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Opinion: Whose shoulders are broadest?

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2nd Feb 2012
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Simon Sweetman is losing patience with bland assurances about how those with broad shoulders will carry the biggest tax burden.

It is a truth universally acknowledged that those with the broadest shoulders should bear the burden of any increase in taxation. Mr Cameron, Mr Osborne, Mr Clegg, and Mr Milliband would all agree with this proposition (a strong suggestion that it means very little as it stands).

Here’s what the Daily Mail had to say on the issue, reporting from the Tory conference in 2010: Who is rich in our society? Or even just comfortably off? Both the Prime Minister and the Chancellor seem to think higher-rate taxpayers are — those who earn more than £44,000 (or £43,875, to be ¬precise) a year. These are the people who from 2013 will no longer be eligible for child benefit.

“We are told by the government that only 15% of those in work earn more than this figure — as though to imply that they are a small, privileged minority which can be called upon to make a bigger sacrifice than the vast majority. Mr ¬Cameron described them as ‘those with broad shoulders’ in his speech at the Tory Party Conference yesterday.

Passing over the fact that even  in Daily Mailland 15% is indeed a minority, I can sympathise here, because I know well someone with four children who earns about £40,000 a year and whose husband needs to spend £2-3,000 a year commuting to work. From what is already a very tight budget, they are going to lose something over £60 a week – and that is net, so is equivalent to some £90 a week of taxable income.

Given the approach of the present government, it is more a case of where tax cuts and spending cuts fall rather than who benefits or pays for increases, and it is very clear from a number of surveys that the burdens will largely fall on the poor to middling parts of our society. And one such cut is the intention to privatise HMRC call centres, with the staff employed by them being paid substantially less (some £3,000 a year) than the present call centre staff who, if I am not mistaken, make about £18,000 a year. But the government’s idea would seem to be that the first cut would be to abolish the 50% rate.

One might think that some of the broadest shoulders belonged to the bankers or to the directors of large businesses, where the gap between what they are paid and what the rest of us are paid has increased exponentially. Can it be right for someone to make nearly 100 times as much as his workers?  But no, they don’t have broad shoulders at all. The mere mention of paying tax causes them to weep bucketfuls and threaten to leave the country (“I’ll scream and I’ll scream till I’m sick and then you’ll be sorry, so there!”). The press then tells us that they cannot possibly be replaced because nobody anywhere will come to a country where they have to pay tax.

But tax is not everything; does this country not have more to offer?  In a recent episode of ‘Borgen’ a leading industrialist threatened to leave the country and take his business with him unless he was able to dictate aspects of government policy. Now that’s not a problem here, where leading industrialists (assuming the financial sector to be part of industry) have no problems at all in influencing government policy, either under this government or the one before. We are not as careful as the Danes. In his case his bluff was called (after all, he played chess with the Queen every Thursday, and in the end his lifestyle was more important).

It is probably worth remembering that the average tax haven provides a lifestyle swept bare of culture and suitable only for morons or zombies (remember Orson Welles on Switzerland in The Third Man), possibly because when money becomes everything, everything else becomes nothing. And of course the relocation of a real business to another country is vastly expensive and disruptive (as distinct from moving a few headquarters staff and pretending that’s where your business is carried on).

Monsieur Sarkozy is proposing to introduce a tax on financial transactions, admittedly because he is behind in the polls. But in this country we are so frightened of the wealthy that we dare not do the thing. Beef-eating surrender monkeys, perhaps?

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By User deleted
02nd Feb 2012 15:59

Flawed concept ...

Do we really think that '.. introduce a tax on financial transactions ..' would do anything to curb the excesses of the financial sector?

Yes, it would raise revenue for the exchequer but in reality it would have very little impact on those with the '.. broadest shoulders ..' who would get the same cut anyway

The real impact would be on any member of the public making a financial transaction who would be clobbered - this includes private investors, pension funds etc.; so if you want your private sector pension to be hit yet again (after GB's tax credit raid) then by all means go for it!

