By Christopher Williams
Before I start this I must make it clear that I have no intention of being impartial in this article and while I do intend to come to a fair and rational conclusion, I must assure you that I will not hide my contempt for UKIP, I will come clean instantly and say that I a centre-left Labour party member and if you support UKIP or their ideals then please do not feel like you shouldn't comment or argue, as I will welcome any opportunity to hear contrasting or similar opinions to my own as it enriches a debate while also forming the fundamental building blocks of a healthy democracy.
I would also like to clarify that this article is not about UKIP as a whole, it is focused specifically on their economic policy and what life would be like for the average Briton if they were to come into power as this is a topic often passed by in political discussion for the juicier euro-scepticism argument which surprises me due to the extremely right wing views they hold. Also I have linked my source for their policies at the bottom of the page for anyone interested in viewing the material though I assure you I have no interest in misquoting UKIP, they do all the dirty work themselves.
I feel that it is important to not just view UKIP as simply an anti-EU party as they do actually hold more views than simply their foreign policy, views which I feel have either been hidden behind the popular canvas of British independance or simply not mentioned at all. I think it would definitely shock a lot of people to know that certainly in economic policy UKIP are a much further right wing party than the BNP and certainly the furthest right legitimate political party in the UK at this moment (at least that I know of, i'm not including the ones which are so insignificant they might as well not exist). The first policy that they list on their fiscal section is that the tax threshold should be raised to £11,500 (i'm assuming that means per annum?) in order to take all minimum wage earners out of tax which is certainly something I am in favour with. The idea that people living on the minimum wage should have to pay tax is a silly one as the revenue it brings in is minimal and it is wrong to force people to pay tax when they can barely afford to pay to live. However, this is then followed the simplification of tax so that (to put it shortly) all taxation is at a flat rate of 31% starting at the £11,500 threshold. While I certainly agree that we need a simplified taxation system so that we can prevent tax avoidance etc, the idea of putting it at 31% is abhorrent and they then go on to say that it "Will make all taxpayers better off". Are they barking mad? If I was earning £11,500 per annum then I would certainly prefer not to have an increase on my income tax as the current lowest band of taxation is 20%, this represents a rise and certainly isn't in the interests of the lower classes.
Furthermore, let's say you are living in London which isn't exactly cheap living and you are earning less than £30,000 p.a. Are you going to prefer to have everyone pay the same flat rate of tax which means that the lowest earners end up losing the most, or would you prefer that people who earn more money should have higher income tax, not necessarily even by a large amount but as a matter of principle, those who earn more should pay more and this is the view of a great deal of low-medium income earners. What it is important to remember here is that although at first it may sound perfectly fair that everyone pays the same percentage making it always proportional to your wage, if you are earning say £100,000 p.a. and you see £69,000 of this then compared to someone who earns £15,000 p.a. will get a whopping £10,350 p.a. Now it's fairly easy from just looking at the figures who wins here, the rich person or the poor one? Both lose the same proportion of money but despite the fact the rich person loses more money he will also have a huge amount of money left whereas the poor person, to put it bluntly, is unlikely to be able to afford a family, let alone a holiday which isn't exactly much to ask for in a country as economically developed as Britain. Now let me ask you again, if you aren't earning pots of money (like the majority of this country) then what would you prefer? To have a flat rate of tax for everyone or have a progressive rate of tax where the richer people are taxed higher percentages, so they still have much more money than a poor person but there isn't as much of a huge gap between the standard of living of the wealthy and the poor.
Moving on from fiscal policy let's take a look at their other economic policies shall we? "Aim to reduce the public sector to the size it was in 1997, cutting many unnecessary quangos and non-jobs over five years. The goal is to exchange two million public sector jobs for one million new skilled jobs in manufacturing and related services and at least one million additional jobs created as a result of lower personal taxes and reduced business taxation and regulation." They almost snuck that last part past us but it is possibly the most ominous part of it all. Reduced regulation? This policy seems almost incredulous to behold, any economist can tell you that along with America we have the most de-regulated economy in the world and this has led not only to one of the most irresponsible economic crises of our time, yes i'm talking about the recession, but a must slower increase in the average standard of living (for that last point I can happily evidence it by lending you a book called Whoops by John Lanchester on economics or I happen to have one more which also explains this far better than I ever would of which the name escapes me). Now privatisation and de-regulation (as I said, this is a bit more complicated and goes into advanced economics but I will happily source you those books which I will bring in the next day on request) are just about the sexiest two words that you can get with a right wing economist and I would like to explain to you why the former of these things would be very unfortunate for your average Tommy.
