No Laughing Matter
In the latest example of the world going mad we have Ukraine electing a comedian to be their President. The fact that the person elected played the role in a comedy show indicates the lines between reality and fantasy are getting increasingly blurred and looking at the headlines in the satirical website, The Onion, I have to remind myself these are a joke as they are often not that dissimilar from those on “real” news sites.
But imagine if such a scenario happened here?
Our own parliament would certainly be more entertaining if Prime Minister’s Question Time was like the Two Ronnies Mastermind sketch where the contestant answered the question before last.
Q. Can the Prime Minister confirm her engagements for the week?
Q. What is the government doing about the increase in liver disease and do you expect it to improve?
A. I am hosting a Gala dinner for Commonwealth leaders.
Q. Will the PM agree to Scotland having another Independence referendum?
A. The amount of alcohol consumed in the country is a serious hindrance to this happening.
Q. Will the government consider giving food parcels to those most needy?
A. They had one in 2014 and said it would last a generation.
As per Monty Python we could have a real Ministry of Silly Walks and every House of Commons sitting would be an edition of “Would I Lie To You,” but on second thoughts it probably already is.
However, one thing that is not fantasy is the fact that the political status quo everywhere is being challenged. Spain is the latest country to see parties at the far edges of left and right make significant gains. If we end up having European elections in this country goodness knows what the result will be.
However there is a bit of reassurance in remembering that behind whatever shade of government is elected there is a civil service to provide advice regarding some of the more extreme policies they may want to introduce. An example of this is The Institute of Fiscal Studies which recently gave a presentation on “The Future of Tax” and the feasible ways governments would be able to raise revenue in the future.
At present the amount of tax raised in the UK is the equivalent of 35% of GDP which is the highest level since the 1960s. However this is still well below France where the tax raised is the equivalent of 45% of GDP, which probably explains the rise of the Gilets Jaunes!
However raising revenue is not quite as simple as putting up the rates at which it is paid, which has been proven to be counterproductive and often ends up raising less. An example of how cutting tax need not reduce revenue is the rate of Corporation Tax which is currently 19% but actually raises more revenue as a percentage of GDP than it did in 1980 when it was 52%!
The presentation highlighted how dependent the tax system is on high earners with the top 1% paying 28% of total Income Tax raised. Scotland is particularly vulnerable as if less than twenty of the highest earners moved away 10% of the increased revenue Scotland raises through its higher tax rates would be lost. Therefore all it would take is a BA shuttle from Edinburgh full of high earners to wipe out all of the additional tax raised.
In the last twenty years governments have increasingly looked upon pensions as an ideal way to raise revenue but the law of unintended consequences has meant that many high earners, such as NHS consultants, have found the additional tax they now have to pay on the pension contributions is an incentive to retire early. This is resulting in the government actually receiving less in Income Tax and National Insurance than if they had continued to work, as well as depriving the country of their expertise which is proving difficult to replace.
However the most illuminating statistic the presentation revealed is these pension funds are now worth more than the properties we own and make up 42% of the total household wealth in the country, £5.4trn in monetary terms. As you are probably aware these are currently free from Inheritance Tax and it doesn’t take a genius to work out the amount of tax this could raise if they decided this should be changed.
It wouldn’t be funny but in the words of Tommy Cooper it could happen “just like that”.