Monday, 8 December 2008

Council spying and surveillance Britain

An interesting story was relayed to me this week which I think sadly is a further example of the erosion of civil liberties and the ever growing spying by the state.

A husband and wife who between them run two small businesses, one a nursery and the other a village newsagents. Last week, the council turned up at their private home, and demanded to search through the contents of their bins to make sure that they were not disposing of commercial waste in their domestic wheelie bin.

The officials then decanted the wheelie bin on the driveway and sifted through the contents to their satisfaction. I understand they did clean-up afterwards - after finding nothing.

What exactly were the council expecting to find? Toxic waste? Weapons of mass destruction? It's a nursery and a newsagents they run, not a chemical plant.

And if there were a few newspapers or nappies in their bin does anyone really care? No - I doubt it. Provided that they weren't throwing out more than their allotted amount.

Aside from this being a shocking waste of taxpayers' money, it is an unnecessary intrusion into the private lives of citizens. And checking on your rubbish is not the only way of the council can spy on you. If you are claiming a single occupancy discount on your council tax, the council have the right to come and search your bathroom to check you only have one toothpaste and bedrooms to confirm you don't have clothes for more than one person.

Far far too many local government and government agencies have the right to access your home without permission. And I always believed that old line from The Bill, "You ain't seeing anything without a warrant". I presume that line has now been dropped from the stock phrases...

The DNA database

A rare good piece of news came out of Europe in the last week. Two men who had taken their case to the European Court of Human Rights won their case to have their DNA deleted from the Government's national DNA database. The two men, who had the DNA sampled, one while he was a minor, were acquitted of all charges and have fought a long campaign to have the DNA removed.

The pair contend that the retention casts suspicion on people who have been acquitted or discharged of crimes, and that they should be treated in the same way as the rest of the unconvicted population.

The establishment of this database has been a stealth attack on the civil liberties of the innocent. 850,000 people are on this database who do not have a criminal record, including 40,000 children. Why should innocent persons have their DNA on a criminal records database? If the intention is to create a national database for all citizens, then that debate should be had in parliament rather than this sneaky approach.

As a result of this ruling, it is almost certain that the records of the innocent must now be destroyed, and not a moment too soon.

Sunday, 30 November 2008

Darling - "Spending spree hasn't worked and I plan more"

Never let it be said, that Darling doesn't believe in throwing more good money onto bad.

In a Guardian interview today, Darling said that "You'd be very foolish indeed to say 'job done'. We've got the Budget next year, and the pre-Budget report in 12 months time. I put more money into the reserve on Monday because I know we're almost certainly going to be doing additional things"

Well there you have it. Monday's spending spree was just the beginning.

And it's not just Darling. Peter Mandelson is apparently drawing up a list of companies that are judged 'too important to fail' and would be bailed out by the Government. If this list were to be leaked, then it would spell doom for the companies involved. I hope that if a list exists that it is not left on a train.

Taxpayers should not prop-up failing companies.

We really are looking at a return to the 70s - Tax and spend, government nationalisations, recession... I can only hope that David Cameron comes to power with the zeal that Mrs Thatcher did and reforms the failing state.

Damien Green's arrest

Damien Green's arrest for receiving leaked documents ranks as the most significant political development of the week.

The MP for Ashford and Conservative spokesman on immigration spent 9 hours under arrest - but was not charged - during which time his constituency and London homes were searched, computers and telephones were seized. In addition, his Parliamentary office was raided.

From what has come out so far, there appears no indication that this was over an alleged breach of the Official Secrets Act. Rather it was to do with an ongoing investigation in the Home Office over the leak of embarrassing documents to the Tories from a junior civil servant.

Green's 'crime' is apparently to have released the information into the public domain - information which is definitely in the public interest, and which is the Opposition's duty to release.

This is something that Oppositions have always done as the video of Gordon Brown below shows:

It's worrying for national security that on the day Mumbai was attacked by extremists, that nine anti-terrorism officers apparently have the time to search MPs houses.

But it is far more worrying for democracy that elected individuals can have their houses and Parliamentary offices raided. MPs work on confidential cases on behalf of their constituents who have the right not to have such information raided by the police.

As for who sanctioned this raid, no one is currently stepping up to take the blame. Despite Boris Johnson and David Cameron being informed, neither Gordon nor Jacqui Smith were apparently aware of the arrest. I find that inconceivable. The arrest of a shadow cabinet member and no one thought they should consult the Home Secretary? Smith has been doing the tour of the television studios this morning claming that it would be wrong to intervene in an ongoing police investigation.

