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Weekend reading: Pre-budget blues

Weekend reading

Good reads from around the Web.

This week we’ll see the Chancellor deliver another uninspiring budget. Everyone knows the economic figures will be bad, and nobody knows what to do about it. (Certainly far more unites our political parties than divides them).

My early optimism in 2010 about a return to growth in the UK turned out to be wildly misplaced (although happily it hasn’t retarded the UK stock market).

Like most people I underestimated how long the global crisis would drag on for – we haven’t seen the likes of this for 60 years. And while I knew UK consumers were living according to precepts of Brewster’s Millions, I didn’t appreciate just how ruinously this dovetailed (IMHO) with excessive state spending to produce a double-whammy of living beyond our means. Now we’re catching up with reality.

I used to think the Coalition government was making the best of a bad hand, but I’ve now concluded they’re simply way out of their depth in facing this challenge.

We all have our own opinions about why most politicians are now basically PR men and self-confident ex-public schoolboys largely untested in the real world. Personally I think the electorate must take most of the blame.

For example, I was rooting for Obama not Romney in the recent US elections, but you only have to see how the latter was vilified for his infamous 47% comment to understand that free debate is toxic in modern politics.

Better than nothing

In any event, there’s no evidence we’ll see anything bold from this lot. Even the things they’ve got right they’ve inched towards half-heartedly, and they’ve embraced stealth taxes to boot.

Being bolder would have at least been good for our animal spirits. I’d have raised the £10,000 personal allowance at a stroke, for example, which would have raised real incomes for the poorest, sent a clear signal about rewarding work, and delivered a boost for the economy.

I’d have been cleverer on spending, too.

I don’t apologize for seeing the need to make many of the cuts the government has started to make. State spending and a growing entitlement culture needed curbing in my view, even without the gigantic IOU left by the financial crisis.

But I’d have offset at least some of these cuts with targeted infrastructure spending. Now is the time for the government to borrow a few billion at today’s bargain rates to build a new town or two in the South East, for instance. Damming the Severn Estuary to create a massive hydroelectric resource would have been another capital spending project I’d have put into place. There are others.

I understand infrastructural spending has a mixed record, but in my view it’d be great for morale. And even if we end up slightly down on the deal in fiscal terms, at least a few hundred thousand young people would have been employed and would have had a better chance of one day owning a home. And there would be slightly less need for fossil fuels in the future, too.

Fiddling while Romford burns

Big bold actions like radical tax reform – say an across-the-board flat rate tax of 30% and all exemptions out the window – are unthinkable with these leaders.

Instead we’ll get more tinkering.

On that note, be especially alert to talk of changing the Bank of England’s inflation remit. The Bank’s own chief economist Spencer Dale warned as much this week in The Telegraph:

The lesson from history has been the best a central bank can offer for “a prosperous and vibrant economy was to deliver enduring price stability”, Dale said.

“Recently, there have been some worrying signs that cracks may be appearing in that consensus. A sense that inflation is somehow yesterday’s war. That central banks should focus more on growth. That a period of higher inflation may even aid the recovery. This is dangerous talk.”

Citing the experience of the late 1960s when policymakers let “inflation to get out of control after nearly two decades of price stability”, he cautioned against being “complacent about the risks posed by further stimulus”.

He added: “It would be irresponsible to repeat the same mistakes again.”

Dale is right to warn on this.

Today we find ourselves with political leaders who have never aspired to be much else. That means in my view that solving our problems via higher inflation – even if it means overall we’re worse off than we might have been – is an  appealing option, because the electorate doesn’t understand the real value of money.

Of course we could argue that politicians don’t, either.

The stage is set for a little-noticed tweak on a par with Gordon Brown’s raid on pensions in the late 1990s.

Fingers crossed that the Bank’s own counsel prevails.

From the blogs

Making good use of the things that we find…

Passive investing

  • Using historical returns to predict the future – Oblivious Investor
  • Common diversification myths – Mint
  • Passive investing doesn’t exist, but so what? – Rick Ferri

Active investing

Other articles

Product of the week: About the only case I see for a cash ISA right now (as opposed to a must-have share ISA) is that you will need the cash soon. In that case, the best instant access cash ISA is currently Cheshire’s 2.5% paying ISA Saver Issue 1. It accepts transfers, too, but beware the 2% bonus rate ends in July 2014.

