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Europe Isn’t Working 9 June 2006

Posted by David in Europe, Formal Works.
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It is clear to see, from whatever perspective is taken, that the European Union isn’t working. What was meant to facilitate peace and promote free trade, has become an instrument of disagreement and trade protectionEU and US flagsism. From the annual budget disagreements to the unfair Common Agricultural Policy that impoverishes the third world, the European Union is in turmoil. Previously passionate supporters, such as France, have struck down its proposed constitution as a failure. Its unity of purpose has become a false unity of artificial culture, attempting to mimic a nation more than an alliance. Politicians vie for control to exert hegemony over others, the individuals are distant to its organisations, the structure archaic and its language a labyrinthine compound of management speak that would put George Orwell‘s new-speak to shame. The EU and its “ever closer union” has failed.

So how should the EU change? Before any proposals can be even considered, the ultimate aim must be agreed. For one, the European Union is not to rival the USA. This would be pointless. A multi-polar world would only create tension, unless both were of the same will, in which case there’s no purpose to being plural. Even in trade, size is not the important factor, rather the flexibility of economies to adapt to changing trends, a factor that benefits smaller economies that can be managed accurately. Copying America, with a single currency and singular economic policy, would be insane. This is demonstrated by the different woes of the Euro-zone. Would America not benefit from different economic policies in California than say, Alabama or Ohio? So any attempts to rival America are misguided, as are attempts to rival China or India, for the exact same reasons. Our strength is in our flexibility, the dynamism of our economies, not in their sheer bulk. The choice is between a cheetah or a walrus.

But when troubles appear in America, they are exaggerated elsewhere. When America sneezes, the World catches a cold. But the creation of a megalithic bulky economy will not aid this, certainly when weighed up against the benefits of flexibility. However, trade can insulate against fluctuations. What can be clear is that we are too dependent on America for trade, and should seek to expand other markets. Depending too much on a single nation for trade is the problem. This does not mean to encourage trade only between European nations, this only shifts the problem to Europe. The answer lies in wider, international free trade. Making everyone less singularly dependent on anyone else. So whilst rivalling America is not a good purpose, promotion of international trade is. Furthermore, trade is of benefit to both partners, and so beneficial to living standards. It is also a foundation for peace.

If trade can be a good basis for peace, then greater understanding can too. The purpose of whatever the EU changes into must not be cultural singularity, and certainly not hegemony, as these merely destroy local culture. The nature of each should be celebrated, not oppressed. To attempt to phase out local customs, atmosphere or legal individuality is akin to attempting to phase out a religion or even race. In centuries to come the attempts to ‘integrate’ differences will be viewed with the same rightful contempt as those who sought to eradicate cultures among natives in the Empires of the past. The differences of the World must be rejoiced in. We must not attempt to create a nation, with one government, one mind and one people, as the EU so boldly dreams of. How monotonous would a World be where everything were the same? A vapid, singular and uninteresting place with nothing to inspire or amaze.

We must promote the liberty of native peoples, whether they be. All peoples have a right to a nation, and no nation has the right to govern another without its consent. National self determination must be promoted. Any attempts at ‘sovereignty pooling’, in effect ganging up to exert power over another without their consent, either internationally or by majority voting, is fundamentally wrong. Any use of force, either by military or politics, against another nation, unless it is in breach of agreed treaties is a fraudulent and unfair doctrine of illegitimate power that has no place among the peoples of the free world. The works of one nation, so long as they are in no way damaging to another nation or in breach of an agreed treaty, are of no business to anyone but the said nation. As such, any new organisation must be inter-governmental in nature and seek only to promote peace, understanding and trade. It must be liberal in nature, laissez-faire in its workings. Beside agreement on non violence, free trade, free temporary movement of people and basic human rights, its function should be merely to promote understanding, reconciliation and culture.

And so a maxim for this new organisation could be agreed; to facilitate free trade without borders, to ensure peace between the free nations of the World, to protect each allied nation from aggression as if it was one’s own, to support local culture, and to allow national self-determination in all matters that do not infringe another’s self determination.

