National debt and public spending increasing: Is it time for the government to consider the case for a negative income tax?

Despite the mandate of this Government being derived from its commitment to whipping out the structural deficit by the end of a five year period, the Coalition is somehow on the path to failure. Whilst the targets are the right ones for the UK’s economic credibility, the means have been counterproductive and badly thought out.

With the forecast that the official national debt is due to rise by £605 billion over the course of this parliament alone (from 53% GDP to a staggering 76% GDP) it is clear that the Coalition’s commitment to a sustainable economy has been thrown off course. This increased borrowing has not been evoked as a desperate attempt to restart business and provide growth, rather it has actually gone mostly on meeting the demands of an increased welfare bill, fuelled by the sharp rise in public sector unemployment. This clearly isn’t sustainable.

The Government’s agenda was to make up the downsizing of the public sector with increases of jobs in the private sector. This has not happened for two primary reasons. One being that it is unrealistic to expect to make it up over a short period of time. Secondly, and most worryingly of all, it is because they haven’t provided the policies conducive to growing private enterprise. Putting this agenda on the back-burner for now, one way in which the government can bring down public spending, and therefore the structural deficit and national debt is to consider something very radical to bring down welfare costs. The negative income tax could be the lifeline this Government needs.

The reduction of the deficit has been made up mostly by tax increases and cuts to investment programmes. This simply won’t do as it is a short-term strategy, it is an ill-thought out way to meet the immediate goal of eradicating the deficit.  This, even if it were to work, may succeed in giving the government credibility in the eyes of the public, but long-term doesn’t sort out the structural problems with the UK economy. Growth aside, one of the biggest of which is welfare costs.

Before the Coalition took office, the cost of welfare under Labour exceeded tax receipts by almost £25 billion annually. This model was indicative of a government attempting to grow dependency and therefore its own power rather than growing a healthy economy. Osborne took the pragmatic approach in his first budget of raising taxes to meet this unbelievable short-coming. Whilst this was understandable, especially because of the Tories fixation on reassuring the public of the earnestness of their centrist agenda, it was a mistake.

The answer isn’t to raise taxes, as common sense perhaps would dictate. Taxes were too high under Labour already. The real problem was that the extortionate costs of welfare dwarf the issue of high taxation. Cameron and Osborne should not have been trying to meet the demands of increased welfare, rather they should have been looking to remedy the problem of this unsustainable public spending.

The conventional methods are limited. For instance simply cutting the provision doesn’t resolve the problem of dependency culture.  It simply scapegoats and points the blame at dependent individuals and punishes them, fuelled by populist demand, for their ‘moral’ failures. This doesn’t offer any kind of redemption for individuals in such circumstance. It only aids social disenfranchisement, rather than encourages them to engage in employment which in the process helps both the individual and the rest of society.

Another method practiced is increasing the provision. This method is perhaps even more damaging as it enables and validates a culture of dependency and inactivity. It takes away any remaining incentive to work, and therefore the need to develop skills which make them more employable. Rather, increased provision traps them in poverty and therefore makes them ever more reliant on state hand outs. This method takes away the human dignity and freedom of such individuals. This sentiment is the primary cause of an Underclass which is so prominent in modern social life. This of course is unacceptable. Although advocates often have forgivable intentions which aim to solve such social ills, it creates vast social problems and tensions.  The means to this end is wrong.

But, if the government takes away the reasons not to work, leaving only the incentives of work for dependent individuals to ponder, this can go a long way to ease this problem. However, the real issue of dependant individuals is not the amount of welfare administered to them, rather it is the very principle of welfare that it is a deterrent to finding employment, no matter how little or large. Therefore dependency alone does not explain away the increasing welfare costs. The biggest problem economically is its flabbergasting inefficiency. Perhaps it’s time the Government considers a negative income tax in the place of this highly flawed and detrimental system.

