For those who want to stop no deal, Jeremy Corbyn is the only hope

www.theguardian.com/commentisfree/2019/oct/04/jeremy-corbyn-mps-labour-leader-legitimacy

Many MPs are in denial, refusing to accept the Labour leader’s legitimacy. Yet he is the only one who can prevent Boris Johnson trashing Britain

Departing Tory leaders have developed an odd and presumptuous habit of demanding that the leader of the opposition resign too. “As a party leader who has accepted when her time was up,” Theresa May told Jeremy Corbyn in her final prime minister’s questions, preparing to leave her party to Boris Johnson and the country without a prayer, “perhaps the time has come for him to do the same.”

In 2016, David Cameron – who had called a referendum lost it, only to then break his promise and abandon the country in a moment of self-inflicted crisis – suggested Corbyn’s resignation would be a patriotic act. “It might be in my party’s interest for him to sit there. It’s not in the national interest. I would say, for heaven’s sake, man, go.”

Stranger still, many Labour parliamentarians agreed with them: Cameron’s speech took place in the middle of a full-blown, if woefully inept, coup.

The political and media establishments are still struggling with the choice the Labour party made in 2015. The fact that the decision was emphatic, had to be made twice following the failed coup, and was effectively endorsed by the electorate in 2017, has not been enough. On some level, that goes beyond the political to the psychological: they refuse to accept his tenure as legitimate.

This sense of denial runs deep – as though insisting he should not be the party leader in effect means he’s not. It is a delusion that recalls the author Doris Lessing’s observation of Blair’s declarative approach to politics: “He believes in magic. That if you say a thing it is true.”

Corbyn is the leader of the Labour party. He has a mandate. He represents something other than just himself. That is not a statement of opinion but of fact. One does not have to like it to accept it. But the failure to accept it will have material and strategic consequences. And, with a general election imminent and the future of the country’s relationship with Europe finely balanced, the moment of reckoning with that fact is long overdue. For there is no route to a second referendum without Labour; there is no means of defeating Johnson without Labour. The party remains the largest, and by far the most effective, electoral obstacle to most of the immediate crises that progressives wish to prevent. Once again that is not a case for Corbyn or for Labour, but for reality.

Jeremy Corbyn is congratulated on winning the Labour leadership in 2015.
‘The political and media establishments are still struggling with the choice that the Labour party made in 2015.’ Jeremy Corbyn is congratulated on winning the Labour leadership in 2015. Photograph: Stefan Wermuth/Reuters

Earlier this week, when asked which was worse, a no-deal Brexit or Corbyn as prime minister, the Liberal Democrats’ Scotland spokesman, Jamie Stone, said: “It may be that somebody else may emerge from the Labour party. I think the ball is very much in the Labour party’s court to see what alternatives they could find.”

That is not going to happen. Liberal Democrats don’t get to choose the Labour leader. Labour does. The Lib Dems have long struggled to understand this. In 2010 Nick Clegg said he could work with Labour, just not Gordon Brown. Two years later they said they could work with Labour but the shadow chancellor Ed Balls must go.

There is candour in this. It is effectively the position of his party and many others, including a few disgruntled Labour members, for whom a potential Labour government under Corbyn is somehow worse than the actual no-deal Brexit under Johnson that may soon happen. But there is a clear contradiction too. Some of those who have devoted the past few years to stopping any kind of Brexit now claim that the only thing worse than a no-deal Brexit – the worst kind of Brexit they could possibly imagine – is the leader of the only party that can stop a no-deal Brexit.

None of this is a reason to necessarily support Labour or Corbyn. There are all sorts of reasons, from antisemitism to an insufficiently pro-European stance, as to why progressives might decide not to back Labour at this moment; and the calculations are very different outside England and in those areas where tactical voting offers the best hope of getting rid of Conservatives. And given the redistributive agenda that Labour laid out at last week’s conference, there are all sorts of reasons why progressives might back it, too.

Political parties are not entitled to anyone’s support. They must earn it. The moment they start blaming voters for not supporting them, they are sunk. That’s as true for Labour under Corbyn as it was for the US Democrats under nominee Al Gore. But that does not absolve the voter from the strategic and moral responsibility of accounting for their vote.

In the second round of the French presidential elections in 2002, which pitted the conservative Jacques Chirac against the far-right candidate Jean-Marie Le Pen, a Communist party local councillor, François Giacalone, voted for the conservative. “When the house is on fire,” he said, “you don’t care too much if the water you put it out with is dirty.”

