. If you need quick access to cash then the banks can always lend you some. In the water analogy it is the same as emptying your water tank into a shared reservoir that you can take from whenever you need to, the only problem now though is that the valve is jammed shut and nobody can access what water remains in the reservoir.

With no liquidity (yes, that’s why they call it that) available the knock on has been high street shops not being able to buy stock, sofa warehouses not being able to offer interest free credit and businesses across the board unable to invest in new equipment. In a bid to cut operational costs a great many companies have cut staff and that has led to a cut in consumer demand because people are feeling like they have less cash in their pockets or don’t want to make any big purchases when they think they might be next for the P45. With the banks, one of the UK’s main industries, all tighening their belts the outlook for the secondary industries that support the banking industry (IT, office supplies etc) is pretty bleak too and this will just add to the increasing tally of redundancies.

We are not the only country that is having problems, the credit crunch is a global thing, but we may be one of the worst off because we rely heavily on imports and have no discernable industries other than the financial services and banking industry.  France has agriculture and nuclear energy, Russia has fossil energy and China has manufacturing that the world relies on. Australia is teetering on the brink of recession but it will be short and shallow because the last few years, while we have been living the high life, has been spent investing in infrastructure which will help them cut imports and increase production.

The US will pull itself out of the recession with their program of job creation and investment in business, add to this the nationalism that the US and many other countries exhibit, which ensures that they buy locally or from within their own country, and the tools are there for them to work themselves out of the situation.

We don’t fare much better though. The last few decades has seen us do little more than run our infrastructure down and increase our reliance on the cash generated by the City banking industry. Nationally we rely on foreign companies for our power and no longer own our own railways (and the roads are a short hop from privatisation). The campaign to privatise our national industries, once likened to selling off the family silver, has left us with nothing. On top of this our national identity has been eroded to the point where people don’t want to ‘buy British’ for a great many reasons so we can’t hope for the same grass roots consumerism that wil save the French. We would rather buy American, French, New Zealand, Chinese or in fact from anywhere else.

So what’s the solution? Do we inject cash into the banking industry in the hope that the blockages will become unclogged? Of course not. The industry is broken and will take a while to naturally right itself. What we need is a program of nationalisation and investment in our own industries. We need to combine this with a better standard of education in useful subjects and a removal of the emphasis on soft subjects such as those related to ‘the media’. The welfare state as it stands is a broken system and all payments to job seekers need to be conditional of productive voluntary and community work, if the state is paying wages to someone then it’s fair to expect some work for that wage. Job creation will allow the government to move people from the unemployment roll onto state payroll where they can be productive to society. Strategies like this have worked in the past for us but a combination of the unions and the Tories have destroyed it over the last few decades so it’s time to try again.

If you are dumb enough to believe the Daily Mail then society is on the brink of collapse with asbo-proud hoodies loitering on every street corner sniffing grannies and robbing glue. If you read the Guardian then you will probably be queuing for the tickets to something they have told you to like, and if you read the Sun then what you are after is right here.

Regardless of your choice of newspaper or your political persuasions the view that the UK is in decline is one that is shared by many people from the retired army officers who post on the BBC Have Your Say site to the white van men who are equally racist but who are less capable of bashing their knuckles on a keyboard. Even the most progressive and liberal people will agree with the staunch socialists that Britain is a bit shit now compared to how it was a century, or even a decade ago.

New Labour, the muddy brown of the political spectrum, clearly think this country is getting a bit shit because they are constantly trying to shore up the collapse by introducing more measures to fix problems that weren’t really problems in the first place.

So here’s a thought, if the country is declining and at the same time more silly laws are being passed and more bureaucratic bullshit is being introduced to manage every day of our lives, maybe there is a connection? A hundred years ago when Britain was supposedly Great and the sun never set on the blah blah blah sorry, I drifted off there. Back when it was less shit there were also fewer laws, so it’s entirely plausible that the reason the country is so shit is that the excessive lawmaking and introduction of bureaucracy is making the country more and more shit. We have a whole heap of people in and around Whitehall who do all sorts of pointless things and never achieve anything in their careers except maybe “influencing policy”.

Simplifying government would mean we could reduce taxes or divert more funds to worthwhile public spending (depending on your political leanings). Reducing the number of different taxes we pay and simplifying the tax system could be done in a way that does not reduce overall tax revenue but reduces the bureaucratic crap that goes with administering the tax system. The government takes a swipe at our cash at every turn yet this itemized tax bill normally adds up to a similar amount for every family with a similar income. The only reason I can see for granularity in the tax system would be if we could have granularity in payments with an opt out system, so smokers who have Bupa can opt out of cigarette tax and people with private security can reduce their council tax payments in line with contributions to the police.

Of course this is never going to happen and would ultimately make the system more complicated. With a goal of simplifying government we can reduce outsourcing, dismantle the think tanks and quangos, bring the ‘agencies’ in house and give them clear and enforceable mandates and cut the number of lawyers arguing over technicalities on everything.

Many years ago I tried to explain to a bright four year old that the government takes taxes and uses them to pay for things like schools and doctors and soldiers. The hardest part to explain was that the public servants, who were paid from the treasury pot, also had to pay some of the money back in tax as he argued that they could just be paid tax free but at a lower amount and then they would not have to pay so many people to work out how much tax they need to pay.

It’s always been my opinion that if it’s hard to explain something to a child then it probably doesn’t make that much sense.

Who do they think they are? Coming over here and doing all the jobs that we are too lazy to do and paying all those taxes to prop up our society. Let’s not send them all back to where they came from.