Ukraine and Crimea

A long way off-topic.

I am astounded at the self-evident incompetence of Western diplomacy here. Since the start of the Kiev protests, the West has not put a foot right.

It was far too loud a cheerleader for the protests to begin with. It has failed to condemn the nationalist ultras who led them. Like Russia, it has put all the West-Ukrainian people under the same heading; Russia describes them as Nazis, the West as democrats. They are probably mostly democratic, but many of the people on the front line were right-wing vigilantes. There is no place in the EU for a nation run by such people.

As soon as the old regime collapsed, the West should have started vocally to agitate for minorities, Russophones and Tartars especially. Self-determination is an important democratic principle, which trumps “territorial integrity”, so the West should have been vocal in pushing for a plebiscite in Crimea. That’s a “yes, but later”, rather than a “no, never” to Putin.

We know Putin was sore at losing his puppet in Kiev. He may well have encouraged the shooting; after all, it worked for him in Grozny. The West’s reaction to this wounded bear? Poke it with a stick!

Kerry, Hague and Ashton feebly echo the paranoia of the former Soviet satellite states who are now their allies. The West can tame the Russian bear, but we will only do so by championing our values rather than taking sides. Putin’s charge of hypocrisy is not without its validity.

PIE, lies and liberty

Obviously, the present row between Ms Harman and the Mail is all politics.

Predictably, Ms Harman has failed to make the case she should be making about her past; political cowardice is rife.

So let me do it for her.

The Paedophile Information Exchange stood for repugnant views. But I will defend to the death its right to to express them, and that is what NCCL should have done and been doing.   People like Hanson, Hose and O’Carroll were far more honest than, say, Stuart Hall or Jimmy Savile. 

Paedophilia is now considered the most heinous of crimes. PIE may well, unwittingly, have helped us come to that position. It sought publicity, it made its case as in a free society it had every right to do. And it lost the argument on the merits of the argument.  Paedophilia is a perversion and acting on it is criminal.

NCCL was right to support PIE’s right to make its case, and no apology is needed.

 

Scotch Salmond

The title is in the imperative mood.

I was once a member of the SNP (in 1975, shortly after I first got the vote, and lived in Scotland). The English attitude, always conflating “England” and “Britain” was as condescending and irritating then as it is now.

These days I identify first and foremost as a Londoner with English heritage. I have family links to Scotland and love it dearly, and despite my youthful aspirations I now fervently hope that Scots will vote no in September.

But I’m still not sure that were I living in Scotland I would do so. Independence is an appealing prospect. A Nordic Scotland, fat on oil wealth, pursuing its own destiny free of the Tory lairds….

Let’s start with the non-arguments against independence, and dismiss them. First, the pound. If England doesn’t want a currency union, there’s no way Scotland can make it join one; and for lots of political reasons England doesn’t. But that doesn’t matter. Scotland could do what Ireland did from 1928 to 1979: shadow sterling with its own pound pegged at parity to sterling. It would constrain Scots fiscal policy just as tightly as a currency union and create no problems for the banks – who would behave as if there were a currency union. The only overhead is that Scotland would need actively to manage its currency, and its fiscal policy, and its balance of payments, to maintain parity. In a currency union, it would need to do the same, differently.

Second, the EU. Mr Barroso is in danger of sounding like a travelling Scot – which is to say, repetitive. He is almost certainly wrong.Whether Scotland could inherit its share of UK membership is an issue that will probably be decided by the European courts – and it seems to me that the arguments, which I won’t rehearse, favour Scotland. In any case, the EU needs a solution to the problem of secession by regions of its member states. Would Mr Barroso be making such a fuss if Czechoslovakia split after its accession rather than ten years earlier? Of course not; the EU would have bent over backwards to keep both the Czech Republic and Slovakia in. It is also, of course, just as arguable that the UK’s membership should also stop, because it will be a different nation (The United Kingdom of England, Wales and Northern Ireland) rather than The United Kingdom of Great Britain and Northern Ireland which joined in 1973. Barroso has his political agenda, but I think the law, practicality and the politics are against him.

So, two non-arguments filling the headlines dismissed.

As a Londoner, I desperately want Scotland to stay in the UK because of the electoral arithmetic; the reactionary conservatism of most of my countrymen isn’t shared by most of us in London. But that’s a good argument for Scottish independence, because Scots will never again be subject to English Tory laws like the poll tax. No, we few English progressives shouldn’t have to rely on Scots support; we must make our own case and win it.

So why would I, eventually, vote “No” – were I to live in Scotland? Because I think that there are better ways to build a better Scotland than creating a new nation state.

Nation states have had their day, and small nations are mice for big cat corporations to toy with . Ireland is in hock to Apple and Amazon; Scotland will be in hock to Donald Trump and BP, which will become its paymaster.

