British Politics’s Blog

The ravings of an individual, UK voter frustrated with our politicians

Posts Tagged ‘tax payers

Stop banks from carrying forward losses to offset future profits

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Most analysts forecast that most, if not all of our high street banks will shortly announce record breaking losses, as many re-value their assets and take the write-off’s on the chin. In fact, informed pundits are suggesting that this will continue for another 2-3 years. Well, there is little or nothing we can do about that.

However, any bank that has been in receipt of state aid, support or taxpayer sponsored insurance schemes must not be allowed to benefit from a double whammy. That is to say that, whilst the taxpayers of this country take on much of the risks associated with their recklessness, the banks carry forward these massive losses, to allow them to offset past losses against future profits. That would most certainly rub salt into the wound. Under current taxation rules, business can carry forward past losses, to set against future profits. This concession made sense for most businesses that have a difficult year or two, or those that are in a start-up phase. It should not be used to reward banks and their shareholders, when they have had to rely on a state bailout or support programme to allow them to survive intact.

Government ministers and opposition parties must provide the assurances, here and now, that the banks will not be permitted to carry forward past losses, to offset against future profits where these banks have been in receipt of any state aid. A failure to do this will allow banks and more specifically their shareholders to receive handsome ‘tax free’ rewards at the very time that the taxpayers will being having to accept higher taxes as a direct conseqeunce of the banking crisis and the largesse, or indifference of our government and ministers. This would be completely unacceptable. If the banks were not so integral to our economic well being, they would not have been treated as a ‘special’ case and received such massive state aid. But they are and they have been. MP’s must now undertake to identify the banks as a special case in the future, given the racing certainty that they would, under existing rules, be rewarded with future tax breaks/concessions.

Once we come out of the other end of this recession, taxes will rise and if the past is anything to go by, the public will be expected to pay the lions share through direct and indirect taxation. This country will need banks and industry to pay their fair share. We cannot afford any bank or any business to use 2 or 3 years of losses to offset against the following 2 or 3 years profits. Everyone needs to make a contribution. If business, such as the car industry are in receipt of state aid, then they must also be prevented from offset past losses against future profits, similarly, if these businesses are not registered in the UK for tax purposes, then they must undertake to do so before any taxpayers funds are advanced and for a period beyond, to make sure that taxpayers benefit in the future. Now is the time to be negotiating tough terms and looking ahead in terms of these banks and businesses making a real and tangible contribution in the future. A failure to do so will result in a massive public backlash in the future.

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UK Economy, can the future be so bright?

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It doesn’t really matter who you listen to, everyone seems to believe that we will come out of the recession leaner and stronger, with most arguments centering on how deep and how long the recession will be. There are also varying estimates as to the level of debt UK Plc will have and also how long it will take to reduce this debt mountain via increased tax revenues. Maybe I am cynical, naive or just plain stupid, but I can’t for the life of me see what we are going to be left with when the recession does actually end.

We know that after the last recession, our manufacturing industry was virtually decimated, not only did many people lose their jobs, but an industry dating back to the Victorian times disappeared virtually over night. Therefore, even if the pound is weak, surely we cannot rely on manufacturing to provide jobs and tax revenues.

So what of the financial services and banking industries? As we all know, this particular recession has been brought about, for the most part, by poor lending decisions of the banks. In addition, much of the profit derived from The City was via ‘manufactured’ trades of bundled mortgages, securities and so on. The financial services and banking sector have now had their fingers burned. In addition, one of the main attractions of the UK was light regulation, and there is every indication that the UK authorities will now start to tighten the rules. Taking all these things together, it is most unlikely that the UK banking and financial services sector will ever look the same again, nor will it offer the same levels of GDP contribution, jobs or tax revenues. Added to which, with many financial institutions and banks harbouring massive losses, it is quite likely that they will not have to pay any corporation tax for a good few years to come.

As our manufacturing base declined, our GDP was propped by the banking and financial services sector, given the above, do we really have any hope of a strong recovery from any of these sectors? I think not. On top of everything else, before the recession, the government were steadily increasing corporation tax as well as red tape. As a direct consequence, the UK was no longer the land of milk and honey from a tax perspective. So in recent years we have seen more and more companies registering their businesses abroad for tax purposes. Southern Ireland is a case in point, where their tax regime is considerable more attractive than our own. This will lead to a further loss of jobs and more importantly in the current debt climate, a loss of tax revenues.