But what is Smith's view and that of Gordon? Is it right that members of the official Opposition should be arrested for doing their job?

Condemnation of the action has come from across the political spectrum. David Cameron is, naturally, furious, writing in today's News of the World. But other MPs of principle are similarly enraged. Nick Clegg has been particular vocal in criticism and veteran Labour MPs Dennis McShane has said that, "... it would destroy people's belief that they could deal confidentially with their MPs about matters of concern to them." - Well said Dennis.

And while not a fan of Ms. Harman, I did think that she looked decidedly uncomfortable when interviewed on Sky News this morning, and has agreed to an inquiry, saying, "I am determined that we should protect those constitutional principles. Our democracy is important not just for electing the government, but for electing the opposition and the role of the opposition is to hold the government to account."

Tuesday, 25 November 2008

The real winners in 2008's pre budget... the banks

Once again, the banking sector is the real winner.

The VAT reduction from 17.5% to 15% was announced as being a benefit to the consumer. But the real winners are the banks. Why?

The banking and insurance sector make supplies of services that fall outside the scope of VAT. What that means, simply put, is that they supply services upon which VAT is not chargeable. But any services of goods the banks may buy from other companies, have VAT added. As a company, you can only recover VAT suffered if you are making taxable supplies.

So for the banks - VAT is a real cost to their business and a tax that they, like the end consumer, have to pay.

A 2.5% reduction is paltry to most people. But for the banks and insurance industry it is huge given the amount that they spend.

Taxpayers are still smarting from bailing out the banks, and I daresay, most would be very unhappy to hear that the banks are in line for this tax reduction.

End of New Labour

Yesterday's budget truly marked the end of New Labour. The branding exercise that made the Labour party electable has been terminated. New Labour was built designed to allay the fears of the public that Labour could be trusted to run the economy and in a series of high profile pledges, to not increase the rates of income tax.

Darling's plans for a new super-tax of 45% on earnings over £150,000 and the latest borrowing projections showing that the country is heading for debt levels of a trillion pounds have proved the old saying that all Labour chancellors run out of money, and all Labour governments bring the country to the edge of bankruptcy.

I personally never believed that New Labour extended far beyond Tony Blair. It certainly never included Gordon Brown. As chancellor, he persistently increased taxes on everyone during the last ten years. From the stealth moves - fuel duty, stamp duty, the appalling removal of the tax credit on dividends which has destroyed private sector pensions, to the more brazen moves, such as the increase in NI rates for everyone above the upper earnings maximum some years ago, here was a man who clearly believed that the state was the best spender of your money.

We all want better schools and hospitals. But the bonanza that has been delivered to the NHS and the state school system has not brought about measurable improvements. Survival rates of cancer in the UK are still well-below comparative countries in Europe. The UK has fallen down the world league table of educational attainment.

The great disappointment of Tony Blair's time as PM was that he did so little to reform public services. Oh, the money poured in. But as it was not matched by reform, much of it has been wasted.

I do hope the public wake up and realise how much has been spent, how much they have paid, and how small the improvements have been. It's time for a change and I'm looking forward to seeing Brown booted out of office.

Monday, 24 November 2008

pre Budget Report leaks and my thoughts

Today heralds the announcement of the pre-Budget Report. Darling is due to stand up this afternoon in the Commons to give details of his tax give away and the expected grim borrowing and growth projections.

I'm not sure why he's bothering, as I would have thought most MPs - like the rest of the public - could have read the budget report in the Sunday papers. This has to be the most comprehensive leaks of what is going to be in the budget EVER.

I can understand the tactical leaking of plans, especially if they are controversial, as a means of gauging the reaction of the press and the public at large. If your plans are shot-down, then you have the advantage of either denying the leaks, (and then ditching those plans), or amending them accordingly to make them more palatable.

But the leaking of the pre Budget report would appear to have little or no benefit. It's surely too late to rewrite the report once it is splashed about in the Sunday papers - the day before. All it has done is give the Conservatives and the Liberal Democrats advance notice of the contents such that they can provide a more considered response.

As for the details... well if we are to believe all of the Sunday papers, then Darling, sorry I mean Brown, is planning the following:

  • A cut in the rate of VAT from 17.5% to 15%
  • An extension of the stamp duty holiday on homes costing up to £175,000
  • An extension of the £120 rebate for basic-rate taxpayers through a rise in the personal tax allowance (this was introduced to 'compensate' the losers in the 10p tax fiasco)
  • A postponement on a planned one per cent corporation tax rise on the profits of small businesses
  • An increase in income tax rates for those earning over £150,000 per year from 40% to 45%

(There are more measures, but these are the significant economic ones. Some of the others appear to be gesture politics at their best e.g. buying back former council homes and 'measures' to ensure the banks pass on cuts in lending rates).