Mainstream media money

Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site.

Passive investing

  • Index funds are parasites set to kill the market – Stockopedia
  • Swedroe: When indexing works and when it doesn’t – CBS

Active investing

  • Japan: Land of rising optimism [Search result]FT
  • Men or machines: Who runs the markets? [Search result]FT
  • The future for bond returns looks bleak – Marketwatch
  • Government set to retain IHT breaks on AIM shares in ISAs – Fundweb
  • Buy gold, they say, but how do you sell it? – Telegraph

Other stuff worth reading

  • Cyprus bailout: Unfair, short-sighted, and self-defeating – The Economist
  • Peston: How pretty is the UK without the bad bits? – BBC
  • UK consumers: Dropping shopping – The Economist
  • Roth: A bear market to remember – CBS
  • UK retirement Vs the best of the world – Telegraph
  • Do your heirs know what they’ll inherit? – Vanguard
  • Downsizing not equity release is the solution for elderly – Guardian

Book of the week: If you’re going to read a book on empowering women in the workplace in 2013, make sure it’s Lean In by Sheryl Sandberg. I often get into rows with friends because I don’t believe women are professionally oppressed anymore in the UK and US, although I’d do something radical if in power to make sure, via better childcare. Sandberg sort of agrees. (For the record, I think it’s a disgrace there are so few female MPs, and would legislate to change. And globally, most women certainly ARE still oppressed).

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{ 24 comments… add one }
  • 1 chris March 16, 2013, 1:27 pm

    I have to say regarding the Romney “47 percent” recording, stating that almost half of the country takes no personal responsibility nor care for their lives, and believe they are victims, seems less like an example of “toxic” free debate, and more (to me anyway) a sign of contempt for almost half of the citizens of a country he wants to be in charge of

  • 2 The Investor March 16, 2013, 2:10 pm

    @chris — I do know what you mean, it was to my ears harsh. Voting Democrat would be easy in the US, whereas in the UK I have to vacillate every few years.

    But my point is look back to the 80s and politicians of all ilks, who made bold rallying stages from speeches. Now we get triumphant platitudes, signifying nothing.

    That’s why Romney was making these comments behind closed doors. It’s the only way to go out on a limb and make an appeal to this (too far IMHO) right wing of his party.

    The sum result is US politicians will conclude there’s no longer even closed doors to protect them.

    Roll on not bold leadership, but yes men who say yes to everything and act to do nothing. The best we can hope for democratic government in such a climate is that it keeps out of our way.

  • 3 Willem de Leeuw March 16, 2013, 2:20 pm

    @ Monevator: I think you mean ‘damming’, not “damning.” But then again, perhaps you do!

    They are trying to build HS2, and Crossrail is under way? Didn’t I see that Reading railway station is/has basically been rebuilt? The was quite a lot of work done for the Olympics (including roads, rail and underground)? BT have been rolling out more fibre across Britain? Lots of new windmills? Not enough I guess, but there are things going on. They probably could do more with the small stuff more easily e.g., fixing pot holes, improving the traffic flow at bottlenecks, but they wanted to cut spending and the big(er) stuff involves nimbys.

    Re your public schoolboy comment, what’s the point of having an ‘elite’ if you don’t try to use them? Wasn’t Gordon Brown a former state grammar school boy? How did that work out? My point is that we should try to judge them on what they achieve rather than on some idea of class warfare. Miliband is another who’s never had a real job (the closest he came was as a journalist?) but would claim to be state educated, IIRC.

  • 4 The Investor March 16, 2013, 2:30 pm

    @Willem — Hah! Thanks, fixed the typo.

    Regarding ex-public schoolboys, some of my very best friends etc.

    However it is pretty striking, is it not, when the leadership of a democratic society is dominated by an educational elite? (In most cases not a cohort selected on merit but by their parents ability to pay, aside from a relatively small number of scholarships and a few grammar schools).