There are three politicians of the present generation who outshine the rest. They are Alex Salmond, Boris Johnson and Nigel Farage. Their talent and their appeal is obvious, but we should always beware the smooth-talking demagogues. Independence gives Salmond and his friends an even shinier new toy to play with. But these demagogues will quail against the corporations; to deal with these big cats of the modern world you need powerful nations with powerful legal systems and a strong civil service.

Scotland as a place, as an idea, as a nation, will fare better without the political constructs of independence. Independence can’t bring the freedom that Scots want and deserve; the liberty that goes with it is a chimaera. But a newly-confident Scotland, enjoying the fruits of devo-max which will be the inevitable result of a No, can forge a new nation without the bonds of statehood, and so can we Londoners. In fact we’re already doing it, but that’s another story.

Land Value Taxes

Years ago, before there was such a thing as Liberal Democrats or the Poll Tax or Council Tax,  the Liberal Party had a policy to replace the rates with something called Site Value Rating.  SVR really didn’t get the pulse racing and was widely confused with STD (a way of ringing someone up in another town without going through the operator) and STV, a form of proportional representation.

But it was a good idea then and it’s a good idea now.

You are taxed for the value of the land you occupy, regardless of the value of any buildings on it. For the Liberals back in the day it dealt with the problem that if you put a bathroom, or an inside lavatory, in your house, your rateable value would go up and you’d pay more rates – which was one reason the rates were so unpopular. 

Land value taxes, or Site Value Rates, are fair. Land value is created as much by the community around you as by your occupation of the site. If you get planning permission for a new whatever, the land value goes up. You are taxed for that increase, but not for the value you put in when you build the new whatever.

But they suffer from the same problem, subjective determination, that I outlined in my previous post about wealth taxes. However, it is manageable, because we are only dealing with one class of asset rather than anything from shares to thoroughbreds. There is an established land valuation profession, and a government agency, the Valuation Office Agency, that does it all the time for other tax purposes. So although it’s complicated, and will create something of an opportunity for tax advisers, it’s doable.

However, there is one thing that must be done with the new tax, and that’s that revaluations should be continuing, with values always indexed to  a taxable date in any year. Rates revaluations were always politically contentious and they kept on being postponed until domestic rates were abolished. There’s still a big issue with business rates and the delayed business rates revaluation is having a bad effect on the high street.   If revaluations are ad hoc, it will create all kinds of problems.

 

Tax Reform: a wealth tax?

I follow, on Twitter, the so-called “Red Tory” Philip Blond.

He has tweeted a few times today about a wealth tax and a tax on land values (which the think tank ResPublica is working on, and which is a much better idea).

A wealth tax is a tax on net assets, that is, the value of what you own less what you owe. It’s usually levied at a few percent a year. Many countries have such a tax (in France, it’s called l’impot sur la fortune). It’s quite different to an income tax, which is a tax on what you earn. In theory, it’s a great idea. In practice….

The big problem with a wealth tax is determining the value of what’s being taxed. It’s a practical problem, not an economic problem. Values go up and down. It’s relatively easy to value liquid assets, like publicly-quoted stocks and shares, but what about the value of a private company? The old master on the wall of the mansion house? M’lady’s tiara? The contents of the cellar? Do you have to get a valuer in every year? Or do you value it, say, every five years and then apply an indexation figure for a particular class of asset?

Immediately you run into complications. And it immediately creates an opportunity for tax advisers, who will be all over your assets (if you are rich) working out how to minimise their taxable value. Much as they do with income and capital gains. This isn’t necessarily a bad thing, after all, the tax profession is an important sector in our service economy…. but in my view it is a significant weakness in the proposal.

I think that objective determination of the tax base is very important to make taxes fair. It’s a weakness of income tax that income (specifically, the difference between income and capital gain) is  subjectively determined, according to complicated rules which create an ecosystem in which tax professionals thrive.  It’s this complexity that explains why the 50p top income tax rate will raise much less than it should and won’t solve the deficit problem.

 

Cameron’s misleading stats

Average take-home pay went up by more than inflation last year to April 2013 for everyone but the top 10%. Proof, according to Cameron that everyone is getting better off; but the truth, as people feel, is that it’s still tough and getting tougher.
So is Cameron lying? No. His claim seems to be true, but it doesn’t do what he says it does.
The biggest problem is the inflation figure, in this case RPI.
This is always a political hot potato and the rival CPI – consumer prices index – was invented to take housing out of RPI, buffing the glow of a housing boom. Politicians now choose whichever most suits their arguments.
However, neither of them measures the problem felt by millions of ordinary people every day, which is that essentials have been going up faster than fripperies. Both CPI and RPI measure the prices of a basket of goods containing the sort of things that most of us spend our money on. The basket changes regularly to reflect changing habits, but it – necessarily – includes non-essential items like electronics, on which we spend more and more of our money. A lot of the non-essential, tech-based stuff we buy has been falling in price, which is a good thing – but it really distorts price indices, and explains how Cameron’s statement disguises the truth.
Essentials are things like food, rent, fuel, commuting and childcare. Not luxuries, feel-good items like a new phone, but the bills you have to pay every day, week and month whether you like it or not; and for most of this Parliament they’ve been going up a lot faster than RPI. It’s this faster-than-RPI rise in the costs of living that is causing the cost of living crisis and makes it hit the poorest hardest.
Cameron understands this, but he has no interest in doing anything about it.