Right now, the house is on fire. Johnson’s first couple of months in office have illustrated that what’s at stake is not a contest between bad and worse. This is a leader who uses the police as props; breaks the law to undermine democracy; and stokes division with rhetoric that can and has been easily co-opted by the far right, pitting a section of the population against parliament and the judiciary. Johnson’s cabinet and its agenda, both with regards to Brexit and beyond, do not represent a mere shift to the right but a paradigmatic sea-change in British politics that, where Europe is concerned, may have irreversible consequences.

Those who last year were literally on the fringe of the Tory party conference have this week been running the show. The coming election will not just be about opposing Brexit – it’ll be about defending democratic norms. The key consequence of understanding that Corbyn is the legitimate leader of the Labour party is understanding that this fire cannot be extinguished without him.

Gary Younge is a Guardian columnist

The Chancellor’s 2014 Autumn Statement: Missed targets and missed opportunities

George Osborne’s Autumn Statement was a reminder of the government’s missed targets and missed opportunities, writes John Van Reenen. The Chancellor’s promise to eliminate the structural deficit has failed spectacularly and the UK economy is barely above its pre-crisis level, a major cause of which was the the decision to launch a premature austerity programme in 2010. Crucially, Osborne’s plans fall short in addressing Britain’s chronic problem of low productivity.

There are things to like in the Autumn Statement. The reforms to end the “cliffs” in stamp duty and make it more graduated tax are welcome, but even better would have been to replace stamp duty entirely with a tax on land values. Rather than taxing people who move, tax the unmoveable wealth that they have. And if you have to raise taxes, few will feel sympathetic with multinationals who will find it harder to avoid taxes or banks who won’t be able to offset their accumulated losses against future taxes.

But the economic elephant in the room is what has happened to productivity. GDP per hour is over 15 per cent below where we would have expected on long-term pre-2008 trends. This is why wages are so low and the deficit remains high. There is nothing serious in the Chancellor’s plans to tackle this pressing issue.

Missed Fiscal Targets

In 2010 George Osborne pledged to eliminate the structural deficit by the end of this Parliament – the 2014/15 financial year. This has spectacularly failed to happen with forecasts of government borrowing rising to £91 billion this year and no expectation of balancing the books before 2018/19. And don’t hold your fiscal breath on it happening even by then.

So what went wrong? Less income taxes have come in than expected in the last year, partly because of the increase in personal allowances, but mainly because of low pay. It’s a stunning fact that real earnings have fallen by over 8 per cent since 2008. Many jobs have been created, but they have generally poorly paid. Low wages, low taxes.

Harpo Marxist Economics

The fundamental problem is that growth has been pretty lousy under the Chancellor’s rule. Don’t be fooled by the 3 per cent headline GDP growth rate. The size of the economy is barely larger than it was on the eve of the crisis representing the worst recovery in over a century. Our faster growth this year is like a “Harpo Marx” effect. The story goes that when Harpo was asked why he was banging his head against a wall. He responded “because it feels so good when I stop.” Similarly, it is unsurprising to have strong growth when you’ve been pushed so far underwater. The real surprise is why it took so long.

A major cause of low growth was the Chancellor’s decision to launch a premature austerity programme in 2010 which choked off the nascent recovery. Austerity eased somewhat since 2012/13, but even the OBR estimates that this knocked off a percentage point off growth per year in 2010/11 and 2011/12. The Eurozone crisis also played a part, as EU leaders administer the same fiscal medicine as Dr. Osborne with similarly disappointing results. Southern European countries can at least say they have no choice if they wish to keep the Euro, but there is no excuse for Northern EU countries like Germany to insist in balancing their own budgets in the face of serious deflationary risks.

Attempting even more severe austerity to meet the 2010 targets – as some on the right have argued – would have been an even more serious error. Like the government’s policy to reduce net migration to under 100,000, it is better to fail at imposing a silly policy than to cause terrible harm in trying to meet it.

But what to do about the productivity elephant?

As analysed by the LSE Growth Commission, Britain has a chronic problem of low productivity rooted in the failure make long-term investments. We argued that we could address this though radical supply side changes in the way we support innovation, and educate, tax and finance our citizens.

A major way of reducing public spending after 2010 was to slash public investment. With low interest rates, under-utilised resources and falling private investment, this was the exact opposite of standard economic advice. The outcome was widely predicted – rather than building, we dug ourselves into a deeper economic hole.

Some of this infrastructure destruction has been reversed, but the Chancellor plans again to accelerate public spending cuts to pay for tax cuts after the election. Since public investment creates capital that can be used in the long-term, it should not be lumped in with current spending like civil service salaries. But for purposes of creating an absolute budget surplus it has been and so, once again, will be ripe for the chop. The Liberal Democrats and Labour rightly want to keep capital investment separate. Let’s hope, if re-elected, this will be one more target that the government misses.

