Bel is thinking

Gordon Brown has been proposing for a while to get hold of any money we have lying in ‘dormant’ personal bank accounts, and spend it on youth and community projects.

This is not a new proposal. He first mentioned it in the pre-Budget Report of 2005, and I wrote about it at the time. The idea is to target money in account that haven’t been used for the past fifteen years.

There is something deeply worrying about this proposal. At its most basic level, it is an assault on property rights. If I wish to leave my money sitting in a dormant bank account for over fifteen years, I do not see why that should entitle the Government to swoop down and take it. And no, it doesn’t matter that the Government is trying to reassure me that I can still reclaim it, even after the Treasury has taken it. That does not make a difference to the fact that the Government has helped itself to my property without my permission.

In addition, it doesn’t matter that the money is to be spent on youth projects, and such ‘good causes’. That is nothing short of emotional blackmail, trying to paint the owner as a selfish dog in a manger who has no use for the money, but doesn’t also want the well-intentioned Government to spend it on deserving and vulnerable people. Or even worse than emotional blackmail, one can compare the Government’s proposed actions to those of a thief who breaks into your house and steals your goods, but it’s alright because he’s only going to give it to the poor.

The point is that it doesn’t matter how the Government spends it. So-called good intentions do not legitimate the act of theft.

The Government will argue that it is not stealing the money because an account owner can still reclaim it if they want it back. But that’s not the point. Why should one be required to take positive action to recover their property? And for those who may not realise that they have some money in a long-forgotten account, the Government’s appropriating of that money is nothing short of theft. They cannot, after all, claim back money that they had forgotten they owned.

Some people may argue that if you cannot remember that you have some money sitting in an account, then perhaps you don’t really need it, and the Government should spend it as they wish. I disagree. That is a dangerous proposition. Property rights should not be qualified in that manner. The fact that you do not make active use of your property should not disentitle you to ownership. For example, the land law provisions under which squatters sometimes acquire rights to property are so tightly drawn because the law recognises that depriving a land owner of his property is not to be done lightly.

To my mind, there is a worrying philosophical issue at the root of this proposal, and this is that the State’s rights to our income and property extend beyond what it may lawfully collect through the conventional laws of taxation. This proposal seems to me to be saying ‘we have the right to take your property, unless and until you show us that you need it.’ This changes the relationship between us and the State. Rather than us yielding up our income, it is the State taking it as of right.

But why should I be surprised by this? As a lecturer in financial law, I have been watching intently as the language of the tax code has changed over the years since Labour came into office. Tax avoidance laws are framed in aggressive language, and even when reliefs are given, they are framed in such language as to leave one in no doubt that the Government sees it as bestowing unto us from its largesse, rather than giving back to us that which we gave it in the first place. Against this ideological framework, I suppose that the current proposals should not surprise us at all.

The Daily Mail tells the story of Mrs Taylor, an unemployed mother of five, who had four of her children while receiving benefits. She has now been ordered to look for a job or have her benefits drastically reduced. Her husband is also unemployed.

Together the couple collect £501 a week in benefits – £179 child tax credit, £64 child benefit, £90 job seeker’s allowance, £126 housing benefit, £24 discretionary housing payment and £18 towards their council tax.

They also receive free school meals and around eight pints of milk a day, making an annual total of £26,052, or the equivalent of a £33,000-a-year salary before tax. [Emphasis mine]

There are two things at work here. The first is the so-called “benefits trap”. It is not Mrs Taylor’s fault that the Government has made it more advantageous in certain cases for people to claim benefits rather than work. She is simply taking advantage of the system in place. The second factor is down to Mrs Taylor herself. If she is in a position where the only work she can get would attract the minimum wage, that would most likely be because she lacks the relevant skills, training and experience to get a better paying job. For that, she should take some responsibility.

Anyway, what shocked me most was not even the size of the benefits payments,  but Mrs Taylor’s reaction to the ultimatum by the council:

“The world’s gone mad,” [she declared] “What’s the point of going to slave your guts out for 40 hours? What do you get for it? Absolutely nothing.”

Yes, darling, the world’s gone mad. Only not in the way you mean. It is a truly mad world which pays you more to sit at home than people with a lot more skill, learning and experience than yourself can hope to earn. These people traipse to work everyday, work as hard as they can, suffer heavy burdens of taxation, and make financial sacrifices. They do all this in order to deliver to you a lifestyle even more comfortable than that which they have. Yes, the world has gone mad. Isn’t it great that you have, up until now, been the beneficiary of such madness?