The best riposte would be more statistics. I propose a new prices index, the essentials prices index, or the cost of living index, based only on a basket of essential items: rent, food, fuel, commuting and childcare. The purpose is to measure the effect of price changes on the poorest part of the population.

It’s also worth pointing out that the main reason Cameron’s claim is true (take-home pay rising faster than RPI) is the rise in the personal tax allowance, which is a LibDem policy. Cameron’s preference is to reduce tax rates, which is generally less progressive.

Nation and Super-Nation: England, Britain, Europe.

I detest Tories mostly for what they do to the social and economic fabric of the nation, enriching the privileged and squeezing the dispossessed, but their current antics over Europe add to my despair. (I hasten to add that many Tories are actually lovely people – some of my best friends have even met some….)

You see, they keep going on as if we had a choice of being part of Europe or not.

We no more have a choice of continent than we have a choice of parent. We are European; we have a common history since we were all conquered by the Romans. We’re family. 

So the debate is not in or out of Europe, but in or out of Europe’s ruling cliques. We find many of them annoying in the same way that we find our siblings annoying.

There is a lot wrong with the institutions of Europe; most of them badly need some reform. Reform will be good for all the member states, because, you know, that same thing about America and General Motors. What’s good for Europe is good for Britain (and vice versa).

According to the backbench Tory approach,  the best way to achieve this  reform is to threaten to flounce. Flouncing was a pretty pathetic negotiating ploy when we were adolescents; it didn’t work then because we always had to come grovelling back for dinner and, because we’re like geographically, culturally and economically attached, we can’t flounce off out of Europe either. We’ll just  end up stranded on the cold side of the door we  slammed behind us.

No, we’ve got to grow up and negotiate as equals with our partners, build alliances, put forward our case and advocate boring but essential reforms. Changes to the Court of Auditors to force transparent accounts. More power to the Parliament, to balance the democratic deficit. Keep regulation  simple and focused on the single market.  Harmonisation and localisation according to  the principles of subsidiarity: eurobuzzword Bingo! This reforming agenda needs statesmanlike leadership which our politicians, on all sides, sadly lack.  Dealings with Europe are presented as protecting Britain’s interests - good – as if these are somehow antithetical to European interests. They’re not. Repeat ad nauseam: what’s good for Europe is good for Britain and vice-versa.

Tories often refer to Churchill (not as often as they do to Thatcher though). For the post-war settlement, Churchill favoured a United States of Europe, of which Britain would not be a member. If it was good enough for Churchill, it’s good enough…. Except, it isn’t. Churchill was an imperialist and he saw Britain in terms of its empire including the Dominions. In 1945 that included a great deal of Africa as well as India, but the sun would soon set on it. The empire had fed us during the war but at a terrible cost. Food miles were expensive in terms of seamen’s lives as well as bunker oil. Practically and economically we needed to build trading links closer to home, and Churchill’s imperialist vision was no longer morally or economically sustainable.  As the leaders of mainland Europe built  structures to replace conflict with co-operation, Britain looked anxiously from the sidelines, enduring the Gallic non until 1973.

Now there are 28 member states, and the constitution developed for six is creaking.  Europe has changed and continues to change. Reform is essential, but it’s not about renegotiating Britain’s relationship with Europe: that’s fixed, we’re a part of it. It’s about developing a robust, flexible constitution based on the three essential freedoms of the Treaty of Rome, that will work for a new and expanding Europe, one that could include Turkey soon and might well go on to include nations on the other side of the Mediterranean basin which also share a Roman heritage.

In the shorter term, it has to address two pressing issues which have so far been neglected or fudged. The first is to adopt a mechanism that allows for newly-independent states to continue in membership, which may mean Scotland, depending on the result of September’s plebiscite. It should be a given that citizens of Europe cannot be deprived of their freedoms. The second is to deal with the problem of the Euro.  The Euro is a great idea, badly implemented; it was lucky to survive the aftermath of 2008.  Trade across a single market with multiple currencies is bound to be more costly than using a single currency, simply because of the exchange costs; so if we want to make the single market work, we really need to make the Euro work.  But while it is broken (and without banking union, it is broken), member states retaining their own currencies must not be put at a regulatory disadvantage: the trade disadvantage is bad enough.  Mr Osborne is right to ask for some safeguards, although the manner of his doing so is regrettable and his motives suspect: he will protect his chums at all costs.  If the Eurozone does manage to reform its institutions, strengthening the ECB so that its monetary firepower is unrestricted, and implementing  banking union,  the case for British membership would be revived. It will need a political revolution here, but it may still be economically desirable in the end. It is quite possible that national currencies including both the pound and the Euro will eventually become entirely irrelevant, superseded by independent, non-national digital currencies such as BitCoin, but that’s quite a long way off.