What has been described can only be described as liberal unionism. The creation of a liberal empire, a Commonwealth or Alliance of self-governing nations, each individual, free and unique, within an umbrella grouping that neither seeks to impose wills or weaken identity. An organisation that is inoffensive to any culture, is truly democratic through national self-determination, that enforces peace, cultural understanding, and the freedom of its members.

And it is not as if this is an untried concept, far from it. In Victorian times, the concepts of “Liberal Empire” were popular concept among many in Britain, resulting in the granting of self government to settler colonies in Canada and Australia. Though limited by lack of understanding of people in other colonies, the concept remained and was planned to be initiated elsewhere. The notion of Commonwealth was created, the discovery that nations need not govern other nations to benefit from trade and that both partners can benefit from that trade. It is during this time that slavery was abolished and its ban enforced elsewhere, and from this same ethos the notion of Commonwealth first originated. The eventual creation of the Commonwealth is perhaps the closest we have come to the creation of a free alliance of nations, although this was very substantially weakened by Britain turning its back on former colonies to favour protectionism and the EU after the Second World War. How many wars and genocides could have been averted had the Commonwealth been developed further?

But this concept of liberal unionism can go further. If thus new institution, which for current purposes I shall call the European Alliance, does not seek cultural monotony, then it need not draw any geographical borders. The World does not end at the Ural Mountains or Straights of Gibraltar, nor at the Atlantic or Bosphorus. This new alliance of independent nations could include all nations, and why not? They are not inferior or to be controlled, and so should be warmly welcomed into this new organisation to further expand peace, understanding and trade. The larger it becomes, the better it would become.

And if it did expand beyond Europe, it could incorporate existing institutions, for instance NATO, the North Atlantic Treaty Organisation. This exists to unite its members for defence, but could easily be absorbed and extended to cover anywhere. The new International Alliance could even replace the United Nations, which itself is failing, and further develop peace internationally. By uniting in a free organisation with solid principles and belief in justice, far more could be achieved. There would be no need for the World Trade Organisation, as the new International Alliance’s basis would be free trade anyway; gone would be the petty protectionism and barriers the WTO seeks to remove with such difficulty.

There is so much more to the World than Europe. We must stop looking in, but look out. We must embrace globalisation and freedom, not try to hide from it by ganging up as Europe and using illogical and damaging protectionism. We must celebrate differences and never seek to eradicate them in favour of integration or common identity. This will not create peace, only resentment at destroyed cultures and lost freedoms. Trade, prosperity and peace should be our maxim. A new commonwealth, built around liberal unionism, a commonwealth of independent, free and sovereign nations, working voluntarily and freely together, based on self-determination and liberty. We have the choice, a nation of Europe, a single, plain and dull region of enforced false cultural identity and destruction of native traditions; or a Commonwealth of the World, a diverse, interesting and vibrant place, where diversity and culture are celebrated, respected and understood, where resentment is reconciled and prosperity built through freedom, peace and trade. There’s more to the World than Europe.


The Tax and Spend Party 2 June 2006

Posted by David in Formal Works, Labour.

1992 Conservative Election Poster

Coming to power amid a fanfare of public support, the Labour government was gifted a growing economy with falling unemployment, a budget surplus and low inflation. No party had ever come to power in such good economic times, and they had only done so by accepting the Conservative economic plans and their neo-liberal economic theories. For a few years, all seemed to go well, prudence was the keyword, used as often as possible and shown wherever possible. However, as is now clear, Labour soon returned to a “spend” government, and soon will have the “tax” prefix.

To see how much has changed, the first few years must be noted. During this time the party spent less than even the Conservatives planned to, gave independence to the Bank of England, enjoyed a budget surplus using it to repay national debt, and even cut income tax by 1%. It would be hard to have been further from “tax and spend” if you tried. But the true test of a government is not during inherited prosperous times, but as the first economic wobbles shook at the turn of the Millennium, a change in gear occurred. Here comes the “spend”.

