Archive for novembre, 2013

Cameron’s Negotiation With EU (for comment)

Vendredi, novembre 29th, 2013

It has been suggested that I write about the concessions Cameron should attempt to wrest from the European Union, as a preliminary to the holding of a referendum on EU membership.

This is a very difficult challenge. Cameron has up till now been very circumspect in revealing his intentions in this respect because, it is said, they are going to be regarded as too minimalist to satisfy his backbenchers and too minimalist to counter the threat from the UKIP in the 2015 elections. These considerations may result in his waiting till after the election to reveal his hand.

What are the areas in which he is most likely to make his demands?

1) A limitation of the strictures regarding Human Rights? The Government has probably already achieved all it can expect in this area.

2) Protection against measures limiting the freedom of the City’s financial market, on which Paris and Frankfurt cast envious eyes, by, for instance, requiring a universal vote so that Britain would have a veto to exercise.

3) Greater freedom to institute measures limiting immigration. This is probably the issue of greatest concern to the electorate and the one to which other countries would be most responsive. His first step is to make welfare measures unavailable to people immigrating with too inadequate financial prospects, aimed chiefly at Rumanians and Bulgarians.

4) Surely, restrictions of the powers of the Brussels administration to impose bureaucratic regulations in the spheres of labour laws, food standards etc. which are probably the major cause of public dissatisfaction with membership of the EU.

5) The expansion of the EU mandate to cover free exchange of services, not just goods.

Cameron is probably caught in a real dilemma. There is little sympathy with Britain’s cause among other members of the EU. Merkel has expressed some feeling of common cause and the Netherlands have evinced some desire to limit Brussels powers but they only want to limit further extension of the powers, not to carry out major revisions.

There is little sympathy among Britain’s EU partners for its demands for yet more exceptionalist treatment. And why would they want to satisfy Britain’s demands for it, knowing that she may subsequently choose to leave the Union anyway?

There is one possible area for hope. There is a desire among countries led by France to carry out greater consolidation of the Union, probably necessitating a revision of the Treaty. This would require a universal vote, which would greatly strengthen Britain’s bargaining position.

One last thought. Surely the one most vital consideration is that of trade, remembering that 50% of our trade is with Europe. It is significant that virtually all of our captains of industry are opposed to our leaving the EU. Some people claim it would be “a gift to the French” as it would discourage foreign investment in Britain by US and Asian investors, if Britain lost assured access to the European markets.

Michael Webster

Sharing Tax Benefits of Growth with “Squeezed Middle”

Mardi, novembre 19th, 2013

Increasing income inequality in the UK, together with policies to protect low-income families and the lowering of tax rates on high earners to encourage less tax avoidance, have resulted in the top 50% of tax payers now contributing over 90% of total income tax collected. Indeed the top 1% (those earning over £160,000 per year) pay around 30% of total income tax and the top 10% almost 60%. These high earners are, therefore, funding by far the largest proportion of Britain’s public services.

Yet the opposition Labour party has threatened to return the top rate of income tax back to 50% (from the current 45%) should it be returned to power at the next General Election in May 2015. At the other end of the scale, the governing Coalition of the Conservative & Liberal Democrat parties is also progressively increasing the tax-free allowance to some £10,000 or more before 2015.

However, with the economy now finally developing a solid pattern of growth, in good time for the Conservative party to benefit at the 2015 election, where is the associated policy to demonstrate sharing the financial benefit of growth with a broader part of the electorate e.g. the “squeezed middle” income earners? Raising the higher (40%) tax rate income threshold is one answer, if the projected overall increase in tax returns from growth will allow, although there is still the need to pay for the costs associated with any “green” taxes diverted from the energy bills of hard-pressed British consumers.

Boris Johnson Backs UK Living Wage

Jeudi, novembre 7th, 2013

Having decided that it has lost the argument to the governing Coalition on competence in managing the British economy as it returns to growth, the opposition Labour party has switched its attack to the cost of living crisis for the “many” who, unlike the rich in society, are not sharing the benefits of growth. The opposition leader’s charge is that the link is broken between growth and living standards in what he described as a Wonga (payday loan) economy, symbolizing a cost of living crisis for poorer families. This has received popular support and represents dangerous ground for the government which, in wanting to be seen to be doing something, is moving into an area where Labour is currently strong.

The government under opposition pressure had to respond to the freeze on energy (electricity) prices proposed by Labour e.g. by a planned review of “green” energy subsidies included in the price to the consumer as well as the overall competitiveness of the energy market. The water companies have also been asked to review any price increases they might have been planning to implement.

Overall public perception that something is really being done about the cost of living remains important, however, and this is where the popularity of the charismatic Mayor of London Boris Johnson can play a major role e.g. in demonstrating his practical support for paying the living wage. It is appropriate that London which is experiencing first and disproportionately the benefits of growth in the economy, should be taking the lead (as demonstrated by the Mayor) in encouraging more and more employers to pay the living wage rate and help households cope with rising bills. Quoting Boris Johnson, paying the living wage makes “pure economic common sense” (less staff turnover and more productive) although he does not think it should be compulsory.

Comparing the additional peer and customer pressures on employers to voluntarily pay the living wage when their business allows, with the more prescriptive policy of Labour to legislate through a tax credit, the latter would place an additional administrative burden on HMRC to ensure compliance. This Labour approach also brings to mind the tax credits of Labour Chancellor Gordon Brown which boost the wages of the lower paid but again effectively provide a subsidy for employers via the tax payer. Finally, making the payment of the living wage compulsory through legislation (as for the minimum wage) could lead to layoffs of workers by firms still not able to absorb the additional wage costs.