Privatisation in short is the idea of selling of all state-owned jobs and businesses to privately owned businesses in the interest of promoting profits and acquiring instant cash for a government. However, this also has the effect of this business (let's take Thames Water as an example) then losing it's accountability to the people and as a result the standards tend to drop while prices soar. Classical libertarian economics! Thames Water is a great example of a once state-owned business that supplied water to all of London but was then sold off by the government and this resulted in essentially the neglect of the entire sewer system and the pipelines running around London that weren't in such extreme disrepair that the street would have flooded if they didn't fix it. Believe it or not, this does affect you as water shortages are partly as a result of Thames Water neglecting their piping and as a result huge amounts of water spillages which naturally decrease our reservoirs. The worst part is that they have the audacity to tell us it's our fault and that it's because we waste so much water by leaving the tap on that there is a shortage in water. Obviously this did have some sway on it but it wouldn't have mattered if Thames Water had maintained it's infrastructure which it would if it had a shred of interest in the quality of service it gives to the public. Unfortunately it doesn't due to the fact that it has a natural monopoly on our pipelines which is often a by-product of privatising national businesses as let's face it, we have no alternative. No alternative results in no competition results in monopoly results in a much lower quality of service for much higher prices and none of this would have happened had Thames Water remained state-owned with the nations interests at heart. This is why privatisation is first and foremost bad for anyone who is earning around the average fee or lower (more than half of Great Britain's population) and is certainly NOT in the interests of the common Briton.
All in all, I would strongly recommend that simply for the economic reasons alone (come and find me and I will happily elaborate on the rest but this article is long enough already without going into more) you should not vote UKIP whether it's because you're a low-earner or because you, like me, have a strong feeling of empathy and compassion for our fellow man and acknowledge the bond of brotherhood we all feel even if certain figures in politics (i'm referencing Thatcher here whom I intend to write an article on soon) want to believe that there is no such thing as society and that we are all in it for ourselves. Don't just think about yourself, think about each other because when you're on £11,500 having to pay 31% income tax and noone is looking out for you, you will be very, very sorry you voted in UKIP.
Thank you for reading and apologies for the rant-like nature of this post, :P
Christopher Williams
http://www.ukip.org/issues/2013-01-25-10-55-7/2010-manifesto
Nice. An insightful fresh new look at UKIP.
ReplyDeleteWhile I hold no favour towards UKIP after careful reading of their policies and you’re justified response, I will argue as an economist against your reasoning, because you have picked apart a couple problems without considering the hefty benefits.
ReplyDeleteStarting from fiscal policy “all taxation is at a flat rate of 31% starting at the £11,500 threshold,” we enter the touchy subject of equality and income gaps. At least £5 billion is lost from tax avoidance within the UK per year, with protests group such as UK Uncut arguing that when including the big oligopoly and monopoly corporations that this figure could rise to £12 billion. I understand the drawback that some people may be worse off, but the base earnings of “£10,500,” is just enough to enjoy a healthy life, granted no holidays. You must consider in today’s age that it’s difficult to get a perfect balance for which social class is most viable to be taxed and while taxing the richest may seem all jolly, they’re truthfully the main drivers of the UK economy. UKIP to combat the income gap have opposed taxing the people on minimum wages, which should close the spread of disposables incomes especially around the median; consequently on average, people are earning similar wages while stopping the abysmal standards of life from poverty. While some may be unhappy, the opportunity cost that the lowest and highest will be motivated, if not more now they are being taxed less, it should allow employment to keep on the rise.
You give an interesting example with the Thames water being privatized. Its infrastructure might have been poorly kept in contrast to before; however there was a noticeable improvement in quality for consumers, because of the introduced improvements to, for example, the water wheels. Economically the privatization of water means larger investment into the new founded private companies and although the good is price inelastic, there are certain standards that must be kept in place by the national rivers authority, including a satisfactory price level and obvious health standards. Furthermore water is and will always be a safe drink, but specifically to the point privatization is important to allow firms precise control with capital to increase the efficiency within the economy. Additionally It’s staggering how you say reduced regulation is “incredulous to behold,” since it definitely holds its merits. You are right that the UK is closer to a free market economy; we allow the price mechanism to set our prices. This competition is required to create a competitive marketplace, with lower prices for consumer, larger variety in goods and higher innovation. It’s why I have a strong belief that we need only regulations and government intervention in the most violated industries such as banking and yes, water suppliers.
Wealth is a disputed topic for all, as everybody comes from a vast background of income walls. I personally believe that firstly to increase taxes, to decrease our “uncontrollable,” debt and push our government spending on supply side policies, we have to consider everybody not the individual on the £11,500 income. Is it fair? Possibly not, but I view our monetary economy as unfair, because the problem lies on inflation and that concurrent currencies are not viable as a decent value of good. I’m in heavy agreement with Hayek, (if interested I am doing a talk on alternative currencies on November 4th :P) which you can further read about in his book “The denationalisation of money.” To finish, I agree with your points to an extent but I was giving you an insight on the other economic side, which is often overwhelmingly more important in my opinion. UKIP is not the party I would vote for, because I am against a few better known policies of theirs, but I can vouch for some which have been left questioned.