Critics, including myself (ideologically speaking) may argue that the negative income tax does take away many of the incentives to work. In addition, it also advocates ‘something for nothing’ benefits. It fails to eradicate the notion that if one wishes not to work as hard, they can still be subsidised by the State through taxation of hard-working tax payers. But in reality welfarism is something that will not be resolved any time soon. Accepting this, the negative income tax is far more efficient and cost-effective to the tax-payer as it requires an inevitably much lower welfare bill to individuals who do not make up the income required for a minimum standard of living. Taking this pragmatic approach will surely bring the cost of welfare down to realistic standards, whilst ensuring it always pays to work. This is because the negative income tax would be ideally introduced in conjunction with a flat rate income tax. Guaranteeing that the State never penalises hard-working successes, whilst on the other hand rewarding idle failures, will remove the problem of Government discrimination, inherent within a ‘progressive’ tax system. It would ensure that every individual is treated equally in the eyes of the State, the bedrock to a just democratic society.

Another possible problem a negative income tax could encounter is the validity and fairness of the figure estimated to be the ‘minimum standard of living’ wage. The Left, if ever to enter government, would of course be inclined to increase this rate of entitlement. This would allow for increased allowances. What this would do is hugely damaging. It would ensure that tax payers are lumbered with a system that disproportionately rewards failures and inadequacies.  It would lead inevitably to abuses of a system which was introduced purely for good intentions. Furthermore, socialists may even increase the level of negative income tax, over Friedman’s recommended 50%. This again disproportionately takes away the incentive to work, making the system pointless. Certain legislative powers must therefore be enacted, such as ring-fencing of the rates, to ensure the system always remains effective in rectifying the problems it sets out to cure, rather than adding to them or causing new levels of deep-rooted State dependency.

Those critical of the negative income tax feel it would lead inevitably to the withdrawal of welfare altogether. The temptation to libertarians may be to withdraw spending in welfare areas such as health and education, with an expectation that individuals are fully responsible for paying for their own services. This of course may be true and whilst this argument cannot be dismissed, the truth is no sensible or right-minded Government would believe that having no role to play in the provision of welfare would have no negative impact on the workforce which wealth generators employ. The risk is that it may lead to generations of infirm and uneducated individuals. This causes a vast range of social problems which of course aren’t amenable with market forces. Furthermore, an unhealthy and unskilled work force holds back the economy. A Government surely realises its greater vested interest of ensuring a strong, healthy, educated society as it enables a strong, efficient and skilled workforce, essential for maintaining a strong economy. The negative income tax must not be used as part of such an ideological agenda. The implementation of a negative income tax must be viewed simply as the means to the ends of a) making welfare vastly more efficient and b) Making the tax system simpler and fairer.

Why Conservative MPs are right to rebel on House of Lords reform

The telegraph today reported that 70 Tory MPs are leading a rebellion to defeat the Bill. Clearly Cameron is putting his leadership on the line over this issue, at best, in order to appease the junior partners across the cabinet table. Or at worst, because he actually believes an elected House of Lords serves the best interests of the country. Either way it is foolish for any government to attempt constitutional reform without the consent of the public. It is more foolish to do so without first ensuring they are carrying the  party with them.

Cameron conceding House of Lords reform  in the coalition agreement is unforgivable. Constitutional change is something which should kept out of back-door negotiations between the two parties. Democratic institutions must be protected from politicians playing party politics. The legacy of such reforms is permanent and impossible to reverse. Whilst electoral reform was borderline inexcusable, at least it was put to the public, in the form of a referendum, to decide whether or not AV was something the country wanted. The conduct of the Coalition over Lords Reform however, has nothing to spare any integrity.

Clegg was able to justify an expensive referendum for changing the electoral system in 2011, yet doesn’t see fit to put the biggest constitutional change the country has seen in modern times to the vote. This is ludicrous hypocrisy and demonstrates pure political opportunism in order to force through changes to the Upper Chamber which nobody really wants, other than liberal dogmatists, taking advantage of their rare opportunity in government, who hold only a simplistic understanding of democracy.

It is astonishing that Cameron has failed to intervene and stop this proposal going any further. Lords reform is something that nobody is calling for, least of all now. The pursuit of an elected House of Lords is something which is alienating Conservative voters and members. Cameron has failed to gage the mood amongst his own backbenchers who have been put in the undue predicament of putting the Governments unity in jeopardy, and his own premiership on the line.