    I agree we should judge people on merit and a couple of years ago I spent a lot of time defending Osborne particularly among my invariably left-of-center friends from what I felt were unfair class-based criticisms.

    I wouldn’t today, but that’s because he’s shown his limits and what he can or more particularly can’t do.

    However I do think it says something about the political environment when such a homogenous group is in charge. Perhaps similar to the 19th Century, when it was all aristocrats and the landed gentry, albeit not quite so visible. That was what I was driving at.

  • 5 Grumpy Old Paul March 16, 2013, 4:00 pm

    As usual, an interesting article and comments. The only thing that almost any group of 50 people in a room with a wide range of backgrounds and views that span the political spectrum would almost certainly agree upon is that our politicians have too little real-world experience with far too many having gone through the Oxbridge PPE, television researcher or PR role followed by a swift climb through the party ranks.

    But what no-one does is suggests is doing anything about it by introducing some suitable qualifying criteria for parliamentary candidates.

    So far as bold measures to kick-start the economy, introduce greater fairness in taxation and tackle the benefits culture are concerned, the only way I see this happening is as a result of a major economic/social/constitutional crisis leading to a government of national unity. The reason being is that, at present, any party in power is petrified of alienating potential voters and thus shuns any measures which disadvantage any significant section of the electorate, especially if that section has a great propensity to vote.

    We’ll just have to be patient!

  • 6 Alex March 16, 2013, 4:05 pm

    Another great Swedroe article (“When indexing works and when it doesn’t”). Very instructive. As ever, thanks.

  • 7 David Stuart March 16, 2013, 5:37 pm

    I think your personal budget is 50 x more important than the chancellors.

    Chancellor takes the middle ground with adjustments neither here or there.

    Where personal budget you can take drastic actions

  • 8 Greg March 16, 2013, 5:39 pm

    I think a major problem is that most politicians are functionally innumerate. I mean, would you want someone with a Spot the Dog reading level in charge?


    Similarly, almost all politicians are scientifically illiterate. The concept of “gather evidence, present it clearly, analyse and decide what it shows via an open discussion & change your mind if new evidence arises” is so alien to the “decide answer, distort any data to support your answer, ignore criticism” mentality of politicians it is ridiculous.

    They are extremely good at winning arguments, but is that what we need?

  • 9 Greg March 16, 2013, 6:02 pm

    Thinking about it, I think I might e-mail my MP with the following questions:

    1) What’s the chance of rolling 3 sixes in a row?
    2) The current UK death rate is 9.3/1000. If there is no change in life expectancy (currently 80.4), will this value go up, down, or stay the same over the next 50 years?
    3) All other things being the same, if we raised the motorway speed limits, would an individual’s chance of dying of cancer go up, down or stay the same?
    4) Torytoffitis is a nasty disease affecting 10% of the population. There is a test (not knowing the price of 4 pints of milk) which will detect torytoffitis with a 99% success rate. However, it will give a false positive 1 time out of every ten. If I take a test which returns positive, what’s the chance I have torytoffitis?

    The last one isn’t intuitive, and I would expect most people who just guess to get it wrong, but I would expect people dictating budgets and policies for our health service to know the answer! (e.g. Stocking up on Tamilflu was a crass waste of money.)

    Any other question suggestions? 😀

  • 10 Neverland March 16, 2013, 7:02 pm

    Very fashionable to be down on Osborne now it seems

    Some people, like Martin Wolf in the FT, have been making these points since 2010

    Personally I made two decisions around the time that trio of chinless wonders (Cameron, Clegg, Osborn) got in:
    – moved my fixed interest investments into index linked gilts
    – moved my equity investments into tracking world market trackers, not sterling based ones

    The thing is no one will vote for a labour party led by a gimp and a discredited ape. In 2015 we will probably have another conservative/liberal coalition

    We face a lost decade

  • 11 Alex March 16, 2013, 9:25 pm


    Can you provide the correct answers for your questions, please? I’d like to check my understanding (or not). Thanks.