Then their is our carbon emissions targets. Our government has committed to a reduction of 80%, this is not empty rhetoric, they intend to make it legally binding. Similarly, a reduction in carbon emissions is not incentive driven, instead is uses a stick rather than carrot approach, meaning higher ‘green taxes’. These taxes will hit not just business, but individuals as well and of course the price will have to be paid both at the tills and in the way of fewer jobs. What this means is that is that any UK business will be subject to higher direct taxes and higher indirect taxes via ‘green’ initiatives. Now, because the UK is one of the few countries taking carbon reductions seriously, it means that companies operating in the UK will be subjected to a competitive disadvantage when compared to other countries.

Then look at what has been driving sales over the past 10 years, the so called “credit bubble”. The economy has grown as a direct result of easier credit, low interest rates and rising house prices. The latter has made people feel more wealthy, leading to a release of equity through remortgages or secured loans, the ‘easy’ money has than been spent in th High Street, on consumables, cars and nice holidays. In a harsher climate, with less money available to consumers, a stagnant housing market, higher taxes and fewer people in work, it is difficult to see how or when we can expect a return to ‘business as usual’.

So, whilst I know the politicians hate to paint a picture that is considered too negative or gloomy, I would like to witness them share their thoughts on just how everything is going to be fixed and over what timescale. Becuase, in all honesty, unless I am missing something, the future does not look too bright.

Do not bank on the banks

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My attention was turned to an interesting post over at Power to the People which followed on from my own post in respect of a bankers claim that “banks are not charities“. The post that I am referring to relates to corporation tax that banks would normally pay and comes at the whole issue from a perspective I had not considered, but is, nonetheless, very relevant in the current economic climate.

As everyone knows, the high street banks are posting massive losses as they move to write-off questionable assets and large consumer debts. However, under the current HMRC rules, they are entitled to carry over losses to offset against profits in future years. This means, that in spite of the significant risks being borne by the UK taxpayer as a direct consequence of the banking bailout, when things improve, there will be no win for us. In other words, the big banks, will not have to pay any form of corporation tax for some considerable time to come, perhaps, in some cases, for the next 5 years.

This, whilst perfectly legal, is an outrageous state of affairs and in my view, must be treated as an exception to the rule. Gordon Brown must bring in urgent new legislation to prevent the banks carrying forward these massive losses to set off against future profits. The principle of carrying forward losses is a good one, however, in this particular instance, it would leave the taxpayer with a very sour taste indeed. Failing which, the government must advise the banks that they could be subject to a windfall tax equivalent to any loss to the Exchequer in terms of tax revenues. The full article can be read here: Will taxpayers lose out to the banks again?

UK banks are not charities

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A senior figure at one of the major UK banks was quoted on Channel 4 News as saying that “banks are not charities“, needless to say this coward was not willing to have his name revealed. But what hypocrites these banks are, they claim that they are not charities, yet they clearly think that the UK tax payers are, after all, only a few weeks ago, they had to come begging for our help.

It is well known that high street banks are the most loathed businesses on the high street and their leaders and managers are, for the most part, considered with the same disdain as politicians. But, what arrogance they demonstrate, these people (high street bankers) made the decisions that ended up with their banks having to come begging for help, they made it easy for people to borrow, they were the architects of their own demise. Now they seek to lecture the government and issue a veiled threat to the very people that have risked their money to protect the interests, jobs and shareholders of the high street banks. They are pathetic, blood sucking creeps, that do not deserve their vast salaries and positions. How dare they lecture us, fair weather friends indeed. I hope this idiot has the courage to ‘own’ his statement, rather than hide in that cowardly way, only politicians and bankers know so well.

I stated in my post yesterday that the public should, when practicable, vote with their feet and punish these bankers by withdrawing funds and cancelling our current accounts and credit cards with all of the banks that so clearly look upon us as the necessary evil, rather than respect.

I also appreciate that many people will not, at this time, be in a position to punish the banks by withdrawing their business. But I do believe, when we are, that we must deliver a hard-hitting message to the banks that have turned their backs on the very people that came to their aid. The banks cannot survive without customers, fact. Every 10 years or so, they go through a phase of telling us they don’t want current account business and shortly afterwards, they realise that they do and go on a recruitment drive. We should all let them know what we think of them for turning their backs on us. Full article

In the meantime, the government should consider their position carefully, the public will not appreciate our money being risked by banks that have little or no regard for the well being of their saviours and their customers.

