Tag Archives: common good

The price of a free market

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As you do, I’ve been thinking about free market economics. So my thoughts turned to the Conservative party, the party of Thatcherism, natural home of free market economics. You’d think. But wait, what’s this? David Cameron wants to stop the free movement of people in the European Union. Well, he can’t have it both ways.

In a free market, prices reach equilibrium between supply and demand – how much they cost to produce and how much people are prepared to pay. This is tied up with the labour market. Wages are determined by supply of and demand for labour, and the cost of wages impacts on the cost of goods. In order for the buying and selling processes of the market to reach a fair price, there should be no barriers to such buying and selling. Otherwise this distorts the true market value. And for prices to reach equilibrium, labour must follow the work, or workers become scarce, wages rise and prices rise. For the market to work, people need to move to where the jobs are in order for supply and demand to keep up with each other. So, we are apparently governed by a party which believes in free market economics but no longer wants the free market to operate in Europe.

I am by no means a defender of free market economics, but if you want a free market, then you need a free market. Restricted movement of people around Europe is not a free market. If you want to intervene in the market, be my guest, I think it’s important that we do. But then you’ve conceded the principle that the market cannot be left to its own devices for the good of society, and it’s no good pretending you haven’t.

And here’s another reason why we can’t leave it to market forces. Openly stated on BBC news last night, in a report about the spread of the Ebola virus in West Africa, the reporter said that, until now, the virus had not affected enough people to make it worthwhile developing a vaccine. He meant financially worthwhile for the pharmaceutical industry, but that doesn’t really matter. In a free market, there must be thousands of people at risk of dying before it’s worth investing any money in order to save them. Because otherwise the company won’t make enough money. Well, that’s business, you cry. But that is precisely my point. What’s good for business and the free market isn’t the same as what’s good for people and society. Developing a vaccine for Ebola should never have been left until it made market sense. This is where public money should be spent for the good of all.

Not all our financial decisions should be left to the processes of free market economics. Some decisions are far too important for that.

 

HMRC says I’ll Take That

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I’ve found the reaction to Gary Barlow’s failed tax avoidance scheme very interesting. As I understand it, the scheme he (and a few other people too) invested in (apparently to support up-coming musicians) has been ruled not to work as a means to off-set taxes due, so the tax on earned income invested in the scheme becomes payable. He hasn’t actually done anything illegal, unless he now fails to pay his taxes, and yet there have been calls for him to return his OBE.

Have we finally reached the point where trying to find and exploit loopholes in tax laws is considered morally wrong if not illegal? Perhaps it’s the OBE that upsets us – given for raising funds for good causes which would probably have benefitted from his tax revenues. Perhaps it’s just because he’s been found out – should or would we have felt the same outrage if the tax scheme had been ruled as legitimate?

However we look at it, it seems to me that we’re not keen on the idea that someone with lots of money isn’t contributing their fair share to the welfare and benefit of all society. This runs contrary to what our Government believes – that we mustn’t tax our so-called wealth creators too hard or they will run away and take their wealth creation elsewhere.

But wealth creators only benefit society if their wealth is shared around into the economy. The theory of trickle-down economics has collapsed under the pressure of the growing gap between rich and poor since the advent of Thatcherism. Rich people’s money isn’t circulated in the economy – it is hidden away in off-shore, tax-free investments. If we want the rich to contribute to the well-being of all, it’s going to be through taxes.

We seem to have the same attitude when it comes to companies too. Even our politicians are up in arms at the idea that the American pharmaceutical Pfizer wants to take over the British Astra Zeneca because they suspect the deal is all about stripping the assets from the British company and then benefitting from the low tax rate in the UK. In other words, using Britain as a tax haven. But it is the same politicians who have created the environment to make this possible. Attracting companies from overseas is one thing, but like with individual wealth creators, the wealth that is created needs to come into the economy.

So what do we really want? Do we create the conditions for individuals and corporations to pursue wealth for their own benefit (after all they have worked for it) and hope that we might gather up some crumbs from the table? Or do we want a system which works in the best interests of the whole of society, where each (individual and corporation) contributes to the good of all according to their means? The public reaction to both these stories suggests we want everyone to contribute to a better society. Let’s do what we can to make sure these principles are applied by those in power making our legislations, and think about these principles when we vote on Thursday.

Finally, thinking about contributing according to means and progressive taxation, I’m going to leave you to look up a story Jesus told about the offerings of the rich compared with a poor widow in Mark 12 v 41-44.

Solving food poverty in Liverpool

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I spent this afternoon at a really interesting conference organised by Can Cook searching for solutions to food poverty in Liverpool. There is so much amazing work going on in the city to support people and help them, from a comprehensive network of food banks to initiatives in schools and communities to help people learn to cook and make nutritious meals on a budget. Many of us at the conference are shocked at the increasing numbers of people relying on food aid – the number of people accessing Trussell Trust foodbanks has tripled this year. How did we come to this in the 7th richest nation in the world in the 21st Century?

