Is life so dear, or peace so sweet, as
to be purchased at the price of
chains and slavery?

The TaxPayers’ Alliance (TPA) shows that the average family pays £656,000 in tax over their lifetime.

After years of the state overspending and misusing our money we now have a greater idea of how far this legacy cripples the finances of British families. The TPA’s latest research shows the total amount of direct and indirect tax that households will pay over their working lifetimes and in retirement. Based on the current level of taxes applying over a working lifetime of 40 years and 15 years of retirement the key findings of their research are:

• The average household will pay over their lifetime a total of £250,000 in Income Tax and £101,000 in VAT;
• Poorest households are hit hardest by VAT and Council Tax. A household in the lowest quintile pays £57,000 in VAT and £55,000 in Council Tax over a lifetime;
• An average household in the lowest income quintile will pay £235,000 in direct and indirect taxes;
• An average household in the second income quintile will pay over £392,000 in direct and indirect taxes;
• An average household in the third income quintile will pay over £556,000 in direct and indirect taxes;
• An average household in the fourth income quintile will pay over £755,000 in direct and indirect taxes; and
• The four most burdensome individual taxes over a lifetime are Income Tax, VAT, employee National Insurance contributions and Council Tax.

Matthew Sinclair, Director TaxPayers’ Alliance said:

Households in the UK now pay an incredible amount in tax over a lifetime, handing over a hefty slice of their income. The VAT hike has added to the cost of living and many taxpayers are really feeling the pinch with little prospect of improvement on the horizon. The Chancellor needs to deliver a tax cut in the Budget, to ease the burden and help the economy to grow. Simpler, fairer taxes can decrease the lifetime tax bill for households and leave everyone with more of their own money, so they can decide how to spend it. 

When the poor are hit so heavily through taxation it is impossible to view current levels of taxation as fair and just. That is why we need lower, simpler taxes.

Last year, the Government delivered the biggest single increase of personal allowances in income tax history. The amount that can be earned before income tax rose from £6,475 to £7,475 in April 2011, which took 880,000 people out of the income tax system altogether. This year, the Government plans to increase it to £8,105. However, we need to go further.

I repeat the call that I made recently in correspondence with constituents:

For far too long, Governments have got away with making promises which could only be funded by excessively high taxes, immoral borrowing and damaging inflation. No other organisation would be allowed to get away with it and neither should government. More than that, I want to see lower taxes across the board. As a Conservative, I believe that less government, less tax, more freedom and more responsibility are elements of the right recipe to create a better society for everyone. I want radical change.

The economic facts behind the Autumn Statement, in as far as they are known or forecast, are available in the Economic and Fiscal Outlook from the Office for Budget Responsibility. Table 4.7 provides forecast current receipts. Table 4.18 provides total managed expenditure. So, here’s a chart of current receipts (i.e. tax) and total managed expenditure (i.e. spending) for the next few years:

The reality is that the Government intend to increase spending every year of the forecast period and to meet that spending with increased revenues. There will only be cuts as a proportion of GDP, and only if it grows. There will only be real cuts if there is inflation.

It’s tragic that we have created for ourselves a state which cannot provide more with more money and that, from the perspective of real public services, there are cuts at all.

There’s much to be said about inflation, inflating the debt away and, indeed, inflating away public expenditure. There’s something fundamentally dishonest about it. That’s why I co-founded The Cobden Centre to press for honest money: our inflationary financial system is undermining society, just as Keynes and Mises said it would.

Keynes wrote,

There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

And Mises explained,

Inflation is the last word in destructionism. The Bolshevists, with their inimitable gift for rationalizing their resentments and interpreting defeats as victories, have represented their financial policy as an effort to abolish Capitalism by destroying the institution of money. But although inflation does indeed destroy Capitalism, it does not do away with private property. It effects great changes of fortune and income, it destroys the whole finely organized mechanism of production based on division of labour, it can cause a relapse into an economy without trade if the use of metal money or at least of barter trade is not maintained. But it cannot create anything, not even a socialist order of society.

We have been plunged into the present misery by a long credit boom caused by low interest rates. Politicians now seem to be helpless in the face of a crisis caused by the inflationary financial institutions they have allowed for the decades following the collapse of Bretton Woods. The only prescription for recovery appears to be more inflation or, as they call it today, “quantitative easing” and “credit easing”.