About the Author

John van Reenen is Professor of Economics at the LSE and Director of the Centre for Economic Performance. He tweets from @JohnVanReenen

http://blogs.lse.ac.uk/politicsandpolicy/the-chancellors-2014-autumn-statement-missed-targets-and-missed-opportunities/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BritishPoliticsAndPolicyAtLse+%28British+politics+and+policy+at+LSE%29

This is how the ‘annual tax statement’ SHOULD have appeared!

05 Wednesday Nov 2014

Posted by Mike Sivier http://voxpoliticalonline.com/2014/11/05/this-is-how-the-annual-tax-statement-should-have-appeared/

We all owe a debt of thanks to Richard Murphy, over at Tax Research UK. He has broken down the information in George Osborne’s misleading ‘annual tax statement’ into its component parts and then put a new version together, under categories that more accurately describe the spending concerned.

Then he turned the information into a handy pie chart – similar to Osborne’s but with one major change:

This version is accurate.

Here it is:

141105richardmurphy1

Let’s just compare it with Osborne’s…

141105osbornetaxsummary

Big difference!

The most interesting to Vox Political is the perception gap between Mr Murphy’s calculation of the total proportion of tax spent on unemployment benefits – 0.67 per cent – and Osborne’s ‘Welfare’ heading, which constitutes 24 per cent of spending.

Talk to most people about ‘Welfare’ and they’ll think you mean unemployment benefits – so the Osborne chart will make them think that government spending on the unemployed is no less than 16 times as much as is in fact the case.

When a government minister exaggerates the facts by that much, he might as well come out and admit that he’s lying to the people.

Mr Murphy wrote: “This is the statement George Osborne would not want you to see because it makes clear that subsidies, allowances and reliefs extend right across the UK economy. And they do not, by any means, appear to go to those who necessarily need them most. The view he has presented on this issue has been partial, to say the least, and frankly deeply misleading at best.”

He wrote: “Add together the cost of subsidies to banks, the subsidy to pensions and the subsidy to savings (call them together the subsidy to the City of London) and they cost £103.4bn a year – more than the cost of education in the UK.

“It’s also no wonder house prices are so distorted when the implicit tax subsidy for home ownership is £12.6 billion a year.”

He also pointed out that unemployment benefits cost only half the amount used to subsidise personal savings and investments.

For full details of Mr Murphy’s calculations, visit his article on the Tax Research UK site.

Mr Murphy tweeted yesterday: “Almost every commentator now agrees that Osborne is going to spend a fortune sending out tax statements that are wrong. Why not cancel now?”

He won’t unless he’s forced to; he has a political agenda to follow.

That is why Vox Political launched a petition to achieve just that.

If you haven’t already, please visit the petition on the Change.org website, sign it, and share it with your friends.

ztaxleaflets

While you’re at it, feel free to share the infographic, created to support the petition:

ztaxleaflets

Please also read yesterday’s Vox Political article on Osborne’s ‘annual tax summaries’, if you haven’t already.

Do the poorest really pay the most in tax?

Authors: Stuart Adam and Mike Brewer

 

The Liberal Democrats have, once again, claimed that the poor pay more of their income in tax than the rich, and that this gap has got larger under Labour. But, by ignoring the fact that the poor get most of this income from the state in benefit and tax credit payments, and by overstating the extent to which indirect taxes are paid by the poor, this comparison is meaningless at best and misleading at worst.

The underlying figures come from the Office for National Statistics, and are not in dispute. As the Liberal Democrats say, in 2007-08, the poorest fifth of households had a gross annual income of £11,105 on average, and paid £4,302 a year in tax, a ratio of 38.7%. Meanwhile, at the other end of the scale, the richest fifth of households had an average gross annual income of £74,247, and paid £25,926 in tax, on average, a ratio of 34.9%. (See Table 1 of this article).

The first key point to note is that benefits and tax credits account for £6,453 of the £11,105 average gross income of the poorest fifth of households. Their original income – in other words, private income from sources such as earnings, private pensions and investments, but not that from benefits and tax credits – was an average of £4,651. So the poorest fifth of households were clearly net beneficiaries from the tax and benefit system, to the tune of £2,151 a year, on average. At the other end of the scale, the richest fifth of households received £1,666 a year in income from the state, and so they are net contributors to the Government’s coffers, to the tune of £24,259 a year, on average.