At the start of the 21st Century, the pound rode high in the currency markets, a stable and trusted currency amid a sea of untried and untested new Euros. Exports slumped, growth stalled, and unemployment started to climb. The Bank of England predicted a housing crash, whilst recession was prophesised by all. With the election just a year away, panic set in. Weathering the storm was not an option for new Labour. Suddenly, but quietly, it borrowed a lead from old Labour, create artificial employment. The first argument that Labour has reverted to its old big spending ways is through government jobs. Previously, the number of civil service posts had dropped 816,000 from 1992 to 1998 and continued to fall, including before that period. However, since 1998 the figure has rose every year. Today 20.4%, or over 1 in 5 people, are government employees. The figure today is 680,000 higher than in 1998. Few of these jobs are beneficial, for instance the number of pen-pushers in the English schools has risen by 47% to 59,000 whilst the number of teachers increased by just 8.6%, the number of doctors increased by 30% whilst NHS managers have increased by 66%, police officers up by 11.4% but admin staff up by 34%. The vast unproductive bureaucracy grows further through quango agencies and local government agencies, and the many contractors employed for unnecessary jobs.

Labour has moved from publicly creating artificial employment through inefficient nationalised industry to creating artificial employment through a vast, ever increasing and all interfering bureaucracy. The words of government do not match the actions. As Gordon Brown promises 80,000 job cuts, thousands more are employed. Even these cuts are not cuts, most are relocations to the North of England and Scotland, the others job redefinitions.

Meanwhile, whilst employing a city the size of Canterbury to manage hospitals, the government has enjoyed other spending sprees as well. Is children’s day care a government job? Apparently, and that’s £1.5 billion a year from the Treasury just for Sure Start. Money has been ploughed into departments, but has much improved? The major works are funded through the PFI (Private Finance Initiative) and are effectively paid for on credit, so this isn’t the big drain. Billions have however, and are still being, wasted through bureaucracy, poor management, and on services which should not be part of the government mandate.

Public sector net borrowing is predicted to be £32bln in 2005/2006, and these figures rely heavily on high growth of around 4%, which hasn’t been forthcoming, and have been understated for each and every one of Gordon Brown’s annual budgets. Current projections are for 1.5% growth instead. Net debt as percentage of GDP has increased from 30% in 2002 to 35% today, with the trend very visibly upwards. Compare this to Australia, where national debt will be eliminated by 2006, or the three years before, when net debt dropped by 9% of GDP. The Golden Rule, of maintaining budgetary balance over the economic cycle except for investment, has been missed and fudged, first with reclassifying certain running costs as investment, then later extending the cycle. Even the golden rule is more bronze, since debt for investment is still debt with interest, and still costs. A true golden rule, and a prudent government, would maintain budget balance including all costs over the cycle, or even on each budget, preferably with a surplus to repay debt. With figures like these, Labour has clearly become a big spending government, mostly on bureaucracy.

And to a very great extent Labour has already returned to its “tax” ethos. By freezing the income tax bands, more and more people find themselves in higher bands due to increased earnings and inflation. This “fiscal drag” has raised many billions for the Treasury. In addition, rising council tax bills, due to decreased government grants and increased demands of local councils, has seen council tax bills double since its introduction. Stamp duty raised £5bln in 2005, again due to fiscal drag from house price rises, it having raised just £675m in 1997. Even the very much publicised rise in rates cut just £250m from the revenue and effected a tiny percentage of homes. Tax has in general risen sharply through fiscal drag, in 1997 the average standard rate payer earning £25,000 a year paid 36% of earnings in taxation, today they pay 41%. Higher rate payers earning £40,000 contributed 36% in 1997 and over 50% today. Since 1997 about 1.6 million have become higher rate tax payers due to fiscal drag. This year 200,000 people will be fiscally dragged into the higher rate, with 100,000 entering the lower rate by the same process. The higher rate band of £37,295 is only 60% above the average. The income tax revenue has increased from £69bln in 1997 to £123bln in 2005, inheritance tax from £1.6bln to £2.9bln and capital gains tax from £1.1bln to £2.3bln today. In total, the increased tax by Labour since 1997 is £1.5bln every week. All of this by stealth.