Even those of us who work in food banks know that they can and should only and always be emergency support for people in crisis, and should not become embedded in our culture. Thinking long-term, I’m impressed by the cooking projects in the city, teaching skills, building community, providing resources. Equipping people is necessary if we want to tackle poverty. Lots of us would like to see the tinned and dried food provided in a food bank food parcel added to with fresh food, and some food banks have successfully incorporated fresh food into what they give out. The idea of food aid + was described by Can Cook. They have asked chefs to create 10 meals with just 15 ingredients, and suggest we could ask for these ingredients to be donated by the public in the same way that food items are donated now. I foresee logistical difficulties, but it sounds good in principle.

But I don’t think any of this gets to the heart of the matter. It does not answer the question ‘how did we come to this?’ The bottom line is that people are relying on food aid because they do not have enough money to buy food to feed their families. And sometimes people don’t have enough money to buy gas or electricity to cook said food or warm their homes. This is what we need to address. The reasons are varied and complex, including debt, benefit delays, benefit changes and sanctions, the rising cost of living, and not least new pressures on household budgets from the bedroom tax (sorry, withdrawal of the spare room subsidy) and council tax contributions. But as someone said this afternoon, one of the reasons is certainly not national poverty. The UK is a rich country, and the problem is inequality.

I read with horror that David Cameron has recently given a speech saying that austerity is the new normal.  Austerity is a big con, and a façade for the deliberate shrinking of the state. While services are being cut and support for the vulnerable in society is being removed, there is still enough money in the treasury for tax cuts for the richest and for businesses. People with mental health problems and disabilities find their benefits are stopped for failing to jump through enough hoops, while businesses are happily avoiding paying between £45 and £100 billion in tax jumping through as many tax loopholes as their accountants can find, according to Church Action on Poverty.  Where is the commitment to a Living Wage, so that people who are in work can actually afford a reasonable lifestyle without relying on state or food bank top ups?

The most striking comment of the afternoon, for me, was a remark about free school meals, during a presentation about the School Food Plan. In schools where universal free school meals were piloted, levels of attainment across all economic backgrounds improved. In other words, even children who might be expected to be well fed already benefitted from free school meals. But even more strikingly, the biggest improvements were observed for the poorest children. Not surprising, you say, but actually, these were the children who were already entitled to free school meals. So it wasn’t the introduction of free school meals which made the difference for these children, but the universality of the benefit. This is a demonstration of the difference that can be made when we truly work together for the good of all, for the common good.

Hard-working taxpayers

I’m growing to really dislike the phrase “hard-working taxpayers”, especially when it’s used to  talk about how much money they will apparently save because of some scheme or other.  I came across it again while I was reading an article about the devastating impact of the Bedroom Tax on residents in Liverpool.  I expect I will feel moved to write about that outrage at some stage, but for now, I want to concentrate on the claim from the DWP that “This reform will save hard-working taxpayers almost £1bn”

Let’s be clear. No reform of any sort will “save” any taxpayer any money at all.  Taxpayers will still be paying exactly the same amount of tax, and even if the “reform” saves any money (which, in this case, I sincerely doubt), it will just be spent on something else.  Personally, I’d rather pay for cohesive social communities than Trident.  The current economic deficit means that it will be a long time before any reduction in Government spending has any chance of leading to tax cuts.

But this aside, I still have an issue with the phrase “hard-working taxpayers”.  It conjures up an image of people working their fingers to the bone only to have all their money taken away by the taxman.  I exaggerate, but let’s think of tax differently.  It is our contribution to the common good, our citizens’ commitment to one another.  It is one of the ways we have a share in our common humanity and support each others’ wellbeing.

And please let us remember that not everyone who works hard pays income tax.  There are plenty full-time carers, homemakers and community volunteers who do not receive any remuneration for their work.  And there are many who work hard but at low paid jobs who do not reach the income tax threshold. (This is another bugbear of mine, when politicians raise the tax threshold and then claim to have helped the poorest. No. The poorest weren’t paying tax anyway because they are poorly paid on low hours or zero-hours contracts.)

Actually, even the unpaid and low paid are still busy paying taxes every day – VAT, fuel duty etc.  These taxes have been steadily rising while income tax has been falling, yet these taxes are hidden from sight and have a greater impact on the poor than the rich.  And so to talk about raising tax thresholds to take people out of tax is nonsense, it only applies to income tax.

So let’s get away from this image of the hard-working, hard-pressed, poor old burdened taxpayer.  Instead, why not rejoice if you earn enough to pay income tax and can contribute to those things you have benefitted from, and which have enabled you to earn as you do? And let’s value people and companies who feel the same and want to contribute their fair share. I’ve come across some websites which are trying to quantify which companies are good taxpayers.  One is Tax Ticked and the other is Fair Tax, which was flagged up by 38 degrees last week.  I can’t vouch for their content – see what you think.