Tag Archives: George Osborne

#oneaday 8: Robbing Peter, lending to Paul?

So all the tough talk about ‘us all being in this together ‘ (sic) (for those non residents of the UK, this was the phrase introduced by David Cameron, now Prime Minister of the UK at the Conservative party conference in October 2009 and has been the rallying call in these tough times) has proved to be a little wide of the mark. As purchase tax, or value added tax (VAT) as it was rebranded some years back rose 14% to 20% on the 4th of January, and thousands of public and private jobs are slashed,  as deep and rapid cuts to the welfare state and the education system,  the majority of folk in the UK are now getting used to a time of austerity. And you know what, we have no choice. The economy of the UK has taken a major battering, why, well in truth there are so many factors it would be a long essay and stuff that I simply don’t understand. But basically we spent more than we earned and we have to do our financial porridge for some years.

One factor that does stand out amongst all the others however, is the fact that some of our banks became insolvent in 2008. Instead of ‘the bank calling the debt in’ as normally happens when businesses and institutions fail, this time the banks carried the debts and could not meet their commitments. There was no one bank to call all the other banks in so to speak. They really were ‘all in it together’. The decision was taken, we are told, in the national interest, by Prime Minster Gordon Brown to bail the banks out. Amazingly no one actually seems to know to what extent. Namely we don’t know the final number. Some sources quote upwards of £1 Trillion. in the case of RBS (Royal Bank of Scotland) we are told that the citizens of the UK now own 83% of the shares. In return for these share the nation poured £45Billion in cash, insured £280Billion of risky loans and set aside a further £8Billion in case things get really bad. So you’d have thought as majority shareholders in this company, we i.e our Government would have had a say in how that business should be run, in the national interest and all that.

But the Government insisted earlier today (when I wrote this anyway) it would not intervene to stop Royal Bank of Scotland’s chief executive, Stephen Hester, earning up to £9Million for last year’s work. Furthermore it will not seek to cap the bonus pool of more than £1Billion that the bank intends to pay it’s high earners. A spokesman for David Cameron said: “We’ve made a broad statement which is about the need to see some restraint and some responsibility from the banks, but we are not going to set bonus pools for individual banks.”

We know the sketch here. Money talks blah, blah. But for all the recent fighting political talk – see below – of those who govern us, those that our pickled voting system has thrust upon us, right or wrong, is always the same. It is just talk and talk, unlike property is cheap.  Indeed the extra tax rate/levy on bonuses from last year has been wiped out,  replaced by a lesser yielding tax on the banks’ balance sheets.

So if you are young and  live in London, or are trying to buy a house in London, or indeed in the countryside close to London – aka The Stock Broker Belt as it used to be called when VAT was purchase tax, one of the consequences of this indecent and bloated excess is that property prices will rise again, thus putting property even further off the radar of those starting out in their working life, those trying to bring up a family. The very same people, many of them pay as you earn (PAYE) tax payers (you know the ones who pay the correct amount of tax as they do not have access to fancy schemes for tax optimisation) are royally being shafted.

The youth should always be at the centre of any society’s future, yet they find themselves over taxed, if they are lucky enough to have a job, under served and utterly betrayed. And the bank band played on. Pfffff. I am not given to cheap prejudice, but I can tell you now, I have complete and utter contempt for these people.

So there you go and to keep it interesting, I have a meeting with our bank manager planned for next week to discuss our  ‘facility ‘for 2011. The name of that bank? I will give you 3 guesses. You should get it right first time. Wish me luck.

Footnote what our leaders said when in Government (courtesy of The Independent today)

‘It is wholly untenable to have millions of people making sacrifices in their living standards only to see the banks getting away scot-free – the banks should not be under any illusion: this Government cannot stand idly by.’ – NICK CLEGG, Deputy Prime Minister17 NOVEMBER 2010

‘I make no apology for attacking spivs and gamblers who did more harm to the British economy than Bob Crow [the RMT union leader] could achieve in his wildest Trotskyite fantasies, while paying themselves outrageous bonuses underwritten by the taxpayer.’ – VINCE CABLE, 22 SEPTEMBER 2010

‘Every decision the banks make like that [paying large bonuses] makes it more difficult to keep a tax regime that they might favour.’ DAVID CAMERON, Prime Minister 17 DECEMBER 2010

‘We will not allow money to flow unimpeded out of those banks into huge bonuses, if that means money is not flowing out in credit to the small businesses who did nothing to cause this crash and suffered most in it.’ – GEORGE OSBORNE, Chancellor of the Exchequer 4 OCTOBER 2010

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#oneaday 3:Tax Lax

On the day that saw the UK’s value added tax rise from 17.5% of the sales value to 20% of the sales value of goods and services, with some notable exceptions, there has been much debate as to whether this is a ‘progressive’ or ‘regressive’ tax. All 3 party leaders seem to have had conflicting and changing views on this aspect, indeed a bout of memory loss seems to have been doing the rounds over the Christmas break. But hey times change and all that, and we are all rightly concerned about the ‘national interest’ so needs must, pay your part.