On the subject of fairness, the current public sector pension liability is enormous and in many cases the benefit far outstrips what the country can afford as well as any equitable comparison with private sector pensions; ultimately this may mean that those in the private sector are reduced to penury in their old age to 'pay for' unsustainable public sector pensions - so effectively the disorganised private are being bullied by an organised & focussed public sector holding them to ransom

The solution - maintain existing public sector pensions for those already in the system and close the final salary basis for new entrants with immediate effect - thereby placing a finite cap on the public's liability in this area

It is all about cutting costs and not being the either entire worlds free health service or free educational system (quantify the education grant recovery from foreign nationals one they have obtained their degree and left the country)

Again, why is the UK so attractive to migrants from other countries and could it be the benefit system? The solution is to have a period where no benefits are payable to foreign nationals entering the country before they have been here 5 years in order to make the gravy train less profitable and curb the 'human traffic in children' to play the system

All in all it is not solely about going for those CEO's on the gravy train but also a more rounded approach to cost cutting and preventing abuse of the existing systems

Furthermore, a disproportionate increase in population also brings other issues such as housing, services, availability of water etc. which all need to be accommodated with finite resources

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By nickja
06th Feb 2012 14:06

...and a flawed response

For the vast majority who get them, public sector pensions are not enormous   But those whose pension savings have been raped by either their employer, eg British Airways, or fund managers over whom they have little control, can only look with envy at public schemes that haven't suffered those vicissitudes.    Is the problem the cost of paying public sector pensions or the appalling performance of private sector pensions over the last 10-15 years?

As it has done with those who receive benefits, the coalition demonises recipients of public pensions in the eyes of those who work in the private sector, effectively setting neighbour against neighbour.   Rather than address what has happened to private sector pensions, it manipulates popular opinion so that opinion will accept a race to the bottom, ie the lowering of public sector pensions to the appalling level of private sector pensions.   And this is leadership?

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By chatman
06th Feb 2012 14:40

Repeating the lies peddled by the super rich

Attacking those at the bottom is falling into the media's trap and  usually arises from blindly lapping up the lies of the establishment-owned medai. Why not tackle the problem of the  super rich before saying we can't afford to pay decent pensions to public servants?

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By User deleted
07th Feb 2012 09:18

Addressing inequality between average people ....

Not an attack but rather a statement of fact that all employees are not on a level playing field so far as pensions are concerned and something really needs to be done to redress the balance

@nickja

‘..Is the problem the cost of paying public sector pensions or the appalling performance of private sector pensions over the last 10-15 years? ..’

The Private Sector has closed down (and continues to) ‘Defined Benefit Schemes’ simply because it deems them unsustainable. With this in mind why are the equivalent Public Pension Schemes regarded as acceptable and not in line with Private Sector thinking?

@chatman

Unfortunately using extremes at either end of the scale is frequently used to distort the facts to favour one’s own argument. Yes there is a gross disparity between the average person and the very rich but is that really a reason to ignore equity further down the scale between average people? Address this inequality first and then look at the issue of the very rich

The average Public Sector Pension for ‘Final Salary Scheme’ is worth approximately £7,800 pa. (based on their salary at the point of retirement, the number of years they have belonged to the scheme and the accrual rate)

The average Private Sector Pension for ‘Defined Benefit Schemes’ (final salary scheme- similar to that of the Public Sector) is worth approximately £7,467 pa

However, most ‘Defined Benefit Schemes’ in the Private Sector have been closed because they are deemed unaffordable by the Private Sector, which is driven by performance and profitability

Therefore the majority of Private Sector workers are in ‘Defined Contribution Schemes’ and have an average pension worth approximately £1,400 pa from a pension pot of £20,000 (money purchase - where the eventual retirement income is based on the amount of money paid in and the amount by which that money grows)

Public sector pensions are more generous than private sector ones because

They are far more likely to have oneThey have a Defined Benefit, rather than Defined Contributions scheme which links their pensions to their final salary and is more generous

Finally in order to get the equivalent of an income of £7,800, a Private Sector pension pot would have to be approximately equal to £142,000

These are facts and not lies peddled by the super rich

So the real question that no-one wants to answer is:

If the Private Sector is closing down ‘Defined Benefit Schemes’ because they are unsustainable why does the Government persist in maintaining the equivalent Pubic Service ‘Final Salary Schemes’ when they are equally unsustainable ?

Could it be that the taxpayer is able to provide limitless resources to fund these unviable schemes whereas Private Sector companies are driven by affordability ?

Clearly double standards which adversely affect the taxpayer

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