Thursday, May 30, 2013

The bold policy that could put Miliband in No 10

Ed Miliband could transform the UK economy and his electoral prospects at a stroke by adopting radical tax reform policies.

The thought occurred to me during the Labour Leader’s spat with Google over its policy of routing profits to low tax Ireland.  Miliband attacked Google’s legalistic defence, proposing tougher rules and increased international cooperation to make multi-nationals “pay their share”.

He will no doubt be pleased by the ensuing headlines but I don’t think this rhetoric on its own will do much to improve Labour’s chance of a return to power in 2015. 

The public will see it like they do banker bashing.  They may agree with the sentiment but talk is cheap and not entirely convincing coming from Labour which toadied up to banks and business something rotten during the Blair/Brown years.

But what if Ed turned the issue into something more than speech-filler and put tax reform at the heart of his manifesto?  Rather than promise a few tweaks to transfer pricing rules and an international conference, he could propose to scrap the bulk of company tax reliefs in return for halving the corporation tax rate to 10%.

Although the Treasury would lose out from a lower headline rate they would gain from the abolition of tax reliefs and, more importantly, remove any incentive multinationals have for funnelling profits abroad.  Indeed the UK would gain from multinationals shifting revenues and profits in the opposite direction.

The knock-on benefits are potentially even more significant: more foreign investment in Britain, more home-grown start ups and billions saved in accountants’ fees.

And why stop at corporation tax?  A similar, although somewhat trickier, deal is begging to be done on personal tax: simplifying the structure, perhaps including NI abolition, lowering marginal rates and abolishing reliefs.  Tax receipts overall should hold up if enough new income is declared at the lower rates and the more efficient system feeds through to economic growth.

There’s a snag of course and that’s why it will almost certainly never happen.  

Labour is traditionally dead-set against lower tax rates and made a lot of political capital by raising the top rate of income tax to a damaging 50% and calling the Coalition “the millionaire’s friend” when it partially reversed the rise.  The left has never bought the argument about lower tax rates paying for themselves by reducing the incentive to avoid and boosting the economy.

But it’s the very unlikely nature of Miliband promoting such a policy that would make it a master stroke equal to anything Blair came up with.  Tony was the master of stealing his opponents’ clothes.  

When he adopted an apparently right wing policy he wrong-footed the Tories and used the resulting opposition from within his own ranks to his advantage.  Standing up to his internal critics made him seem strong and non-partisan to moderate voters.

That’s exactly what Miliband needs to bury the Red Ed tag.  Facing down some left-wing carping about tax cuts for the rich would do wonders for his standing with the majority of the country.  He would also have a substantial economic policy which isn’t just about spending and borrowing more which would finally distance himself from the Brown legacy.

Most importantly he would sew dismay and discord in the Conservative ranks.  They would be shorn of one of their key arguments (Red Ed’s is weak and has got nothing new) and the right wing of the party, including already wavering financial backers, would be further disillusioned seeing Cameron outflanked on their territory.

There are a myriad different ways of reforming the tax code on a lower-rates-less-breaks basis.  Ed Miliband could pledge to do it in a more Labour-friendly way by focusing more on the closing of loopholes than the lower rates.  But I don't suppose he will which is perhaps just as well because Labour's return to power would in general be a nightmare.

From our website:  Spanish maternity benefit

Monday, May 20, 2013

The best and worst of UKIP

I am delighted to see the continued rise of UKIP because it’s really rattling the established parties.   The big parties are so poor at the moment that the old joke “Don’t Vote – The Government Will Get In” keeps coming to mind (and the Worst government policy 2012).

What’s interesting this year is that UKIP has ceased to be just a home for Eurosceptics.  According to YouGov its anti-immigration stance is more attractive to supporters (76%) than its EU withdrawal message (59%).

UKIP has no chance of getting its hands on any levers of power, but it’s clearly going to be disruptive force in British politics for a while.  So it’s a good time to consider its wider policy agenda.