With this tax ethos and low interest rates, consumer debt has soared. Now with debts of over £1 trillion, the public are facing a bleak future. As consumer spending, which has propped the economy up since 2000 along with the government spending, hits the buffers, growth has halved and the deficit is estimated at £36bln. To meet his own damaged but publicly known golden rule, Gordon Brown must raise £11bln a year. Already clearly a tax and spend government, fiscal drag may have reached its end, and income tax will have to be raised by 3% to cover this shortfall, as spending cuts are unlikely.

Since 1997 a total of 66 stealth taxes have been introduced, and in 2005 the government covered up the Treasury’s report on flat rate income tax. The report, supporting the simple and effective replacement of income tax, had key areas blocked out as part of its release under the Freedom of Information Act. A separate report by the Adam Smith Institute backs a 22% flat rate tax and £12,000 personal allowance/exemption. Under this system the bottom 40% (around 10 million people) would save between 8.9% and 12.1% of their salaries, paying no income tax at all, those earning £11,500 being the best off group (12.1% saving). Only a very few huge earners would save more. The refusal by the government to look into the tax, which has transformed many countries and works well, is another sign of their high tax mentality. The cost of this tax change would be £12bln, less than half the enlarged civil service cost. A major boost to the economy, it is believed to be revenue neutral within 3 years, would end much of the benefits trap, stop the overtime not-worth-it trap, encourage work and help low and middle income families.

But Labour is fundamentally opposed to reforming tax in any way seen as non-progressive, even though the large allowance makes it certainly not regressive, and the spending spree continues. It could be said the first few years were just to build an image, although bureaucrat creation soon soared in 1998, but the first years seemed so prudent. But already a tax and spend party once more, soon taxes will be raised, and the image shattered.

Anything But Prudence 2 June 2006

Posted by David in Formal Works, Labour.
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Gordon Brown cannot have a dictionary or know the meaning of prudence. “Prudent; adjective 1 wise or careful in conduct, 2 shrewd or thrifty in planning ahead, 3 wary; discreet”, or so reads the English Dictionary. Add this term with the name “Gordon Brown” is in itself a huge contradiction in terms. Yet how has the Chancellor made himself known as “Prudent Mr Brown”? The answer lies in just how prudent is Mr Brown?

Looking at his record, Gordon Brown could have either a split personality or mad twin brother, as there are very decidedly two faces of Brown. First, there’s the prudent, cautious, sensible if dull Mr Brown, who reigned up to about 1999/2000. Then there’s tax and spend Brown, the rule bending, deficit building, bureaucrat hiring and still dull Mr Brown, who took over 1999/2000 and have ruled the Treasury ever since. Either that, or he just may be the Jekyll and Hyde Chancellor.

Things started rosy before Brown had even stepped inside Number Eleven, when Blair took over the Labour leadership and the ‘New Labour’ era begun. The Conservatives had reversed their good economic reputation, and Labour was keen to harvest this and reverse their previously terrible one. As the economy recovered from the ERM and early-90s recession, Blair and Brown built a reputation as economically trustable. Publicly ditching tax rise plans and embracing the free market economy, speech after speech, policy launch after launch, bludgeoned a belief into the public that Labour was the economic saviour. Suddenly, the Labour shadow Chancellor was speaking at the CBI, meeting business leaders and telling the TUC off for being out-dated and wrong! They won over business, and the public too, into their ‘New Labour’ reputation. Even top business leaders endorsed Labour on a 1997 election broadcast. Labour publicly championed cheap mortgages with low interest rates, stability, growth, low inflation and private sector employment. The stage had been set for prudence.

And prudence was what Britain got, then at least. Key principle was the Golden Rule. Willingly portraying himself already as the prudent Scottish Presbyterian, Gordon Brown became trusted thanks to his public Golden Rule for public finances; that over the economic cycle, the Government will only borrow to invest. To the public, it was obvious, to Chancellors, and Labour, a Damascus moment. Sticking to the Golden Rule became vital, and it lasted fairly well.

Brown further cemented his economic reputation by one of the new government’s first acts, the granting of independence to the Bank of England. The government demanding they set interest rates “to maintain interest rates as low as possible whilst keeping inflation below 2%” and requiring “a written apology and explanation if the inflation level is breached”. Granting the BOE was a policy so Tory even the Tories opposed it, though later they backed it. The idea had been considered by Margaret Thatcher, but decided against as it would “remove a substantial block to Labour”. Now mortgage costs were the Governors fault, not the Governments, and Brown radiated prudence, self-control and sensibility.