UK banks continue a path of self-interest

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I was pleasantly surprised when the Bank of England announced that there was to be a further reduction of 1.5% in interest rates, dropping to 3%. After all, most of the economists arguedthat the banking bailout would not work, unless or until there was a “substantial” reduction in interest rates. So, eventually, the Bank of England reacted positively, even if they could have gone further.

So what have the main UK banks done? The answer, little or nothing. With the odd exception, the Cheltenham & Gloucester and the Bank of Ireland for example, none has announced a reduction in the rates they charge their customers, claiming only that the matter was under review. Now I know that the LIBOR rate is supposed to be an influencing factor,  but if the banks were to pass on the 1.5%, surely they would be neutral.

The whole point of the Bank of England reducing the interest rates, was to provide the economy with a well needed shot in the arm, but if the high street lenders do not reduce their rates accordingly, it will be a largely meaningless initiative. I have read a few blogs and a number are calling for some form of positive action by banking and mortgage customers, but for the most part, it seems to be creating nothing of a stir. My own view is that that banks have received massive support from the UK tax payers and many of these people are also their customers.

Therefore, I believe the banks have a moral obligation to offer their support by passing on the rate reductions in full, at the earliest opportunity. Prevarication should not be an option. Banks were careless in their past lending practices and therefore they have to shoulder some of the responsibility for the situation many borrowers find themselves in. Not all, but some. high street lenders and mortgage companies could help themselves (in the long run) and their customers in the short-term by recognising the fact that the economy and many of their customers need and probably deserve an economic stimulus as would be provided by a rate cut.

One website has suggested a boycott of banks that do not pass on the rate cut, especially those that have received tax payer funded state aid. I agree. I also appreciate that many people will not, at this time, be in a position to punish the banks by withdrawing their business. But I do believe, when we are, that we must deliver a hard-hitting message to the banks that have turned their backs on the very people that came to their aid. The banks cannot survive without customers, fact. Every 10 years or so, they go through a phase of telling us they don’t want current account business and shortly afterwards, they realise that they do and go on a recruitment drive. We should all let them know what we think of them for turning their backs on us.

I earnestly hope that fellow bloggers out there will post more on this issue and try, together, to pressurise the high street banks into action and encourage a backlash if they don’t act positively. I am also disappointed, that the government did not include some form of pre-condition, that state aided banks should pass on any interest rate cuts. It is not as if the UK government were not aware that 1. interest rate cuts were inevitable, 2. banks would try and profit from cuts and 3. there would be a public backlash against the government if state aided banks were to shaft their customers.

We need wholesale tax and benefit reform, not meddling

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The news that the Liberal Democrats wants to reduce income tax for middle and low income earners is welcome news, albeit the chances of them getting sufficient votes to deliver on this commitment is unlikely. However, it does appear that they are willing to fill the void left by the current reincarnation of the Tory party.

The conservatives have traditionally been a party of tax cuts, not something that is always justified, but nonetheless, for the most part that is how they are perceived. David Cameron does not seem to want to make this commitment, because he is justifiably concerned that the Labour party will scream that the conservative party will hit schools and the NHS to fund the tax cuts. Rather than fighting this unsubstantiated claim, David Cameron is avoiding the fight and in my view, showing how incredibly weak he is, both as a person and a politician.

Gordon Brown said in 2004 that he could save £20bn per annum in an efficiency drive within high spending departments. He has not delivered on that commitment in fact, quite the reverse, we have actually seen an increase in public sector spending. Neither the LibDems nor the conservatives are willing to look to fund tax cuts from an efficiency drive, yet only an imbecile would claim that government departments are efficient or not guilty of waste. There have been numerous reports lately claiming that £billions have been wasted.

What we need is wholesale reform, not tinkering, backed up by a firm commitment to reduce taxes. The government, and it has to be said, the opposition parties believe it is okay to keep taking more and more of our money, every time they screw up, they either borrow, which lets face it, we will have to pay for, or they will introduce more stealth taxes. It has to stop. Under this Labour government, more and more people believe that they have an automatic right to look to the state, more accurately the tax payer, to provide them with an income, housing etc. There are nearly 870,000 people claiming unemployment benefits and 2.5m on some form of disability benefit. That is 3.4m people that require some form of tax payer funded benefits.