Let's deal with these one at a time.

VAT from 17.5% to 15%

The aim with the cut in VAT would be that it would incentivise people to spend now, prior to a likely increase in VAT later. My belief is that this is fraught with problems:

1: Businesses will face considerable costs in changing all their systems to account for the change in VAT rates. Simple businesses will find it easy, others will find it far more difficult. In addition all those 1000s of items will need to be repriced - that is, assuming the retailers pass on the savings. Are 'pound shops' going to suddenly change their prices to 97.5p? - unlikely.

2: It doesn't actually put any money back into people's pockets. To access the savings you have to spend money in the first place, and generally, the problem is that people are nervous of their future job prospects, don't have any money and actually need to pay back debt they've racked up during the last ten years. I'm not sure that it would have the desired fiscal stimulus. Most food is exempt from VAT as are children's clothes, newspapers, train fares etc.

The goods that will be affected are that new plasma TV that you were going to buy. So - instead of it being £699 including VAT it would now be £684... a £15 saving. Now if you were considering spending that much money, would your decision be affected by a £15.00 saving? Unlikely. Even on a £10,000 car, the saving would be about £220...

When the retailers themselves are having 20% off days, I think that this will have very little impact on anyone's spending plans.

And let's not forget, that it is highly likely that any additional spending will be on imports e.g. that plasma telly - and imports are going to be more expensive now anyway, owing to the weakness of the pound - note Sony's announcement earlier this week, that it is increasing prices after Christmas owing to the exchange rate movements.

Verdict: An awful lot of money to borrow to finance a tax cut that will have such a marginal effect.

Stamp duty holiday extension

Fewer are buying houses as they cannot access mortgage finance. As the rates on new mortgages taken out are now about 2% above base rates, this is going to do little to restart the housing market. The housing market will only recover when confidence returns.

Stamp duty needs to be completely revised as a tax. It is simply wrong that the rate is 1% up to £249,999 and then 3% on £250,000 and above. So if you were buying a property at £249,999, you would pay £2,499 in stamp duty. But if you bought a property at £250,000, you have to pay £7,500 in stamp duty.

If stamp duty has to be retained, and I believe that it is a major barrier to mobility in the economy, then it would surely be far more reasonable to have a graded tax - something like 1% on the first £250,000 and then 3% for values between £250,000 and the purchase price etc.

Verdict: Fairly cheap. Can't see much revenue being lost in the short-term owing to the fact that no one is buying property anyway. Tiny benefit as a fiscal stimulus.

An extension of the £120 rebate for basic-rate taxpayers

I have to agree with this. The abolition of the 10p tax rate for lowest paid was unfair and unjust. A permanent correction should be introduced.

Verdict: Fair and just. Will provide a small fiscal boost.

Corporation tax - delay in introduction of 1% increase in CT for small businesses

Incredibly marginal effect. Aids only small businesses making profits in the first place, and these enterprises are highly unlikely to change any investment decisions on the basis of such a small move. If your business had profits up to the maximum permitted to access the lower tax rate, then you'd save £3k per year in tax on profits of £300,000. That could probably just about pay for the changes to your systems to implement the VAT rate changes.

Does nothing to help small businesses that are not making profits.

Verdict: No measurable impact.

Income tax rates for those earning over £150,000 per year up from 40% to 45%

This is a deeply cynical and political move, and nothing do with economics whatsoever.

It is entirely engineered to neutralise the Tories' charge of a tax bombshell to come. Most people casually looking at the budget announcement would think, "Oh great, well those people that are 'rich' can pay for this." And that is Labour's intention - announce massive borrowing and imply they will 'soak the rich."

If this is announced this afternoon, it would be a bare-faced lie - and must be shot down by the Tories.

Raising rates of income tax on those earning over £150,000 per year would generate additional revenue (assuming those people didn't catch the next plane out) of £2bn. Sounds great. But the VAT proposal alone will cost £12.5bn, so there's a massive hole in the public finances which will need filling in after the election.

Verdict: No one should be under any illusion - taxes will rise in the next two years. And it won't be the rich who are paying it back. It will be everyone.

Janet Daley has an excellent piece in today's Telegraph. Her conclusion is simple, and I agree with it -

The Government is borrowing too much because it is costing too much because it is doing too much.