Despite Blair’s open pro-European stance, Brown stood firm with his 5 economic tests which had to be met before joining the Euro. Once again, cautious, sensible, prudent. The tests themselves were another example of prudence and generally extended the Conservative “wait and see” policy. Prudence continues on a closer look that reveals some questions may never be satisfied, and allows the Treasury to simply rule out joining in a more Euro-friendly way. For instance, “Are business cycles and economic structures compatible so that we and others could live comfortably with euro interest rates on a permanent basis?” will probably never been satisfied as the euro interest rates aren’t even suitable for existing euro-zone nations. “If problems emerge is there sufficient flexibility to deal with them?” can be responded with a firm no, without flexibility of interest rates problems are worsened and lengthened, as slow growth in Germany and inflation in Ireland. “Would joining EMU create better conditions for firms making long-term decisions to invest in Britain?” is again no, as the flexibility the Pound offers yet still being inside the Common Market has caused much investment in Britain. “What impact would entry into EMU have on the competitive position of the UK's financial services industry, particularly the City's wholesale markets?” is more of a lengthy question, but many agree the Euro will damage flexibility and freedom to adapt to the global situation. Finally, “will joining EMU promote higher growth, stability and a lasting increase in jobs?” is once again no due to the flexibility problems already mentioned. On the Euro, Brown has been most prudent and sensible, although could now easily rule out joining quoting the Continent’s economic gloom.

Next came another major revelation of New Labour. For the first few years they stuck to Conservative spending plans, even making savings, and allowing the budget surplus to continue growing. This is a very prudent act, saving for a rainy day. Further, to the shock of many, cutting the standard rate of income tax by 1p. The prudent image was by now reinforced, cemented and firmly stuck in the public consciousness.

But, it was not to last. As the Millennium approaches, cue ominous music. A strong pound has hurt exports and the balance of payments went decidedly red. Fears were rife of a housing crash and in 2000 the stock market crashed badly. The first economic wobbles since Labour came to power were happening and threatening melt down before the impending election. It is around this time that prudent Brown becomes tax and spend Brown.

First of the Acts of Imprudence was to freeze the income tax bands. By refusing to raise income tax bands with inflation or wage inflation, more people moved into higher bands, paying more tax. This process, known as fiscal drag or tax creep, in effect works as a silent tax rise, as people move unknowingly into higher rates. Any tax rise is imprudent, removing the incentive to work, reducing investment and strangling the economy. After several years of this imprudent policy, tax is now rated as the highest stress factor among young people according to many surveys. More and more people are quitting work or working less, as tax bands make it not worth the hassle, thus eventually cutting tax receipts anyway.

Later, in 2005, the Treasury deliberately removed positive sections on a research paper about so called “flat rate income tax”, and has avoided the issue, which was described as revenue neutral within three years, and positive thereafter. It is most imprudent to use fiscal drag as a stealth tax increase and not to look into alternatives.

The Millennium downturn was delayed due to a number of factors. A weaker Pound lead a small export lead recovery, although recently this has deteriorated as the balance of payments worsens. Low interest rates continued to encourage property development, and the house market has been vital to continued economic growth. Most important however has been consumer spending, with a great deal of it on credit. Savings are at a very low rate, and UK personal debt is now over £1,000 billion. This High Street bonanza would normally have pushed up inflation, however this has been temporarily slowed due to cheap imports.

However, most imprudent has been the public sector driven recovery, financed through ludicrous levels of spending. Budgets for all departments have soared with little real improvement; the rapid growth being eaten up by managers, consultants and bureaucrats. In fact, bureaucratic employment has been vital to the later Brown’s economic mirage. Government figures show 650,000 new civil servants have been created for the main Central government alone since 1999. Local government, quangos and other quasi-government organisations have all been very busy recruiting. Public sector spending is now one-third of economic growth, and it cannot ever be sustained.