She is lobbying her local MP to help her make her case. As she lives in the Camborne, Cornwall area, I take it that her MP is the Lib Dem’s Treasury spokesman, Julia Goldsworthy. Perhaps Goldsworthy will deliver a few home truths to this deluded woman. Then again, judging by the Lib Dems’ general approach to public finance, perhaps not.

Remember those poor pensioners who lost their pensions after relying on dodgy advice in a Government leaflet?

Even though the Parliamentary Ombudsman had ruled that the advice contained in the leaflet was “inaccurate, incomplete, unclear and inconsistent”, the Government looked the other way and refused to compensate them.

Good news for them. The High Court has today held that the Government was wrong to reject the Ombudsman’s report. This means that the Government will now have to revisit the Ombudsman’s report and consider how to resolve the situation. This will most likely lead to some form of compensation for the pensioners.

The Government had previously refused to countenance compensation, instead uttering some laughable, sanctimonious drivel about its fiscal responsibilities. This from a Government that has ‘excelled’ in inefficiency, waste, confused tax policies, and all-round economic incompetence.

Far too many people have suffered the consequences of this Government’s ham-fisted and incompetent approach to finance; pensioners, tax credits claimants, Railtrack shareholders, small businesses, investors, the ordinary taxpayer, all have suffered. Tax credits are overpaid, and then reclaimed all at once, causing hardship to claimants. Misleading advice is given to investors, who suffer loss after relying on the advice. Tax laws are made, and then just as quickly changed, causing uncertainty, and in many cases, loss to people who have laid out money in reliance on the law. Sometimes, changes are made with harmful and far-reaching retrospective effects, so that people are then forced to go back and undo financial arrangements they made many years ago, even before this Government came into office.

What a  risky and precarious climate in which we now do business and invest, and it has been created by Labour. In most cases, the Government has simply shrugged its shoulders and let the losses lie where they fell. That should not happen this time. Even though it will have to dip into public funds to do so, the Government must compensate these pensioners. It is surely the right thing to do.

John Prescott’s office is being given an additional £587,000 to assist him in his ‘duties’. What duties, may I ask. Ever since Prescott was stripped of his ministerial duties last May, he has been struggling to find relevance in one way or the other. The stark truth however remains that Prescott occupies an office without a job.

This bonus payment brings the total annual budget for Mr Prescott’s office to £2,547,000. Needless to say, the Conservatives have attacked the 30 per cent increase.

Leaving aside the fact that this is public money being so wasted, I wonder how much of this ‘excessive bonus’ Mr Prescott will be giving to disadvantaged communities. Perhaps Peter Hain might like to have a word?

According to the Telegraph:

The BBC has spent another £700,000 of licence payers’ money replacing its on-screen links between programmes, it announced today.

The corporation racked up the bill while creating seven different scenarios - made into 14 short clips - in which the camera pulls back to reveal the viewer is looking at the world in an unexpected way through the figure “2″.

Three of the new BBC2 shorts were shot in South Africa, apparently because the film-makers wanted sunny weather.

This on top of the £1.2 million they spent on “rebranding” the BBC1 shorts last year. Spending other people’s money, such a wonderful thing, isn’t it?

It’s Sunday, so it can only mean one thing: politicians are attacking City bonuses. They certainly seems to make a habit of it on Sundays (see here and here).

This time, it is our old friend, Peter Hain. He has returned to his favourite theme. Now he wants City workers to pay two thirds of their bonuses to deprived communities.

Exactly what is it about private enterprise that Peter Hain does not get? Is it the bit about what companies pay their staff being no business of the Government? Or does he not get that these bonuses have already been subject to high taxes, which in turn were supposed, under Labour, to have already been ‘redistributed’ to these deprived communities he so champions? Or perhaps he does not understand that people are generally paid what the market feels that they are worth?

What is it that Mr Hain cannot understand? I would have thought that these were truths apparent to a secondary school economics student, even in these dumbed-down times. I know the Left traditionally has a history of woeful ignorance in matters of the market, but at this stage of his political career, there is frankly no excuse for Peter Hain.

Peter Hain, and by extension, this Government, must learn that not everything is to be determined by political decisions, or legislative action. Some matters transcend even the so-called ‘good intentions’ of a Labour government.

By making this suggestion, Mr Hain is admitting that his Government has failed in its avowed pledge to tackle poverty. In 2005-06 (see pdf), this Government collected £405 billion in tax. It paid out a net sum of £17.3 billion in tax credits in that same year. Going by previous years, the taxman estimates an overpayment of tax credits of almost £1.8 billion.