Today was also the day that the 38 Degrees Campaign ran its rather irreverent ‘Artful Dodger’ ads in some of the national newspapers – The Guardian, The Independent and the i. Allegedly, The Daily Mail, The Daily Telegraph and The Metro (part of the same group as the Mail) pulled the ads, or put their prices up. That is their right and their call, both the Daily Mail and The Daily Telegraph have shown their hands in recent times, so we all know where their allegiances lie. But we have a free press and for that we should be thankful.

This is the rather dodgy ad run by the 38 Degrees Team

However, one issue or number that I am totally perplexed about is the quoted £150 billion per annum which tax avoidance, tax dodging or working within the tax laws depending on how you view these things is supposed to cost the UK Exchequer. £150 billion – ie just shy of the deficit we are all being told must be chased down with extreme vigour and haste.  This is a serious amount of money and I for one would like know where this figure comes from – does anyone know or is it an urban myth? Have Vodaphone avoided, legitimately or otherwise, paying UK taxes to the tune of £6 billion last year? We need some facts, please.

This whole issue of tax and tax avoidance, indeed use of individuals’ or companies’ earnings to put against their tax allowances is relevant in the computer and video games industry, given our disappointment when the much campaigned for production tax credits. The Film Council has used the tax breaks system and National Lottery funding to part fund many films on the basis of cultural relevance. The net result of all these systems to offset tax against production of creative industrial output is that we have a pretty healthy film industry. Only today I watched ‘Tamara Drewe’ and ‘Another Year’, two very British films that would never get made in Hollywood, or if they did, would be dramatically altered in their final delivery. Last week I watched ‘Made in Dagenham’ and ‘The King’s Speech’ and the same observation could be made. These films define our culture both in an historical context as well as a contemporary one. They also earn the UK money, provide key jobs, and get us noticed in an ever competitive world. In short they feel like a good thing.

A quick look at the UK Film Council’s website tells quite a lot, namely:-

  • The core UK film industry now contributes approximately £4.3 billion per year to the UK economy – up by 50% since 2000, when the UK Film Council was created;
  • In 2009 UK films took 7% of the global box office and 17% of the UK box office; Independent UK films took an 8.2% share of the UK box office, the highest figure of the last decade;
  • UK film grossed $2 billion at the worldwide box office last year;
  • UK box-office takings are at record-breaking levels, worth £944 million in the UK in 2009, up 62% from 2000;
  • The overall territory box office gross for the UK and the Republic of Ireland exceeded £1 billion for the first time in 2009;
  • UK Film Council investments in British films have been hugely successful – for every £1 we have invested, £5 has been generated at the box office;
  • Over 173.5 million people went to the cinema in the UK in 2009 – up 31 million from 2000, the highest since 2002 and the second highest since 1971;
  • The UK has more digital cinemas than any other European country – 365 and counting;
  • Overall UK audiences had a far greater choice of films in 2009 – 503 films were released, 31% more than a decade ago;
  • The UK film industry directly provides jobs for almost 44,000 people, with extended employment impact of 95,000 jobs;
  • The film industry earns over £1.3 billion in export income from film rights and film production services;
  • In 2009 alone, British films and talent scooped 36 awards. 

Impressive stuff. Now, what if we could convert some of that ‘tax avoidance’ into ‘incentives to back creativity and innovation’ to produce a win win for the tax payer/avoider and the creative industries? Rather than blaming the bourgeoise or the benefit classes in some outdated class war, if we really are all in this together, let’s get creative and encourage big earners to contribute to things that can earn the UK vital export Dollars, Euros and whatever China uses as currency. After all, I actually think we could do with some culturally British computer and video games, rather than every game that is based on earth being impregnated with American or Japanese cultural reference points.

More on this in the coming weeks.

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