Brown inherited a budget surplus in 1997, which continued to grow. However, since 2000, he has pushed the government into the red. Any borrowing is imprudent, but the “shrewd in planning ahead” definition also comes into play here. For every year in office, at every budget, Gordon Brown has over-estimated growth and thus also over-estimated tax revenue. In 2004 he planned a £10bln budget deficit and got a £36bln one. For 2005 he now predicts a £36bln deficit, and will probably get an even worse one. Suddenly it looked as if the Golden Rule would be breached, and it would have been, if it wasn’t for one handy get out clause; except investment. He could borrow all he likes to “invest”, and has. But when he was still heading for humiliation, he decides to redefine investment. Suddenly, maintenance costs become investments, as do dozens of other costs, and voila, he saves himself thanks to fudging figures and creative accountancy. By 2005 however, even this was not enough, and Brown extended the economic cycle to suit his rule. Now, the cycle is measured by his rule, not the economy, and this imprudent act has left the next cycle far less to spend.

It is not only fiscal drag that has occurred under Labour. A variety of stealth taxes, surcharges and extra costs have been spread around. Some taxes now only collect marginally more than they cost to collect; a wasteful tax that harms the economy. Extra costs put onto councils by the Treasury have lead to council tax rises, and the proposed revaluation will see most bills rising sharply as they have in Wales.

Further imprudence has lead to greater benefit dependency, particularly tax credits, which discourage people working over 18-hours per week, or earning more money, as benefits stop. Other benefits too create a cycle of dependency.

The economy recently has been held up entirely by government spending and consumer credit, which obviously cannot last. Both have been inflationary, and this has been held off by cheap imports keeping costs steady. It has been imprudent of the Chancellor to prop the economy up with heavy spending and rising national and personal debts. The recent EU-China trade disagreement threatened inflation by stemming imports, and as quotas still exist this problem will return. In fact, some of next years quota has been brought forwards, leaving less for then. Mr Brown’s imprudent spending, and encouragement of personal spending beyond means, will be a serious problem in the future, both as debt, tax and inflation. Much debt is as mortgages, with high house prices, however a slump could cause widespread negative equity.

Today, we have at least a £36bln deficit. Certainly not prudent. Independent growth forecasts are half of what the Chancellor expects, and he will face a shortfall of £11bln just to keep within his discredited and devalued Golden Rule. This is equivalent to 3% on the basic rate of income tax. Certainly not prudent. Trade figures continue to worsen, inflation creeps upwards despite cheap imports, and consumer spending is struggling. The High Street is braced for a bad Christmas and bleak economic future. Though he will blame much on high oil prices, it is he who is to blame. In conclusion, there can be just one phrase; it was going so well, what went wrong? Brown was the master of prudence, now he is a wasteful and gambling with the future.

Stealth Taxes 2 June 2006

Posted by David in Formal Works, Labour.
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The term “stealth tax” can be used to refer to any (generally new) form of taxation collected or imposed quietly, secretly or in any underhand way, so as not to incur excessive negative press comments or to score highly on the public consciousness. Notable examples are increases in duties, charges, above inflation revaluations, taxes on suppliers and removal of exemptions. Under the current government however, their use has soared.

Most taxes have attempted to use some form of stealth, spin or gloss to reduce damaging opinion, however the widely regarded start of stealth taxes was in the 1990s. Under the Conservative Government, several stealth taxes such as cutting Mortgage Interest Tax Relief (MIRAS), whilst charges and fines from speed cameras were also collected to the Treasury as a revenue source.

However it was after the 1997 Labour election victory that the term stealth tax took increased brunt of spending, particularly after 1999/2000. Labour had promised not to increase income tax, and so stealth taxes were their only way to fund the ever larger spending spree and waste. Although also planned by the Conservatives, MIRAS was totally phased out, but Labour stealth taxes spread further. Married couple’s allowance for under-65s was removed, windfall taxes were placed on utilities and North Sea oil, pushing up prices and reducing investment. Pension dividends were now also taxed, whilst various extra fines, charges and penalties were introduced or increased.