  • 12 chris March 17, 2013, 12:11 am

    as I have such grand plans for the weekend I thought I’d take a stab at your questions, will check answers after I’ve posted, as its more fun that way
    1) three sixes in a row, 1 in 216? ie 1 in 6to the power of 3? this is making me want to do a maths course to get back up to speed
    2) as the population has been ageing for so long, if it stopped aging and stayed at 80.4, surely that would increase the death rate? though id have thought improvements in medicine may stop that? im sure theres a simpler mathmatical answer?
    3) Raising motorway speed limits, again assuming all else the same id have thought that would increase the risk of dying in a car accident, and so, make cancer deaths (marginally) less likely?
    4) ah bayesian thinking, I recently read “the theory that wouldn’t die” which while good, kept not actually explaining how the bayesian methods were conducted (outside giving v simple examples, including one similar to this – that said going on memory alone) so with a population of 62.6 million,10 percent, or 6.26 million, have torrytoffitis, 56.34 million don’t, of those that don’t 5.63 million, or 1 in ten, will get a FALSE POSITIVE . and of the 6.26 million actually affected, 99% or 6.19 million will get a CORRECT POSITIVE result, and 1% or 62,600 will get a FALSE NEGATIVE.
    So in total, 11.831 million people will get a positive, 47.62% (5.63 million) will be FALSE, and 52.37% (6.197 million) will CORRECT, so its more likely than not that if you are diagnosed then you actually have it? am off to read the appendix of the book to see if thats even close, but i had fun anyway

  • 13 J. Money March 17, 2013, 12:52 am

    Thanks for the shout 🙂 Your blog literally JUST came up in a convo I was having the other day with another UK blogger – Maria from The Money Principle. You know her? She’s a big fan of yours.

  • 14 Grumpy Old Paul March 17, 2013, 2:14 pm


    4) Suppose population is 1000 people.
    Then 100 are affected.
    Test will flag 99 people who are actually affected.
    Test will flag 100 people who are not affected.
    Therefore probability of being affected if shown positive is 99/(99+100)
    or 49.75%.

    But I agree with you about the prevailing level of innumeracy and plain incompetence amongst not just politicians but people in positions of authority and influence. Three glaring examples come to mind:

    a) Failure to measure mortality rates in GP practices (Should have been measured since 1948 and would have identified rogue GPs very quickly. Easy to adjust for median age of patients within practice.)

    b) Ditto hospitals but statistical analysis is a little more complex and probably requires using an overall total for a hospital supplemented by a department level breakdown.

    So there has been a failure over 64 years to measure the most basic output from the NHS – mortality rates . It beggars belief.

    c) The “expert” statistician involved in the tragic case of the family who experienced two sudden infant deaths who calculated the probability of this as the square of the probability of one sudden infant death when it is obvious to any numbskull that two infant deaths within a family cannot be treated as two statistically independent events.

    Why do incompetent people get into so many positions of authority? Within a work environment, the ability to progress is often based on a few attributes:

    – High energy levels
    – High presenteeism
    – Verbal fluency
    – Good memory
    – Willingness to “play the game” and accordingly be perceived as a “team player”

    Note that competence and analytical skills don’t figure.

    There is a separate problem, especially in the UK, the “managerial status” culture in which, rather than individuals being respected and rewarded for being competent practitioners, respect and reward are largely the preserve of those with”manager” or “director” in their titles.
    In consequence, good practitioners with little management ability are incentivised to become managers as also are poor practitioners who may or may not have real management capability.

    I’m retired now having escaped at the age of 53 which I regard as the greatest achievement of my working life! No bitterness about work – just wry amusement. However, my anger about incompetence within the government and the NHS is both genuinely fierce.

  • 15 saveonarola March 17, 2013, 4:15 pm

    Just a small quibble. Raising the personal allowance to £10,000 doesn’t ‘raise real incomes for the poorest’, because the poorest one-third of adults don’t pay any income tax. When looked at across families rather than individuals, it’s actually a regressive rather than a progressive measure. Also, the IFS is agnostic on whether it would boost the economy. Source: http://www.ifs.org.uk/publications/6045

    The overall effect of your suggestions – tax cuts and infrastructure spending plus spending cuts – seem, broadly speaking, to be fiscally neutral. Since it’s vital to reduce borrowing, do you think there’s any place for higher taxes on the wealthy, given the well-documented increase in inequality over the last thirty years, and the fact that incomes for the wealthiest have actually increased substantially since 2008, while everyone else has got poorer?