Government rebellions are never taken lightly in the Conservative Party. This is more the case than ever with the reluctant rebellion of Nicholas Soames, a Tory MP who has only once in his long parliamentary career, voted against his own party. This is indicative of the mood of Tory backbenchers whose patience again is being stretched to the full by Cameron’s leadership. Cameron is playing with fire with his own backbenchers. This is something a leader can only get away with so many times before it comes back to haunt them. Not even Tony Blair was immune. Cameron is clearly not in touch with his own party over this issue if he believes he can come out of this unscathed.

Never before has a government attempted such drastic constitutional reform. Therefore Cameron is on unchartered territory. Whether or not it gets passed remains narrow, but either way, Cameron is surely putting his standing within the party in danger.

Attempting constitutional reform, without being put to the electorate, represents a clear betrayal of the public. Never should a government attempt to change the goalposts over the countries democratic system without the mandate of the British people. Therefore out of principle, all MPs must realise their abuse of power and oppose the Bill.  This is unlikely to be the case, but what upholders of democracy can hope for is a sufficient tory rebellion.

Local Council Elections: Why only conservative policies will win back Conservative voters

Local election results are a harrowing punishment for the Coalition’s last couple of turbulent months in Government. An ineffective Labour Party under weak leadership have claimed council 713 seats, whilst the Tories have made a dramatic loss of 378 seats and surrendered the control of 12 Councils. These results are completely unacceptable for the Conservatives and such a substantial loss could have been avoided.

Those on the Left will exploit this defeat and explain it, incorrectly and misleadingly, as being allusive to the countries anger at austerity measures. This is simply not true. Every indication and poll reveals that the public do accept the need for cuts.

Rewind to this time last year in the Local council elections, despite high unemployment, hard-felt cuts and protests, The Conservatives actually made significant gains of 86 seats and 4 councils, an outstanding achievement for a party of government wielding painful cuts. This is reflective of how competent the Conservatives appeared at the time. Fast forward to this year and it’s a completely different story.

Of course the underlying reason behind this embarrassing defeat is the perceived sheer incompetence and corruption from the leadership in the national party. This all started with the poorly handled Budget in March. Alone this would probably not have proved so costly come elections, but the event was not one in isolation. This has been followed up but bleak economic forecasts and political scandal which has highlighted poor leadership. In short, the elections couldn’t have come at a worse time for the Coalition.

The Conservatives have lost touch and appeal to their traditional voters. The Tories attack on the elderly through the ‘Granny tax’, a product of a poorly presented Budget, is a betrayal of our loyal supporters.  No real Conservative government fails to look after our elderly. The truth is that many, and far too many to be politically forgiving, are disillusioned by a government that tries desperately to appease everyone and succeeds in looking after nobody whilst taking the concerns of our core voters for granted,  because this isn’t a government of principle, it has become a Government of apologists.

The support of House of Lord’s reform is a classic area over which Cameron has led the Tories into the pockets of liberals. Too conscious to appear ‘modern’, Cameron is supporting reform that will see our Upper Chamber taken control over by a bunch of career politicians, under the thumb of their leaders in the Lower Chamber. What’s more is that he and Nick Clegg want to do this without putting it to the public in a referendum. If Cameron wants to claim back our supporters then he must climb down over this policy, which conservative voters feel threatens our parliamentary democracy. This is not a Conservative policy.

Cameron and Osborne must too ease the tax burden of our supporters. The Coalition has failed to do anything to this extent. Those who earn in excess of £25,000 are substantially burdened by high tax demands. Those that earn an income of £50,000 pay a massive £15,000 of hard earned money in tax.  Under no interpretation is this a Conservative tax system. Especially during times of austerity, these policies are an unforgiving attack on our aspirational and hard-working Middle England. To ensure we don’t lose these votes to Labour again, we must not exploit them through unreasonable taxation.  