The biggest stealth tax however is resultant from fiscal drag, also known as tax/fiscal creep, a term describing the current situation in which tax bands are frozen, despite inflation, and so more earnings are dragged into higher tax bands. For instance 1.3 million more people now pay higher rate income tax, an increase of over 50%. Other tax bands, such as inheritance tax and stamp duty, have also been frozen, and with higher house prices all but a few escape these taxes which once only a few paid. Biggest joke of all was the highly publicised increase in stamp duty thresholds, which only cut £500m from a £5.5 billion pound tax, and only assisted very cheap housing in very cheap areas. Since 1997 revenue from stealth tax has increased eight-fold, yet most hardly know, the effect of its stealth plain to see. The use of fiscal drag has let more and more people creep into higher rates without knowing.

It is generally regarded that there have been 66 stealth taxes since 1997, although one figure from the Institute of Fiscal Studies estimates 157. Others have included fuel tax, greatly increased duties on alcohol and cigarettes. A reduced amount of council expenditure has been funded by the Treasury, with council tax, sometimes labelled a stealth tax due to above inflation rises, increasing greatly. In Wales, revaluation was labelled a stealth tax, as a far greater number of homes entered a higher band than those that went down. A similar and indeed worse situation due to larger price increased will occur in England although it has been postponed until after the next election.

Further stealth taxes are planned, including a further increase in North Sea Oil Tax, an extra tax on land sales for redevelopment and a truly socialist inspired council tax “top up” based on factors already included in the property value such as bedrooms, views, gardens and conservatories. A large fine will also raise revenue from anyone not letting the tax commandant photograph ones house including bedrooms, bathrooms, other interior rooms, gardens and views. The tax is reminiscent of the 17th Century window tax, which is alleged to have created the term of daylight robbery. Perhaps this is simply plain robbery?

In conclusion stealth taxes are any form of revenue collection the Government gets away without the public really noticing or directly feeling the bite, using methods just as fiscal drag, exemption removing, above inflation rises, taxes on production which won’t directly be felt by voters who’ll blame higher costs on “fat cats” or inflation, and top ups which are hard to measure. They have become endemic since 1997, as the Labour government has desperately sought to fund its uncontrollable spending spree, often for creating “stealth unemployment” in the form of unnecessary bureaucratic jobs, but also in plain and simple waste.

How the Euro is Doomed 28 May 2006

Posted by David in Europe, Formal Works.

Swedish Green Party - No to the Euro Advert 

The Euro, the final result of years of currency market intervention tantamount to market rigging, restrictive economic practices and visionary dogma, was introduced in 2002. Its effects have been as predicted, though most Eurozone nationals have found it a harsh wake up call, and its many symptoms and side-effects will only become more evident as the malaise of restrictive practices takes control further.

With its introduction, the 12 Eurozone members handed their economic independence to the newly created European Central Bank. But it is not the lost sovereignty that bites back, but what the sovereignty was, is and will continue to be used for. The ECB, now a major financial institution and accountable to no-one, controls the interest rates and monetary policy of the Eurozone. Along with this, the ECB necessarily also sets limits on spending, thus controlling fiscal policy as well.

The Euro is a conquest of sovereignty. It gives us a margin of manoeuvre. It's a tool to help us master globalisation and help us resist irrational shifts in the market – Dominique Strauss-Kahn, French Finance Minister, The Daily Telegraph, 1st January 1999.

And the main effect of this loss of sovereignty has been a total loss of flexibility, what they wrongly call "irrational shifts in the market". Whereas each national currency once moved freely on currency markets, based on that nations economic situation, all are now combined into the single currency. The Euro now moves for the Eurozone wide situation, an average situation that no nation may actually have. This is also true for interest rates, set by the ECB for the Eurozone average, not what each nation actually needs. A study by the University of Liverpool showed that no single Eurozone nation suited the ECB interest rate, with many such as Germany over 1% out.

Lacking the flexibility on interest rates and currency valuation, each Eurozone nation has its own unique problems. To worsen the situation, global changes don’t affect the Eurozone symmetrically; some areas will be hit harder than others. With no national level flexibility, there is no way out. A nations currency value and interest rates are a safety valve for problems, if control is lost, the results are felt elsewhere; unemployment, inflation or deflation, boom or bust economies, deep lengthy recession and no escape.