  • 16 Tony Edgecombe March 17, 2013, 5:44 pm

    The opportunity for bold moves has gone. Two years ago Osborne could have done whatever he wanted and blamed it on the previous government. As time has gone on it’s become much harder for him to do anything significant.

  • 17 The Investor March 17, 2013, 6:02 pm

    @saveonarola — Yes, fair comment, I should have said “poorest workers”. Ironically I fell into the left’s language there. 🙂

    I am of the school of thought that thinks people who earn their own money should always do notably better than people who do not work. That wasn’t a radical notion once, but after 13 years of Labour it became one.

    If people are disabled or temporarily unemployed, they absolutely should be supported and retrained etc. 100%. But self-sufficiency not state-support is for me an absolutely superior outcome wherever possible. Aiming for that will sometimes mean unpleasant choices.

    I do not think it’s morally superior to have hundreds of thousands of people living on benefits in moribund economic areas for years on end, kept on life support as bloc voters for the left. I also don’t think that as a society we’re better off having families on benefits in big London houses for many years on end, while many of my working friends can’t buy 1-bedroom flats and keep postponing having children.

    In fact, I think the opposite.

    I appreciate there’s a squeamish ‘yuck factor’ with some of this stuff, and I am as against the far right as the far left. But I do think the pendulum had swung too far.

    It’s not so much even because Mondeo man, or whatever he’s called now, deserves an extra £100 for a bigger TV at the expense of Benefits Bill down the road.

    It’s that I think it’s enfeebling for everyone concerned and a waste of human capital and lives to actively incentivise economic inactivity.

    Anyway, as Grumpy Paul says, we’ll all have our own views; I spend half my Facebook time debating politics with my friends, who are all pretty left wing in theory (I say in theory, because it always seems to be someone else’s taxes who are meant to be going up, not theirs…)

    I agree with you that inequality is an enormous problem — a real existential threat to our capitalist way of life. The rich, as a group, can’t keep pulling away like this, although somehow we must enable a Bill Gates or a Richard Branson to start with nothing and grow all the way, IMHO. These innovators clearly enrich us all.

    It’s the swathes of mediocrely super-rich (financial services, FTSE 100 directors, public sector bosses, heirs, etc) that I think justifies curbing. I’d agree it’s difficult to pick winners and losers.

    I’d far prefer to see a solution that capped pay at the top of companies and pushed up the salaries of the rest of the workforce compared to stifling taxation, to tackle this. I don’t have a great practical solution though.

    I’m not against taxation as part of the mix, but I think at roughly 40% of GDP that the State is already big enough.

    That said — and despite what probably seems a pretty economically liberal agenda above — I’m not actually convinced it’s vital to *immediately* reduce borrowing. I think it’s vital we have *a plan that we’re on* to reduce borrowing, but I think that plan could be different, and it could be slower.

    The irony is of course we should have saved in the good times. Instead, we overspent and promised more to come.

    But I don’t think it’s a great idea to cut back too far in the bad times.

    Our government can currently borrow at barely the rate of inflation — it’s near free money. I don’t say that’s a reason to double down on State spending, but I do think it allows some flexibility before low financing was threatened.

    Labour would have also cut, but a bit more slowly to support what I see as uneconomic spending in many cases — and it was certainly all set to cut capital spending. Indeed the Coalition stuck with most of its capital spending plans.

    This is the wrong way around. I understand nobody likes to see the impact of this or that state spending on an individual level, but I believe in capitalism and think we need to keep the IMHO superior goal of enriched citizens taking more care of themselves front and center. (I appreciate that’s unpopular nowadays!)

    We’re in a bind, and there’s no easy answers. But I think what might be helpful now are big gestures that enable the country and its businesses to rally around and realise everything isn’t doomed. (Every time Mervyn King opens his mouth, for instance, I’m tempted to sell all my shares and buy gold and baked beans!)