Yet more money and bank credit may lead to a boom initially, or perhaps merely to a moderation in our difficulties compared to our neighbours, but it is bound to erode the capital stock, to hide losses and to cause a yet worse problem later. The illusion of prosperity created by “monetary activism” cannot last.

If we are to have lasting prosperity and a just socio-economic system, we need instead, as the Chancellor used to say, an economy based on save and invest. That requires, as prerequisites, honest money which holds its value and a state which lives within its means.

Click for PDF

Yesterday, I gave a presentation which sets out:

• What Conservatives have always sought to conserve – liberty against the onslaught of socialism, of state control.
• How the war of ideas has been won by the statists over the course of a century, leading to our present crisis.
• What the Coalition is doing – raising taxes to meet increased overall spending.
• Why even that hurts so much – over half of Government spending is essentially fixed in the short term, amplifying the effect on the rest.
• The three key taxes – income tax, national insurance and VAT.
• How the US rescue package made unemployment worse.
• How the Coalition is giving power away and enabling people to cut through bureaucracy.
• The shifting centre ground, the consistent values of the Conservative Party and how we need to change the terms of the debate.

We went on to discuss what Conservatives can and should do now to reshape our country and make gains in this long-running battle against the rise of the state.

The slides are available here. I have added some additional slides on debt, debasement, monetary factors and the spectrum of ideas.

In connection, I can thoroughly recommend browsing the Conservative Poster Archive: from 1909:

CPA poster 1909/10-14

Updated.

A story on Money Marketing, reporting my comments to them on a letter that two of my constituents received from HMRC as a first demand (notwithstanding HMRC’s claim in the article that it is only sent as a third reminder):

A Conservative MP says recent letters from HM Revenue & Customs demanding people pay up or face having their possessions auctioned is an example of behavioural psychology now being employed by the Government.

And

He says: “We now have the state publicly backing and using scientific techniques of behavioural psychology to extract what it wants. It is sinister. You could dismiss it as a crazy conspiracy theory if it were not online with Cabinet Office written on it.”

Mindspace is available here.

It’s ironic: according to the Adam Smith Institute, present levels of taxation are counterproductive and lowering rates would raise revenues. Yet the state is resorting to higher rates and a bigger stick.

Great.

Reminds me of The Prisoner:

Number Two: I am definitely an optimist. That’s why it doesn’t matter “who” Number One is. It doesn’t matter which “side” runs the Village.
Number Six: It’s run by one side or the other.
Number Two: Oh certainly, but both sides are becoming identical. What in fact has been created is an international community–perfect blueprint for world order. When the sides facing each other suddenly realize that they’re looking into a mirror, they will see that “this” is the pattern for the future.
Number Six: The whole Earth as the Village?
Number Two: That is my hope. What’s yours?
Number Six: I’d like to be the first man on the moon.

Steve Baker (Wycombe) (Con): I beg to move,

That leave be given to bring in a Bill to require certain financial institutions to prepare parallel accounts on the basis of the lower of historic cost and mark to market for their exposure to derivatives; and for connected purposes.

I rise not as an expert in derivatives or derivative accounting, but as someone who has wrestled with the problems of the banking system in the company of experts, both academic and practical. I am persuaded that a parallel, more conservative accounting regime for derivatives would mitigate some of the worst risks in the financial system.

Even though banks are governed by overarching EU and Basel rules, it is for British regulators to approve the day-to-day activities of British banks. This is a profoundly important role. My Bill is a moderate proposal which seeks to improve accounting transparency to enable that role, because, as Mervyn King has said,

“banks are global in life but national in death”.

Read the rest of my speech via House of Commons Hansard Debates for 15 Mar 2011. The Bill was successfully introduced.

There’s too much state intervention in banking already, so I hesitated to propose another imposed measure. However, it seems to me that until we expose the exploitative merry-go-round fostered in banking by the State, we will not achieve meaningful change.

In the preparation of this speech and supporting material, I am deeply grateful for the tireless support and encouragement of Prof. Kevin Dowd, Visiting Professor, Cass Business School, Prof. Margaret Woods, Reader in Accounting at Aston Business School and Gordon Kerr of Cobden Partners, who admits to having previously played a small but significant role in crashing the British banking system.

To learn more, please see www.cobdencentre.org.