If we define “net taxes” as “taxes paid less benefits received”, then the net tax rate of the poorest fifth is -46% of their original income (or -32% of their after-tax income), with the negative number reflecting that they are net beneficiaries. At the other end, the richest fifth have a net tax rate of +33% of their original income (or +50% of their after-tax income). These figures show what one would expect: the tax and benefit system as a whole takes money from the rich, and gives it to the poor.

The combined impact of the tax and benefit system on the distribution of income seems much more enlightening than the impact of the tax system alone when talking about fairness. The Liberal Democrats’ analysis does highlight, though, that benefits and tax credits do more to reduce income inequality in the UK than the tax system.

A second difficulty with the numbers relates to the way in which indirect taxes are treated, and this affects whether they appear to be regressive or not. People who are interviewed in the sort of surveys which underpin this analysis, and who report a low current income, tend to spend a lot relative to their current income, and therefore pay a lot of indirect tax relative to their current income. But this arises because the figures are a snapshot view of indirect taxes paid in a given period as a percentage of income in the same period. In reality, much low income is temporary, and people borrow and save to smooth out their living standards; over a lifetime, individuals cannot spend more than their income. As acknowledged by the ONS (see footnote 35 here), we get a different impression of the impact of indirect taxes by ranking people by their level of spending. That shows, for example, that VAT is progressive as a percentage of spending, since zero- and reduced-rated goods (such as food, children’s clothes and domestic fuel) are necessities that are bought disproportionately by the poor. IFS researchers have written more about this issue here, although it must be noted that the ONS analysis suggests VAT is regressive even as a percentage of spending.

What about the Liberal Democrats’ second claim: that the tax system has got less redistributive over time? Following the definition we introduce above, net tax rates on the poorest fifth have gone up since 1997-98, and those on the richest fifth have fallen very slightly (the 1997-98 figures which underpin this calculation are available in Table B here. But the poorest fifth have seen their own private income rise faster than the richest fifth (masking the opposite trend at the very extremes of the income distribution), so this may not be a particularly enlightening comparison: net tax rates should rise as incomes rise under a progressive tax and benefit system.

A more definitive answer is provided by analysis of the impact of Labour’s tax and benefit reforms on the distribution of income, which have been strongly progressive, with the poorest households gaining, on average, and the richest households losing, on average (but with the precise amounts depending on what one considers to be a “change”). It is also clear that these changes acted to dampen down what would otherwise have been a large rise in inequality.

Even on the Liberal Democrats’ peculiar definition, a natural follow-up is to wonder whether the tax system would get any less regressive over time under their policies? IFS researchers will provide a fuller assessment of that after their manifesto has been published. It is reasonably clear that the reforms to capital gains tax and the new mansions tax should increase the tax burden on the rich, but it is less clear that the proposal to increase the income tax personal allowance to £10,000 will help many of the poorest households, as the poorest fifth of households will contain those with incomes too low to pay income tax. (In any given year, one third of adults do not pay income tax and one quarter of adults live in a family where no-one pays income tax). The largest beneficiaries of the higher personal allowance will be families with two earners (where both earn less than £100,000).

http://www.ifs.org.uk/publications/4813

 

A £10,000 personal allowance: who would benefit, and would it boost the economy?

Authors: James Browne

Despite the planned net fiscal tightening of £123bn per year by 2016-17, the coalition government has sought to cut income tax for low-income individuals by increasing the income tax personal allowance to £10,000 by 2015-16. Significant increases to this allowance – the amount of income that is not subject to income tax – have already been implemented or announced, at a combined cost to the government of nearly £5 billion per year: it increased by £1,000 in 2011-12 to £7,475, and it will increase by a further £630 in 2012-13 to £8,105 (£700 and £210 more than it would have gone up by under default indexation rules in those years respectively).

How much more would it cost the government to meet its target of reaching a £10,000 personal allowance by 2015-16? Normal price indexation of the personal allowance (the assumption underlying the Office for Budget Responsibility’s forecasts for the public finances) would mean that it would reach £8,885 in 2015-16 without any discretionary policy changes given current inflation forecasts. Compared to this baseline of £8,885, a personal allowance of £10,000 in 2015-16 would mean that tax revenues were £5.3 billion lower in that year. To reach that ambition earlier, as several Liberal Democrat and Conservative politicians have recently advocated, would reduce income tax revenues by more than this, as shown in the table below:

Year £10,000 personal allowance introduced Annual cost to the Exchequer
2012-13 £8.9bn
2013-14 £7.7bn
2014-15 £6.5bn
2015-16 £5.3bn

Note: Costs are for the year in question: if the personal allowance were subsequently increased in line with inflation (the default indexation policy), the cost would remain roughly the same. Alternatively, if the personal allowance were frozen at £10,000, the cost would fall as shown in the table.