Now I accept that there are people with genuine disabilities and they should receive our support, but how much longer can the tax payer be expected to fund 3.4m people (and rising), that are making no contribution? I have deliberately ignored pensioners given many have contributed to state pensions for most of their lives.

Someone needs to say it how it is. There are just too many people expecting too few tax payers to fund their living costs, subsidise housing costs, as well as provide free education and health. Enough now, some of these people, probably that vast majority, can help themselves and they must. In these difficult economic times, those working have to make significant cuts, or take on extra jobs, or both. Why? Because we are expected not only to cover our own cost of living increases, but also the rises faced by those who make no contribution, in other words we pay twice.

Uncontrolled immigration places a further burden on the tax payer. It does not take a genius to work out that the contribution in taxes and national insurance made by many immigrants seeking work in the UK, does not cover the free education and health benefits received by their offspring. So, what happens? There are fewer jobs available for the 870,000 people claiming unemployment benefit, so we have to keep forking our our hard earned money providing them with tax payer funded benefits. Whilst the people coming into the UK and accepting low paid work, cannot possible pay enough tax and national insurance to cover the free benefits they receive.

There is nothing wrong with immigration, provided they can make a genuine and a net contribution to the UK economy, not simply provide employers with a source of cheap labour, which in itself is exploitation of the individual and the tax payer. There are many people that have genuine disabilities that prevent them from taking any work, but this is by no means the majority, those genuine claimants are entitled to our help, because that is our way. The rest must find some form of gainful employment, even if it is part-time. There will always be people unemployed and of the 870,000, some of these may be between jobs, but once again, they are likely to be in the minority. The others, well some will have never held a job and they must be required to make a contribution.

Redistribution of wealth may be a fine goal, but not if the hard pressed tax payers are simply expected to reward people that are making no attempt to make a contribution to society. Successive government have failed to grasp the nettle, but they must, we need to urgently reform our whole benefits system, so that the genuinely needy receive an appropriate level of help and support and the others, those that refuse to make a contribution are forced to go to work.

Very wealthy people are able to employ clever people to avoid paying too much tax, but the rest of us, who do not have that luxury are expected to make up the balance, simply because we are the easier target. It is far, far easier to hit the lower and middle income earners than it is to get the long term unemployed back to work, to determine which of the 2.5m people are genuinely unable to work and tackle those guilty of extravagant and complicated tax avoidance schemes.

Think about it for a moment. We tax and insure our cars, because if we didn’t, we could expect to be arrested, charged and fined, because we are, for the most part, law abiding tax payers. The others, well they won’t tax or insure their cars, if they are arrested they skip bail, if they get caught by a camera, then it doesn’t matter, because the car won’t be registered in their name. It is estimated that there are 1m uninsured and untaxed vehicles on our roads. We tax payers, received our pay, with tax and national insurance deducted, why, because we are law abiding citizens, the others, well they work cash in hand, because the chances are they won’t get caught? Why, because it is just too difficult to track and too costly to enforce?

We need wholesale reform, after all, any money earned, starts off as our own. That’s right, when you apply for a job, you get told how much your employer will pay you. Then the pimp, sorry the government comes along with hand extended and says, well you have a “social responsibility” and we are going to-redistribute some of your income to those less fortunate than you and to pay for things like health, education and pensions. We all sit there and take it, why, because we are law abiding and of course, we don’t have any choice? If government gets it wrong, no matter, they will just come back for more, perhaps in the form of direct tax, such as that on petrol, energy, insurance, vehicles etc.

Some people don’ realise this and of course the government won’t tell you. But when you buy petrol or a new car for example, the government add the duties and then VAT to the duties. How bad is that, not only do we pay VAT on the cost of the goods, but we also pay VAT on the duties! No wonder they think we are a bunch of mugs.

Someone, perhaps a political party, needs to stand up for the hard-pressed tax payer. Accept that there is a disproportionate amount of money taken from us and that the system needs serious reform. The LibDems have suggested that they could provide some tax cuts by tackling waste, but they have set the barrier way, way too low, even if this is a paradigm shift by the LibDems. If you are going to take flack for suggesting that we can keep some of our hard earned money by the government tackling waste, why not also target abuse, not just the wealthy, but those happy to receive tax payer funded benefits?