If the Scots do secede, and rather selfishly I hope they don’t because of the English electoral arithmetic, England too will become a nation again. Its economy will be even more dominated by London. London is Europe’s most influential city. It is our New York and Brussels could become our Washington, Edinburgh our Boston, Amsterdam our New Orleans, Barcelona our San Francisco, Frankfurt our Chicago. Add Helsinki, Copenhagen, Paris, Rome, Venice,  Athens, Prague, Budapest… one can love Europe just for its cities.

I suppose I should mention Mr Farage. He is, with Mr Salmond and Mr Johnson, one of the few charismatic politicians active today.  Each is more demagogue than statesman. But for all that I disagree with him, he is perhaps the only hope we leftie English  have of defeating the Tories here should  our tartan comrades desert us.

Buy-to-let taxation

The more I look at this, the more I am convinced that buy-to-let income isn’t being fairly taxed. 

Fair taxation of BTL should be a  pillar of Labour’s next manifesto (OK, subject to a little bit of cynical key marginal/swing voter analysis: are BTL landlords likely to affect the outcome of the election in key marginals? Don’t expect they are, but  if so, shh… don’t put it in the manifesto but sneak it in in the first Budget).

Here’s my suggestion.

- Remove mortgage interest as an allowable expense against BTL rental income.

- Replace maintenance and repairs as an allowable expense with a single, flat allowance.

- Require that all BTL tenancies  be notified to HMRC

- Provide that if a BTL tenancy isn’t notified, the tenants have security of tenure and can get the rent fixed by the Rent Tribunal. 

- Tax all BTL income under Schedule A at the higher rate for taxpayers under State Pension age.

- Make letting agents responsible for deducting tax at source

- Let tenants search the HMRC website to check their landlord has registered the let.

- Make CGT chargeable on BTL homes when they stop being used for BTL, e.g. become someone’s main home.   

 

EU Benefits

Seldom do I agree with the right, or these days with Nick Clegg. 

But it does seem to me that the benefit rules could seriously be improved. Not because, as we know, it’s much of an economic problem, but because it’s become a political problem.  Benefits have little to do with the free movement of people and labour, and I will always support that.

I’m not sure, though, that a simplistic time delay is quite the right answer. As a European, I have a feeling that what’s needed is a Directive harmonising the benefit rules across the Union.  Hardly something that the Eurosceptics will love, but it’s a neat political answer that pro-Europeans should be championing.  Europe solves a European problem.

There’s room for plenty of debate about how it should work. Perhaps something like this:

- Member states decide the levels of social security benefits for their own country

- Directive sets out certain minimum and maximum criteria for entitlements. 

- Entitlement must not be discriminatory, that citizens of all member states must have the same entitlement to benefits in every member state;

- criteria for entitlements must meet certain minima but could include a residence requirement. NB not a citizenship requirement, that would be discriminatory. 

- the residence requirement could not exceed a level set by the Directive, (3 months to five years have already been suggested; I’d go for six months). 

- this needn’t be a country, could apply to a local authority. So if I move to London from say Newcastle I shouldn’t be able to get housing benefit or JSA until I’ve lived there six months.

- the same applies if I move to London from Bucharest or Sofia.

- But I should be able to apply to my local government to take my benefits with me for the same amount of time, so say I was on the dole in Romania, I could ask them to send the same money to me in London until I was entitled to London dole. Or I got a job, whichever was the first. 

Osborne, David Cameron’s Dick Cheney.

Or should that read David Cameron, George Osborne’s George Bush?

Today’s piece in the Observer, by Nick Cohen, is right on the money.

The whole of the Coalition is a nasty piece of work, but the most cynical, manipulative and sectarian of them all is George Osborne.

He is a lot smarter than he looks. His manipulation of the economy is masterful, timing the false growth from asset inflation to peak for the next election. His agenda is simple, to keep his party in power so that his people can carry on looting the wealth of the country.

As George Bush was to Dick Cheney, so Cameron is to Osborne. 

It is a small mercy that the mechanics of  Osborne’s raids – the destruction of the NHS and the aspirations of the young and poor – don’t involve quite so many dead as Cheney’s Iraq war. But the purpose is the same.

 

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