Source: Author’s calculations using the IFS tax and benefit microsimulation model, TAXBEN, run on uprated data from the 2009-10 Family Resources Survey.

 

These figures all assume that the threshold at which the higher 40p rate of income tax starts to be applied is unaffected. This means that higher-rate taxpayers get the same benefit from the higher personal allowance as those who remain basic-rate taxpayers. If the government wanted to lower the cost of achieving a £10,000 personal allowance, it could prevent higher-rate taxpayers from benefiting at all by reducing the threshold at which the 40p rate starts to be applied: this would reduce the cost to the Exchequer from £5.3 billion to £3.3 billion in 2015-16. This approach would lead to a significant increase, of around 600,000 in the number of higher-rate taxpayers. Under current policy proposals this would also mean that about 200,000 more families with children would lose their Child Benefit because an adult in that family would become a higher rate taxpayer after the lowering of the higher rate threshold (these Child Benefit savings would account for about £300 million of the reduced cost to government of meeting its £10,000 target in this way).

The gain from increasing the personal allowance to £10,000 in 2012-13 (without changing the higher rate income tax threshold) would be £379 a year to each individual taxpayer aged under 65 with an annual income between £10,000 and £116,210. There are three groups of individuals who would not benefit: those aged 65 or over, who already have tax allowances exceeding £10,000 (other than those with incomes above around £29,000 who see their allowance reduced to the level of the allowance for those aged under 65); those who do not have incomes high enough to pay income tax anyway (more than a third of the adult population); and those who have the personal allowance fully withdrawn as their income exceeds £120,000. Those with incomes between £8,105 and £10,000 would see their income tax liabilities fall from less than £379 to zero. A gain of £379 is of course larger as a percentage of income to a low-income individual than someone with a higher income, although it is important to remember that the poorest third of adults do not benefit at all because their incomes are already below the personal allowance.

But if we examine the distributional impact at the family level (which is normal for this sort of analysis, since we would expect at least some degree of income sharing within families) we get a different pattern to the one we might expect. This arises because two-earner couples, who tend to have higher family incomes, can benefit twice over from the increase in the personal allowance because both members of the couple would see their income tax liabilities fall by £379, meaning that they would gain £758 in total. Thus, the highest average cash gain occurs in the second-richest tenth of the income distribution (some of the richest tenth would not benefit because of the withdrawal of the personal allowance above £100,000, lowering the average gain for this group). As a percentage of income, the gain is roughly the same from just below the middle to just below the top of the income distribution, with the bottom and the very top gaining by less than this.

To summarise, the common assertion that increasing the personal allowance is progressive is true if one considers the gains across individual income taxpayers. It is not true if one considers the gains across all families as relatively few of the poorest families contain a taxpayer and two-earner couples gain twice as much in cash terms as one-earner families.

Distributional impact of increasing personal allowance to £10,000 in 2012-13, by income decile group

Income deciles

Notes: Income decile groups are derived by dividing all families into 10 equally-sized groups according to income adjusted for household size using the McClements equivalence scale. Decile group 1 contains the poorest tenth of the population, decile group 2 the second poorest, and so on up to decile group 10, which contains the richest tenth.

 

Source: Author’s calculations using the IFS tax and benefit microsimulation model, TAXBEN, run on uprated data from the 2009-10 Family Resources Survey.

 

Some have argued that a higher income tax allowance would be a good way of introducing a short-term fiscal stimulus for the economy. In our annual Green Budget, we argued that the case for a fiscal stimulus was not clear cut, but said that if the government did choose to introduce one, it should be timely, targeted and temporary. Increasing the personal allowance does not seem to meet any of these criteria. An increase in the allowance would not be especially timely: individuals would not see the effect in their pay packets until the Autumn. It would not be well targeted: the Office for Budget Responsibility suggests that increased investment spending or spending on benefits (or indeed cuts to the main rate of VAT) would deliver a larger direct boost to the economy in the near-term. And being a long term government ambition it would not, of course, be temporary.

Increasing the income tax allowance takes low income people out of income tax. Therefore, it is the best way of focusing income tax cuts on those with lower incomes. And it will strengthen work incentives, especially for low earners. But it is important not to claim too much for a policy which, especially in the current fiscal climate, is expensive. By definition it will not help those on the lowest incomes, who do not pay income tax anyway. And in the current context it is clearly not the best way of delivering a short term fiscal stimulus – and it should not be pursued for that reason. Any stimulus needs to be timely, targeted and temporary.

http://www.ifs.org.uk/publications/6045