We need a party for wholesale reform and they need to tackle the people that are registered as disabled, but are able to work. After all, those that use or abuse the system are just taking it away from the genuinely needy, who should receive our help. Those claiming unemployment benefit must be required to work within a given period or lose all benefits. It is enough now, for far too long we have heard (and have allowed to pass unchallenged), people on benefits saying that they would be “worse off if they went back to work”. Surely this means that the benefit payments are too generous?

Why can’t lone parents group together, so that some can go to work, whilst the others look after the children? In the real world of the tax payer, that is what we do. What makes lone parents any more deserving? Why should someone that has never contributed anything in the form of income tax, be entitled to housing, benefits, free furniture, free health and free education? If they have an automatic entitlement to receive these benefits, what incentive do they have to work and make a contribution? Successive governments have added to the notion that everyone is entitled to state aid of some sort. Why should these people not be encouraged to help themselves, rather than helping themselves to the hard-earned money of honest tax payers.

Unemployment figures have been massaged by this government by allowing more and more people to claim that they are unable to work through disability, there are currently 2.5m in this category. It is a fair bet and some government ministers have alluded to this, that as many as 1.5m are able to do some form of work. So is the true unemployment figure actually 2.4m? Those that are workshy as opposed to genuinely disabled, must be identified and should be forced back to work. If necessary, through a steady decline in the benefits they are receiving, if that means that some become homeless, so be it. They always have a choice.

I accept, that if there are no jobs available, then we must take that into account, but whilst there is, those able and capable of working must be dissuaded from claiming benefits. Not incentivised, because that is morally wrong, they must be dissuaded through a steady fall in their tax payer funded benefits. We must also change some of our language, for example, state benefits should be changed to tax payer funded benefits, which is a more accurate statement. The state is faceless, but everyone know someone who is a tax payer, they will invariable be the people looking knackered without the ability to buy a pint in their local.

Many low paid workers are claiming that they need more money to deal with the rising cost of living, well firstly I should like to point out that the problem is not uniquely theirs and it is wrong to play the victim as if it is an exclusive right, everyone is suffering. But, more importantly, they need to approach it from another angle, they should not be looking for more money funded, in the case of public sector workers, by the tax payer, instead, they should be entitled to keep more of their own money. By tackling government waste and making more people contribute, we can all see a reduction in our taxes, we will all feel better off and this country will prosper again.

I cannot see any of the political parties tackling this issue. The LibDems have moved from a party of higher taxation to one that is now talking of reduced taxes. Albeit it without the support of the entire party and, it has to be said, with a limited remit in terms of what aspects of abuse they will tackle. The conservative party has consistently refused to address taxation as if it is a poisoned chalice, because they don’t want to take on the current government on regarding waste, and abuse of the benefits system. Then the Labour government, who, through their self-righteous programme of re-distribution have built up this waste and allowed a situation where even they know that there is no more money to be had from the hard pressed tax payer. What hope is there for us with such weak politicians?

I am not advocating that everyone who is claiming unemployment benefit should lose, it, nor am I suggesting that everyone in receipt of disability benefit is workshy, far from it. I am arguing that unless we reform our tax and benefits system, this country will be bankrupt. We already have a massive accumulated deficit in public sector pension schemes, an aging populating and high borrowings. We also have hugely expensive PFI schemes that need to be paid for over the next 20 years. The tax payer is straining under the additional burden placed upon them by this government’s failure to tackle the issues in case they lose some of their core vote. However, unless we address the issue of those that are contributing little of nothing in the form of income tax and national insurance, then we will reach a stage where those currently funding this largess will no longer be able to cope themselves.

There needs to be a reduction in those claiming tax payer funded benefits, a corresponding increase in the number of people contributing income tax and national insurance and a halt to immigration unless or until they can demonstrate that they can provide a net contribution to the UK economy, taking account of their needs, such as free health and education…the government has no right to exclude this cost when making statements about how they contribute. If we don’t, we will reach the point of no return, where we have to borrow more and more money just to fund our pensions and benefits system, until one day, our government bonds will have the same status as junk bonds. By then, it will be too late and there will be considerably more people that will need some form of tax payer funded benefits, but with no-one left to turn to. Doomsday scenario or basic economics, you choose?

 

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