Thanks, Nick Shields
Firstly I would just like to state that a great deal of your language seems to imply if I might say so the idea that I know very little about economics. I didn't study it in school I do read A LOT of books on economics as it is incredibly helpful in deciding the pros and cons of many dilemnas in economics so please acknowledge this as your response gives me the impression that you don't think I know much about de-regulation, I know it has merits I just don't think they outweigh it's problems.
DeleteI do state in this article "While I certainly agree that we need a simplified taxation system so that we can prevent tax avoidance etc," so I agree that the taxation system definitely needs simplification to combat tax avoidance that is definitely a must and I would like to point out that UK Uncut take this approach from a left-wing perspective like myself and still believe in progressive taxation.
Obviously it's difficult to find a balance when it comes to taxation as we must consider everyone's perspective, please don't consider me naive enough to jump at the first opportunity to tax the rich simply for the sake of being "Jolly." While they are the main drivers of the current economy due to the fact that it is structured around speculative investment as opposed to manufacturing and industrial investment but it is important to remember that we would be in just as much trouble, if not more, without the working class as well as without the upper class. As I pointed out before, UKIP have not raised the tax threshold to combat the income gap as they have absolutely no interest in doing this, they merely raised it in order to ensure that unemployment benefits were not a more favourable solution to being in work. The policy that shows their absolutely lack of interest in tackling the income gap is the fact that they desire a flat rate of tax which has the effect of making the rich richer and the poor poorer. This removes any kind of opportunity or motivation for a low-earner as it becomes much more difficult for them to essentially 'climb up the ladder' despite the fact that true capitalism is meant to promote this ideal if one works hard enough.
As for your third paragraph, the reason I find the need for even more de-regulation incredulous to behold is because of how heavily de-regulated our economy is already. We are not only closer to the free market economy, we bathe in it while the banks splash money and I am glad you agree that is certainly one area that has gone far too far. As for the benefits vs the flaws of de-regulation as a whole, that is a much larger debate that would not do merely for the comments section of another article (if you're interested you could always write an article defending de-regulation that I would read and then debate the issue).
You highlighted one of the main problems with privatisation in Britain which is the fact that certain markets and industry end up (especially when nationalised companies are sold off) without competition and a perfect example is Thames Water which is why I used it. I don't know about you, but if I so desired I would be unable to switch water suppliers, thus where is the competition you speak of? I agree that healthy competition is fantastic for the people as it benefits the common man greatly due to low prices and high quality of services, but when you end up with services like Internet providers forming oligopolies or Thames Water essentially being able to form a legitimate monopoly a major, major problem forms which only state intervention and regulation can solve.
Finally, our fundamental point of clash (to use a debating term :P) is the fact that you think the economic side "Is often overwhelmingly more important in my opinion." You didn't say what it is more important than but I will assume based on the rest of your reply that you are referring to the welfare of the, as you strangely put it, "Individual on the £11,500 income." The combination of low-income earner and individual are something i've never heard before and this is coming from the perspective of someone with a great deal of right wing friends. There is no way that low-income earners are the individuals in this country, they form a collective majority of the country compared to high-income earning individuals which often seem to be the main benefactors of our de-regulated economy (to give an example, bankers who are paid appalling amounts of money when let's face it, despite the fact that 'run the economy' they certainly don't do a good job of it, it's due to the greed of bankers and their policy of increasing the risk of lending as much as possible to get the highest return that we ended up in this recession in the first place because the risk was so high that when the bubble burst, the average income-earner became very unhappy as a result). In my view, an economy should at the end of the day be designed to benefit as many people in that corresponding country as possible and the way this can be done is through lowering the wealth gap in our society and trying to increase the average standard of living as much as possible. What's the point of having huge amounts of growth (which I assume is one of the benefits you were referring to when talking about de-regulation) if it ends up just going into the pockets of those least in need of it? Surely it would be better to settle for not as much growth but with a better standard of living for everyone? That's the way I see it at least.
DeleteFor the majority in need, not the minority who aren't.
By the way I really enjoyed reading your response Nick thanks a lot, it was well reasoned, concise and a joy to read! Furthermore you answered my request at the start for differing points of view to my own which as I said before will enrich this blog all the more and I thank you for that! :D
Your maths is wrong, you state that at at 31 percent rate of tax a man on £100,000 will be left with £69,000 and a man earning £15,000 will be left with £10,350 but you haven't factored in their tax threshold of £11,500. A man earning £100,000 will actually be left with £72565 while a man earning £15,000 will be left with £13,950 leaving him with 91 percent of his income. Other than that a nice read!
ReplyDelete