So having collected, and ‘redistributed’, the above sums, there are still deprived communities in the UK, to which Mr Hain wants City workers to contribute? Unbelievable.

Under this Government, we have seen taxation rise to the highest levels for a long time, with nothing to show for it. If Peter Hain wants to act concerned about the plight of deprived communities, perhaps he could start by questioning his own Government about their failures in this regard. He could ask them precisely how it came to be that despite record tax levels, and despite their claims to care about the underprivileged, we are in the situation that we are.

Then after doing that, he could take a few weeks off work and enrol in a community college in Neath for a crash course in economics.

The National Audit Office is unhappy that a final budget for the Olympic Games has still not been set.

Surely the NAO should know better by now. Judging from the way the Olympics project has been going, a final budget would not guarantee anything approaching certainty. Even if such a budget were set, it would only be exceeded. Not to be too cynical, but it appears to me that its only purpose would be to indicate the minimum level of spending. The only way is up.

The green-eyed monster is at it again.

First, it was Peter Hain, now it is the Lib Dems’ turn to grumble about City bonuses. Their Treasury Spokesman, Vince Cable, attacks huge City bonuses, claiming that they highlight ‘the gross levels of inequality in human wellbeing up and down Britain’.

Of course they do, but that is no reason to take action against them, especially as they are not the reason for the inequality in the first place.

As to ‘the gross level of inequality’, is Mr Cable unhappy about its existence, or merely about the fact that it is being ‘highlighted’? He comes up with a number of daft proposals; such as denying tax relief to senior executives on their pension contributions, and the possible removal of taper relief on the sale of second homes and stock options.

I’m not really in the mood to discuss the reasons that these proposals are sheer madness; this is, after all, Sunday. I should be halfway through the Sunday Telegraph magazine or some such by now. All I will say for now is: since when is it the Government’s business what a private company pays to its employees? And in case it has escaped Mr Cable’s notice, higher earners currently already pay higher taxes.

Maybe I will return to this topic later, maybe not. It all depends if Mr Cable provokes me again. Back to the Sunday Telegraph magazine.

Remember dear old Joyce and Sybil Burden, the octogenerian spinster sisters who sued the Government over their potential inheritance tax bill? They have just lost their case before the European Court of Justice.

To recap, they have lived in the family home all their lives, taking care of their father. On his death, the family home passed to them. They are worried that on the death of one of them, the surviving sister would have to pay inheritance tax on the share of the house passed to her. They fear that she may be forced to sell the house. (Actually, strictly speaking, there is provision in inheritance tax law for instalment payments in such a case as this, but how realistic is that, given the particular circumstances of this case?)

Anyway, the sisters went to court arguing that they were being discriminated against under UK law. The basis of their argument was that, if they were a lesbian couple in a civil partnership, the house would have been exempt from inheritance tax on the death of one or the other. The UK court dismissed their case, and they appealed to the European Court.

The two sisters have a valid point, but I always felt the ‘discrimination’ argument was not going to hold much water. Far better to have kicked up a fuss about the unfairness of inheritance tax. The solution they seek is more likely to be delivered by political means, rather than through the courts. Inheritance tax is an immoral tax. Apart from anything else, I fail to see the logic why a married couple or a civilly partnered couple can claim the exemption, but not, for example, two sisters. If the exemption is based on wanting to prevent much disruption in family life, surely the same could apply to two siblings living together. I’ll be the last person to quarrel about a tax break for married couples, but I fail to understand the limits of this particular exemption.

What about people who never marry? Are their survivors and dependants to feel the full force of the taxman’s ‘great clunking fist’? What is the rationale for that? Does the Government really believe that the unfairness and resentment that this creates is worth it for the extra £4bn a year that inheritance tax generates? This is an unnecessary and arbitrary tax, penalising hard work, savings and enterprise. If the Government will not abolish it, it should at least target the reliefs to prevent such manifest unfairness.

Interesting article over on The Last Ditch comparing tax collection to an organised crime protection racket. In particular, I like this statement:

We hear a lot from government about crime but although they like to compare themselves to businesses, talking cheerily of “services” and “customers,” they resemble organised crime much more than they resemble your friendly local capitalists.

To my mind, the underlying point is the sense of entitlement the Government feels towards our own money. As they feel entitled to our money, they think nothing of implementing the most aggressive tax administration regime in order to prise it out of our hands. It is for the same reason that they do not feel any need to take our views into account when they spend the money.

Check out the article, it’s worth reading.