The current account balances of France and Italy continue to worsen. France has gone from a deficit of $8.4bn in 2004 to almost $39bn last year, while Italy’s deficit has worsened from $15bn to $36.5bn. Spain’s deficit is $83bn ($55bn). Germany, by contrast, has seen a strengthening of its current account surplus. If this is convergence, it is not as we know it – The Business Newspaper, 28 May 2006 

Growth is destroyed by the inflexibility; just 2.4% projected for 2006, compared to 4.8% in America. Some look to America as a model for the Eurozone, but the reality would be harsh, the US Federal Reserve has to focus on the big wealthy states such as New York and California as these are most productive. The ECB may be forced to do the same, trapping poorer Eurozone states as the EU answer to Kansas. The areas are simply too large to converge to equally high standards.

During change over shop keepers took advantage of the switch and ‘favourably converted’ prices in their own interest, triggering inflation. The inflation lead to wage inflation, leading to further price increases. A cycle of inflation is thus triggered through expectation. Lack of flexibility makes tackling it hard, as only solutions involving spending cuts and tax remain open. The inflation makes the country less competitive, further slowing growth and costing jobs.

From the extent of our country, its diversified interests, different pursuits, and different habits, it is too obvious for argument that a single consolidated Government would be wholly inadequate to watch over and protect its interests; and every friend of our free institutions should be always prepared to maintain unimpaired and in full vigor the rights and sovereignty of the States and to confine the action of the General Government strictly to the sphere of its appropriate duties – Andrew Jackson, A Political Testament, 1837

In addition to poor growth, unemployment and worsened economies, spending of Eurozone member states is restricted to maintain Eurozone balance. In times of crisis, such as in Italy now, or Spain where ‘bust’ is predicted, or Greece where inflation is running away, cuts to public spending and services, and/or tax changes, are necessary.

For all the hype of greater wealth, the Eurozone has failed to deliver. International companies do not trust the currency, leading to much investment in Britain. Foreign reserves have not rushed to stockpile Euro bonds, lest not Italian ones where a higher yield accounts for the risk of collapse, and the Dollar remains the World’s favoured currency except among anti-Americans. There is some minor increase on Eurozone-Eurozone trade, mostly consumers buying shopping, although this is very small and balanced, causing very little in the way of shifts in wealth, trade or prices.

The one effect that has occurred as the EU hoped is increased stabilisation compared to other currencies. This however is artificial stabilisation through the currency following Eurozone average figures, which suits no-one, certainly not the Eurozone member states, as none match the figures exactly. As the Eurozone economy worsens, the exchange rate will move anyway. Currencies move for a reason, merging currencies for stability is like strapping yourself to the Titanic for fear of icebergs.

Furthermore, ideas that economic integration would lead to political integration proved wrong, and the EU project has stalled. The Euro is predicted to die a slow death over 10-20 years by Paul De Grauwe, an economist whose work was used to make the case for the single currency.

Italy, Spain, Portugal and The Netherlands…are now powerless to restore their competitiveness without introducing outright deflation, and large increases in unemployment. A political union is the logical end-point of a currency union. If political union fails to materialise, then in the long term the euro area cannot continue to exist. Now that nobody appears to want that political union, you can begin to wonder whether monetary union was such a good idea. Political unification has failed. But that is a big problem for the currency union. That is in danger. The effects of this will take time, he said. In the longer term, the monetary union will collapse … not next year, but on a time frame of 10 or 20 years. There is not a single monetary union which survived without political union. They have all collapsed. Sometimes I wonder: do we still need the European Union? I start to have doubts about that. It is sufficient that countries open up their economy. You don’t need to do that in the context of the European Union – Paul De Grauwe, a Eurozone founding economist

The Euros main effect has been to worsen the European economy through lack of flexibility, dynamism and freedom. The rigid Europe-wide “one size fits all” idea has proven an abject failure; “the Euro has been a disaster” (Silvio Berlesconi, 2005). What has been gained in stability has been lost ten times over in inflation, unemployment and stagnation. While the global economy has marched on, the Eurozone has been on the brink of recession since the Euros creation.