But the issue that directly affects everyone is the economy. It’s only through Ed Miliband’s weakness and Labour’s serious lack of any credibility over the economy that has seen Cameron and Osborne get off so lightly. When compared to Labour, The Coalition appears business friendly, but in reality they are not pro-business and inadequately Conservative. Osborne’s failure to see through an even lower corporation tax, as well as the top rate of income tax is sheer weakness. This is a party that got elected on a mandate that it will make the tough decisions necessary to recover the economy, yet caved in over the budget out of fear of being branded a ‘Party of millionaires’, which those who they feared would say this, did anyway.

The only threatening opposition to this Government is coming from their own Conservative back benchers and voters. Labour are up to nothing, yet are being rewarded for the Coalition’s own failure. This must be addressed before going into General election in 2015. The only small chance of Labour winning will come from Cameron throwing it away through turning away the genuine conservative vote.

Cameron has to give up the idea that he can appease the left with anything short of socialism. Third-Way social democratic policies only succeed in putting off Conservative voters and the aspirational. Desperate stunts to appear ‘modern’ are work of a party in opposition. Cameron is not in opposition anymore, he is leader of a Conservative Party in government. These Local Council results one would hope can only remind him of this. The only bit of good news is the imminent re-election of Boris as London Mayor. Whilst Boris has retained his supporters, Cameron is leading the national party away from his. This could prove very significant if Cameron’s leadership comes under threat. And it is only by listening to his voters that he will avoid a leadership challenge.

House of Lords Reform: How an elected Chamber will fail democracy

Ever since the Parliament Act 1911, reform to the House of Lords has been an issue, with varying priority, to our mainstream political parties. However what the coalition appear committed to achieving is to the detriment of democracy in the country.

But only inflexible, dogmatic liberal purists who have little more than a romanticised ideal about democracy advocate a fully elected chamber, that and opportunistic politicians in the Lower Chamber who appear to be using this populist issue to centralise their power over the Lords. This is very dangerous.

What an elected Second Chamber would do is pave the way to inevitable formal party politicisation of the House of Lords. Currently governments attempt to do this informally by appointing an overwhelming number of Peers for their own party in order to help ease their legislation through the Lords. Not only would an elected chamber endorse this, it would go much further than that into genuinely dangerous territory. At the moment, Peerages can’t be removed, so future governments can rebalance the Lords through appointment of their own Peers, but what this kind of reform would do is see all lords lose their permanence.

Purely speaking, this doesn’t sound too bad, but like all things with this debate, in practice it would prove counter-productive to democracy. Peers under this kind of system would be under far more pressure to toe the party line. This is because it is the leaders of the Lower Chamber who would have control over the party list of candidates. What politicians in the Commons want from an elected chamber is ‘yes’ men and women. Peers, who have a history of showing independence and therefore doing their job of scrutinising Bills, will inevitably find themselves taken off the party list, come the next election.

If the Lords have their hands severely tied when it comes to scrutinising legislation, due to this threat, then what do they really offer to democracy? If they can’t adequately hold government legislation to account, if they become mellowed to effective status of Select Committees, then having a Second Chamber simply becomes an expensive waste of time. Legislation may as well go straight from the Commons for Royal Assent under such a system.

Another inevitably from such a reform is that the quality of our Peers will woefully decline. Instead of experienced public servants with expertise in various areas, we will have a second Chamber of career politicians, who have no real world experience or recognised expertise in any field. Not only this, but they will be second-rate career politicians. What aspirational upstart would chose to run for the House of Lords, stripped of all its prestige, in favour of real power in the House of Commons? The answer is only those whose options are limited by their own inadequacy.

Understanding democracy as only being about elections is far too simplistic. Mussolini, Franco and Hitler held elections. Fixation on this element, whilst ignoring others, leads to effective “elective dictatorship”. Lord Hailsham’s use of ‘dictatorship’ is no exaggeration. If the government is able to pass their legislation, which often lacks direct mandate from the public (especially a sensitive area for the coalition) with ease, not only through the Commons but also through the Lords, what such a political system would do is lose all credible scrutiny, therefore it ceases to be democratic. It would be the final nail in Parliament’s coffin and would complete the project of consecutive government’s agenda to further centralise their power. This must be prevented.

Conservative Back benchers, over to you…