    Big *new* capital spending projects — earmarked and very visible, not piecemeal across the country — could help with this. Perhaps something for every region.

    Say a bold new town with brilliant high-density architecture and zero emissions in the South East, maybe the brownfield lands East of London. Damming the Severn for the West country and Wales. Some of the worst estates rebuilt in Glasgow and Edinburgh as well as some sort of break for its oil industry. Perhaps a high-tech campus / enterprise zone with 5% corporation tax rates for new investment or similar in Northern Ireland. (I am making these up on the hoof, but of course I haven’t been in power for two years to think about it).

    I favour construction because it is very manpower intensive, pushes money towards the lower income levels, and because the UK needs more homes.

    Infrastructure is also helpful because you can (to an extent!) put a price on a few big bold projects, whereas enabling pensioners to have an extra £5 on their fuel allowance or whatever just disappears in the morass.

    The £10,000 personal allowance limit should have gone up immediately so it was noticed, too. It’s pointless being dribbled out like this.

    Sorry, bit of a rant! 🙂

    @JMoney @Alex — You’re very welcome!

    @Greg — Intriguing questions. I’m sure you’ve got a few heads scratching. 🙂

    Thanks for reading all, whatever your views, and hope you’re having a good weekend despite the rain. 🙂

  • 18 benfitzg March 17, 2013, 11:51 pm

    Neverland – Ashcroft has stopped funding the Tories for the next election. The Tories failed to overturn electoral boundaries favourable to Labour. Labour are strong favourites.

  • 19 TonyN March 18, 2013, 2:55 pm

    One of the best suggestions for infrastructure spending I have seen in recent times was an article in the London Standard suggesting printing the £30bn that the NHS (I think) Pension Fund was in deficit and giving it to the fund on the proviso it was entirely used to fund infrastructure projects such as home building, toll roads or bridges, maybe even a town as you suggest above.

    This would stop all the printing going into the Banks’ reserves where it is never seen again, and put the money directly into the economy, at the same time providing a long term annuity income or rolling sell/build programme to finance the pension fund going forwards.

    What’s not to like?

  • 20 Ignorant March 18, 2013, 6:08 pm

    Thoroughly enjoy your site and comments. I am not desperately in favour of any paticular party or point of view. I do though think it is fair to say that although Martin Wolf has been convincingly putting forward the point of view that Osborne should be borrowing more and investing for several years.
    Others have to me equally lucidly been putting forward the other point of view including in the FT
    I am happy to castigate politicians for many things but I am not really prepared to say that they should have had greater foresight as to the right thing to do with the economy in these very unusual times.

  • 21 The Investor March 18, 2013, 11:15 pm

    @Ignorant — Thanks for the kind words about the site. 🙂

    I’ve written in support of State spending on infrastructure for Keynesian-style reasons a few times.

    For example –>

    In 2008: http://monevator.com/why-i-dont-want-gordon-brown-to-cut-my-taxes/

    In 2011: http://monevator.com/a-good-time-to-be-investing-for-governments-and-for-most-of-us/

    @TonyN — Quite like that plan. Might be seen as too close to outright monetisation of debt not to spook the markets though. (Where would it stop, etc? See contagion risk after Cyprus move today for parallels! 😉 ).

  • 22 saveonarola March 19, 2013, 12:52 pm

    @The Investor

    Wow – thanks for such a long response. It’s a bit intimidating, because I feel I should respond in kind, and we all have limited time. In fact, I don’t know where you find the time to write this blog, but I admire the fact that you do.

    This is such a complicated issue, I find it hard to know where to start. It seems to me that Britain has been a lucky country for a long time, and now things are reverting to the mean. The question is how to avoid going too far the other way.

    I’m not sure that looking at things in terms of left and right, Labour or Tories, is all that helpful. All developed countries are in pretty much the same boat – even saintly Germany has 80% debt to GDP, unrecapitalised banks and is massively on the hook regardless of what happens with the euro – and many of those had supposedly right-wing governments in recent years.

    For me, the important thing is we’re seeing an epochal rebalancing in power from west to east. For thirty or more years, eastern nations (principally China) have been selling us cheap stuff, which we’ve bought with borrowed money, which they’ve recycled into our bonds, keeping our interest rates low, so we could carry on borrowing money to buy their cheap stuff. We’ve been living beyond our means and it had to end sometime.