The BBC has published this guide to UKIP policies.  There are lots of things I would agree with but it’s more of a right wing “wish list” than a realistic policy platform.  Saying they’d like to double prison places and set a flat rate of tax signal their appeal to a certain sort of voter but have that other-worldly, we’ll-never-get-in-anyway feel that you get with minor parties.

But to be fair to UKIP, it’s really noticeable going down the list how many policies are unique to them and fly in the face of the combined big party consensus.  For instance, no one else is speaking out against the madcap energy policies that Labour and now the Coalition are pursuing.

I am particularly heartened to see that UKIP oppose HS2, the multi-squillion pound high speed railway project. 

If you speak to most people about HS2 they are really sceptical – about the build costs, the alleged benefits, the time to delivery, fare affordability and simply whether the government is being honest about the case it is trying to push through.   Unsurprising when you consider what happened with the much less ambitious HS1, a 68 mile line between London and Folkestone.  Passenger numbers have been 1/3 of what was predicted and the consequent revenue shortfall has left the taxpayer on the hook for £10bn!  People can wearily see HS2 going down the same track (sorry for the pun) but at much greater cost because it’s five times as long. 

So hats off to UKIP for at least trying to slow down the public sector money-wasting machine.

I am less impressed by their immigration policy which is under review but is currently a commitment to freeze immigration for 5 years.  That’s frankly ridiculous.  London is the UK’s biggest success story in recent decades and a relaxed policy to immigration has been a key component.  To think Britain can thrive while locking its doors to the rest of the world is very misguided.  To give an example of the harm this policy would do, we would become a much less attractive to multinational companies and high net worth individuals who come here to spend money, invest and start businesses.

That’s not to say there isn’t a problem – uncontrolled mass immigration of the kind Labour and the EU have foisted upon the UK has caused all sorts of legitimate concerns about crime, jobs and strain on public services. 

But the right way to go about it is leave the door open to immigration while simultaneously tightening the requirements for staying in the country: anyone not working for an extended period or who breaks the law should lose their right to stay.  

UKIP and the Coalition are at least making the right noises about immigrants having to pay tax for several years before having access to benefits and public housing.  As UKIP recognise, doing anything meaningful on immigration will require Eu withdrawal (EU's migrant rules prove the Referendum case).

All in all UKIP is a welcome breath of fresh aware and deserves to harvest the right of centre protest vote, but risks looking old-fashioned and intolerant without some more nuanced thinking on one of its flagship policies.

From our website:  Taxation of Spanish Rental Properties

Sunday, May 12, 2013

It's easier than you think to give up news

Inspired by this article - News is bad for you - I gave up news last week: no news in print, online or on TV/Radio.  I included all sorts of media such as blogs, sports reports, free papers, magazines and finance websites.

I don't necessarily buy every argument in the article which sees our news-saturated lives as "toxic".  But I do accept that I generally waste a lot of time on news of dubious value and thought it might be an idea to see how it feels to be news-free.

Actually I got through the week fine with only one or two moments of weakness, the main lapse occurring on a flight to Spain when they handed me a free Daily Mail and I couldn't resist the sports section.

But essentially I did go news free.  First consideration - did I miss anything?  I still saw headlines occasionally and people talk, so I got the gist of the big things going on.  So I didn't feel in the dark or ignorant.

I did miss my news fix at certain times of the day when part of my routine involves news consumption e.g. looking at sports and finance websites when I eat my lunch.  I read more of my book instead but there are times when you just want to browse or flick through something.

Were there any positive benefits?  The article talks about too much news inhibiting your mental capacities, especially concentration and memory.  I can't say I noticed any positive side effects along these lines, although maybe a week isn't long enough to notice the effect.

All in all, the week taught me that I could quite easily survive with less news in my life.  In future I will cut out any aimless browsing and viewing and just check out a few news articles a day at the times which suit me. I suspect the main benefit is that I will get through more books.

From our website  - Spanish non resident taxes
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