With the party political conference season almost upon us it’s bemusing to watch the ineffective jousting of the tories by Lib Dem leader, Nick Clegg. Deeply wounded by a torrid introduction to office he continues to lurch from one self-generated crisis to the next.
Clegg’s call for an emergency tax on the rich is a little late in the day given recent government history on the topic and will only serve to raise mild amusement and a few eyebrows within Conservative ranks as well as doubts about his floundering leadership in his own.
Were an emergency tax-raising plan for our flagging economy deemed necessary I’d have anticipated something a little more creative and persuasive from the Deputy Prime Minister. Instead we are presented with a proposal in which Clegg effectively wants to re-introduce a previous increase that was mainly reversed at the last budget – a reversal that he supported.
I also doubt if an intervention is justified at this time. But then I have never before encountered such a shambolic government as this and following the tax debacle at the last budget nothing any cabinet minister says about this subject should greatly surprise me.
Sadly, and despite overwhelming evidence to the contrary, I continue to expect better from government than what is being offered by this one. Will I ever learn…
There are sound arguments suggesting that with an increasingly vulnerable and unpredictable situation developing within the eurozone we should refrain from increasing taxes of this nature and keep our powder dry until we need to rely on the muscle such interventions can provide. However, in the event such an increase was to become justified, I think I’d temporarily increase corporation tax rather than income tax.
The banks have refused to lend to businesses who need the money to invest and expand. With uncertainty and fear a plenty, many have instead banked their profits; strengthened their accounts; reduced overheads and come out the other side more confident and secure than perhaps they had expected.
So bank balances are strong even though usual levels of output and expansion may have flat-lined or become reduced. The recent anomaly in a weakening economy but rising employment may in part be explained by this phenomenon. Some businesses may be taking on a few more employees – trainees for when they are ready to invest or expand again.
Many businesses are in a better position to pay an emergency tax than many others in society and if they aren’t investing or expanding then they aren’t contributing to the resolution of our faltering economic revival. The government needs to persuade them to do so.
Combined with a concerted effort by government to force the banks to lend - not the empty rhetoric and inertia characterized by them at present - we should begin to see the stimulus needed to alleviate our situation and give the economy a much needed kick-start.
Whatever the real solution to our present predicament, there can no longer be any no-go areas for government in the face of this particularly problematic debt and deficit crisis. I would however qualify this by insisting that essential and compassionate provision for the ill, vulnerable, elderly and poor remains in place and an absolute priority.
Business owners are unlikely to go to the extreme of withdrawing their trade from the UK to move abroad if a rise in corporation tax is seen to be fair and temporary. A small increase may also go some way to silence those who argue that a rise in income tax upon the rich is counterproductive and won’t generate the revenue most of us would expect it to.
Were their argument to hold up to scrutiny, it perhaps demonstrates that in taxation, as in life, what one expects can quite unexpectedly collide rather clumsily and uncompromisingly with reality. Nick Clegg’s unflattering spell in government is at least testimony to that.