    But what to do? I agree that the solution is self-sufficiency, as individuals and as a nation. That means our own rebalancing – a massive investment in and incentivisation of training and investment in construction, all kinds of manufacturing, but especially high-tech, and (clean) energy generation.

    How to achieve it? Can we borrow the money? Who knows? I’m not a wonk. Maybe we can borrow a bit more, but this sort of tinkering, like the left/right debate, feels like more of the same to me. I think any changes we make will be pointless unless they go along with a new mentality, that sees a good life in terms of neighbourliness and being satisfied with what we have rather than measuring happiness in terms of consumption and status. I think we need to consider what kind of nation we want to be.

    I would cancel Trident and gradually withdraw from helping to police the ‘Pax’ Americana as we become more energy independent. I would raise taxes on unearned wealth (land, capital gains, inheritance) and lower taxes on productive investment. I would oblige companies that earn profits in the UK to pay taxes in the UK. And I would cancel universal benefits for those earning well in excess of the national average or with substantial assets.

    There is a ‘yuck factor’ to some of these ideas too, but I think most people who are well off are happy to pay taxes if they feel they are buying into a vision of community, a happier, more productive nation, and one where the rule of law protects them from more violent forms of expropriation.

    Finally, I would end the fractional reserve banking system. I don’t know enough about this subject to say what I would put in its place, but it simply can’t be right that institutions able to issue debt virtually at will can then demand the nation’s property, regardless of the cost to all taxpayers, when the debtors can’t pay.

    As I say, I’m not sure it’s helpful to think in terms of left and right. The idea of a Labour-sponsored benefits client state seems like a caricature to me, like the idea that Tories don’t care about the poor. Governments of all stripes have ducked this issue because finding work for people with no education, skills or confidence is a very resource-intensive business.

    Even moving families on housing benefit out of London, I suspect, will turn out to cost more money than it saves, unless they’re going to live on the streets or in shanty towns. For what it’s worth, I also suspect the reason your friends can’t afford a one-bed flat in London has a lot more to do with bankers and the super-rich buying up swathes of property which they then rent at extortionate rates.

    But I think we probably agree on a lot more than not. For that matter, I think you have more in common with the ‘left’ than you seem to think. Surely both left and right want to see working people able to live off their incomes without needing ‘tax credits’ and other forms of state support? How to achieve this? For me, it can only be more productive jobs and a more equitable division of the profits of capitalism.

    I’m a capitalist too. I think people who take risks and create wealth should be enabled and rewarded. But I don’t buy the idea that tax stops people working harder. No one I know has ever turned down a job they wanted because the money wasn’t good enough. In my experience, people work hard and succeed because working hard and succeeding is integral to their sense of self-worth, not because they want to be rich.

    Okay, that’s my rant! Thanks for the brain food.

  • 23 The Investor March 20, 2013, 12:23 pm

    @saveonarola — Thanks for your long reply, which contained much food for thought! You’re right about busy-ness, which means I’ll regretfully have to leave this enjoyable conversation here for now. 🙂

    One thing though — you’re right about me actually being less economically right wing than it might sometimes appear. I did an online test the other day, and it told me I was socially left of center (so I believe in personal freedoms, marriage for anyone foolish enough to want it, etc) and economically pretty close to the center.

    It’s amusing to me because many of my friends think I’m essentially Gordon Gecko (even The Acccumulator might say this at times!) As I said when I wrote about inequality, the average person in my circle espouses very left wing views while enjoying the fruits of a capitalist system — there is no consistency there.

    I think it’s partly up to those of us who believe in free markets and superior — but not outrageously unequal — outcomes for those people who do best to re-articulate why this is a good thing, and to remake the case for capitalism as an overall force for good.

  • 24 Pam@Pennysaverblog March 22, 2013, 10:31 pm

    “Lean in” sounds like an interesting book, thanks for mentioning it. Unfortunately women still are oppressed both in North America and around the world, although not as overtly as before in some places.

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