Tuesday, 6 October 2009

Alternatives to Austerity

Here’s why the debate has to change: cuts, pay-freezes and benefits witch-hunts are not the only solution for sorting out the mess of debt and deficit that we are told ails the treasury. 

Indeed, they are not even the best solution.

In a twenty-four hour period that has seen Labour announce a year-long pay-freeze for top civil servants, then be derided for doing so by the Tories, only for Conservative shadow chancellor, George Osborne, to pledge to do the exact same thing in 2011 if the Conservative Party get elected, it is easy to get wrapped up in the panic-stricken dominant narrative that our economy is in trouble, and the only way to save it is by taking a hatchet to our out-of-control spending.

But that is simply not true.

The economy is in trouble alright, big trouble.  Some of it has to do with the crisis of faith that led to last year’s global downturn, and some of it has to do with the billions of pounds pissed away on unnecessary wars in Iraq and Afghanistan, but none of it has to do with paying out too many benefits, paying public-sector workers too much money, or – despite the International Monetary Fund’s myopic and ideologically distorted opinion – providing decent healthcare.

We are not drowning in a mire of debt and destitution because we spent too much on schools and libraries; nor are we suffering because of the BBC’s licence fee.

The economy is in trouble because billionaire investment bankers decided to gamble with poor people’s mortgages; the economy is in trouble because taking control of the Middle East turned out to be a little harder than we thought, and the richest 2% are not yet getting the return on their investment.

At bottom though: the economy is in trouble because, although the money is there, no one has been bold enough to get it.

I am talking, of course, about raising the taxes of the rich.

Not George Osborne’s meaningless “man-of-the-people” gestures from earlier today – taking the Child Trust Fund away from wealthy parents who don’t need it anyway; denying tax credits to those who earn over £50,000.  Those sorts of superficial measures merely take with one hand whilst giving with the other (ask a person earning £50k a year whether they’d rather have a £250 Child Trust Fund Voucher and a thousand pounds in Tax Credits each year, or get to keep £5,000 more of their money at a lower rate of tax and guess which option they’ll choose?)

I’m talking about finally saying enough is enough, and taxing the rich properly.

I’m talking about finally admitting that, if you earn £100,000 a year or higher, you’re probably earning too much money.  That there is a point at which wealth becomes an obscenity; there is an acceptable limit to how many homes you should own; how many cars; how many yachts.  That, if you can’t live well on a salary of £5000 a month (£100,000 a year, taxed at 40%, and divided by twelve) then you have probably lost all sense of perspective.

When one considers that the much-lauded Tory proposal to cut down on Incapacity Benefit fraud is based around the idea that the £17.50 a week difference between Jobseekers Allowance and Incapacity payment is important enough to claw back that annual saving of £910 per person, it puts such figures into perspective. 

Raise the 40% “higher rate” of income tax to 50% for those earning 100k a year (as it is if you hit the £150k number), and you can add an extra £10,000 a year per person into the national budget immediately: the equivalent of nearly eleven individual Incapacity cuts, and all without having to pay the salary of an “assessor”, or the subsidies for the New Deal on top.

If the Conservative figures are correct, and one in five of the 2.6 million currently claiming Incapacity Benefits can be moved to standard Jobseeker’s Allowance, then they are claiming that taking £910 a year from 520,000 people will raise £1bn over a five year period. 

Yet if you taxed just 20,000 people earning £100k a year that £10,000 (10%) extra, then you would be able to get that extra billion over five years without making a single cut.

In 2007 there were 500,000 people earning £100,000 a year in the South-East of England alone!  By raising their income tax that extra 10%, over a five year Parliament, you would bring in a monumental twenty-five billion pounds in extra funding – twenty-five times the amount of the Tory Incapacity Benefits plan; and that’s not even the whole of Great Britain. 

But the Tories would rather force a disabled or mentally ill person to live on a £3,297 a year Jobseeker’s Allowance than force someone who earns £100,000 a year to pay an extra £10,000 in taxes and still keep £50,000 a year – a take-home salary almost £20,000 higher than the current pre-tax national average.

And this isn’t even mentioning the earnings of the super-rich.

Do you know what ten percent of a million pounds is?  It is £100,000.  Ten percent of a billion: one hundred million.

By raising the taxes of the super-rich millionaires and billionaires to 60% or 70% – even 80% – you could fix the hole in public spending immediately and still leave the ludicrously wealthy with ridiculously high annual incomes.

One million pounds a year, taxed at 70%, would leave our humble millionaires with £300k a year to live on.

One billion pounds a year, taxed at 80%, would leave billionaires with an eye-popping annual income of two hundred million pounds! 

One moderately taxed millionaire (a 20% raise) and one moderately taxed billionaire (a 30% raise) would therefore bring in one billion, five hundred and one million pounds worth of brand new money over a five year Parliament, on top of what they might already pay.  Two millionaire and two billionaires would bring in over three billion pounds in new investment.

I cannot understand why we don’t start talking seriously about doing this, and why taking £17.50 a week from the worst-off in society and freezing the pay of doctors and teachers is the best economic solution our political leaders can come up with?

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