Budget thoughts....

Randwick Woods Saturday

I've had a very busy week but did want to cover some of the budget.....basically it seems clear that George Osborne has failed to deliver what the economy needs. It is extraordinary that there are more cuts to corporation tax to basically allow large multinational companies and the wealthy to gain private profits at public expense.

What we need is investment in renewable energy and energy conservation, in public services, public transport and public goods are all essential for our future.We didn't get it. Click read more to see lots more....

As the Green Party press release said: "The Chancellor refused to admit that this government is using the banking bailout deficit to slash expenditure on essential public services to justify tax cuts for the richest people and for corporations using tax havens to avoid paying a fair contribution to society. And, of course, allowing wealthy individuals and multinational corporations to pay ever-decreasing income tax worsens the deficit that the government claims to be so concerned about.....The Chancellor misled Parliament and the public: unemployment has increased since his government came to office (2.53m up from 2.47m). He says borrowing is down but a like for like comparison puts new borrowing up by 2.2bn on last year, at £123.2bn."

Nef also wrote critically of the budget saying: "George Osborne delivered his fourth budget of cuts. It is another a budget that will hit the poorest hardest, slashing taxes for big business while making a mockery of the government's pledge to be the 'greenest ever'. And what are we actually getting in return? In 2010 Osborne pledged to deliver "fiscal credibility", his tough austerity drive delivering growth, cutting the deficit, and reducing the national debt.  But austerity isn't working. As our graph below shows, the government's economic policies are failing on their own flawed terms." 

Green Party leader Natalie Bennett commented: "George Osborne's obsession with austerity is now glaringly clear. With even the International Monetary Fund telling him he needs to spend more money, he's still stuck with Plan A, which is failing in even its own terms, with his deficit-reduction targets extending ever further into the distant future. We need to invest to create jobs, to make our economy and our homes fit for the 21st century, to create a jobs-rich, low-carbon future, with manufacturing and food production brought back to Britain. The Bank of England has already e-printed £375 billion for quantitative easing, to the great benefit of the richest 5% in Britain and little impact for the rest of us; what Osborne should have done today was set out a big investment programme in renewable energy generation and energy efficiency at interest rates designed to maximise uptake rather than profits for Green Deal lenders. Treating 1 million of our cold draughty homes each year would create 140,000 jobs, save each household up to £250 in fuel bills, and cut carbon emissions."

Welfare Cuts

On the weekend I was catching up on the impact of this budget. A new report by the Joseph Rowntree Foundation warns that a combination tax rises, welfare cuts, and wages freezes will mean that within two years almost 7.1m of the nation’s 13m children will be living "below the breadline". This is shocking and has huge impacts on the whole of our society. Below is more from the Green Party news release with some of my additional comments.

Personal allowance vs. public service cuts

Under the new budget, the first £10,000 of income are tax-free for all workers, regardless of their tax rate. This tax cut is being paid for primarily by cuts in services, which are relied upon by the very same poorest people in the UK, and the loss of those services will not be made up for by the tax cut. The cut is also being given to everyone, regardless of income level, which gives the rich a total tax cut of £42,500 per year. This means the main benefit – the potential of lessening the gap between rich and poor – is wiped out.

Corporation tax giveaway

This is a race to the bottom. The changes will encourage multinationals to shift more of their business to tax havens. There is no benefit to small- and medium-sized British companies. The reforms represent a triumph of corporate regulatory capture, begun under the last Labour government and accelerated under this one.

·       By the time Osborne's cuts to corporation tax – from 28% when the coalition took power, to 21% by 2015 – have been phased in, the government will have forfeited £5bn a year in revenue.

·       The IMF says cutting corporation tax does not boost growth.

·       Fair corporate taxation does not mean an uncompetitive economy: two of the four most competitive countries in 2011(Finland (3) and Sweden (4)) had higher tax rates than the UK

·       These changes will not benefit the SMEs that make up almost 60% of private sector employment, but instead allow large multinational corporations to use tax havens to an even greater extent to avoid contributing to our society.

Tax cuts for the wealthiest

Cutting tax for the richest individuals won’t drive growth or create jobs but it will increase our deficit. The Centre for Economic Policy Research has shown that cuts to top tax rates do not translate to higher economic growth. The Green Party would ensure high earners pay their fair share of tax contributions by extending the 50p tax rate to cover salaries over £100,000, raising around £2.3bn per year. We also have a policy of 10:1 ratio between the highest and lowest paid workers.

The Chancellor refuses to admit that this government is using the banking bailout deficit to slash expenditure on essential public services to justify tax cuts for the richest people and for corporations use tax havens to avoid paying a fair contribution to our society.

Osborne’s actions do not match reality and nor does his rhetoric: he claims that the IMF supports his studies, while IMF studies show that austerity never results in economic recovery.

In addition to these losses in revenue, the exchequer will be deprived of close to £1bn a year by 2015 in taxes on foreign subsidiaries.

The Green Party would phase out VAT - a regressive tax on spending which hits poorest people hardest - and replace it with taxes to cover the full environmental costs of pollution and raw material use, levied as close to the point of production as is practical.  We would introduce a wealth tax to ensure the richest in society make a fair contribution and use taxes on international financial transactions and on bank profits from polluting investments to incentivise and finance a Green economic transition.

Tax avoidance

If Osborne really wanted to reduce the deficit or fill the tax gap of £35bn to £120bn he wouldn’t have slashed HMRC staff by 10,000 and funding by £3bn in 2010. By 2015, staffing levels will be at an all-time low of 56,100, significantly limiting HMRC's ability to collect taxes.

Nor would he have slashed tax rates by 75% for multinational companies with subsidiaries in tax havens, as he did in 2011 and which he has not reversed. And he’s proudly boasted about further cutting tax rates for large corporations from 28% in 2010 to a historic low of 21% in 2014, when what we need is for companies to pay a fair share of contributions to the society that enables their profits.

If the Government were serious about cracking down on tax avoidance and evasion it would be shutting down tax havens such as the City of London and Crown Dependencies and it would have supported Caroline Lucas’s private members bill requiring all companies to publish what they earn, a crucial building block for any system that is tough on tax evasion and avoidance.

A Green government would make corporations pay a fair contribution to society by closing corporate tax avoidance loopholes. We would reverse the Tory-Lib Dem tax giveaway for multinational companies with financial subsidiaries in tax havens, increasing tax rates from 5.75% back to 23%.

We would increase the declining main rate of corporation tax from 21% in 2014 back to 30% but keeping small firms’ rates substantially lower, to support the main job creators in our economy.

Aid budget

One piece of good news is that the UK government has kept its promise to spend 0.7% of national income on aid in today’s budget announcement. However we have to also tackle tax dodging by UK companies in developing countries - as ActionAid note that is still a major reason why nearly a billion people go to bed hungry every night - despite having a great opportunity to make it harder for companies to dodge their taxes overseas in this year’s budget the government failed to take it. 

Shale gas tax breaks - astonishing!

The lack of commitment to ensuring that Britain has a stable energy policy will plunge us further into fuel poverty and increase our reliance on economically volatile and environmentally destructive fuel sources. 

Tax breaks for environmentally and socially reckless energy shale gas will help a few corporations at the  expense of everyone else. Shale gas is bad for Britain due to local environmental impacts (including water contamination, air pollution and release of carcinogens) and its absolute incompatibility with our international climate crisis commitments. The Department of Energy and Climate Change and other experts say shale gas is unlikely to reduce energy prices significantly. Furthermore, it will suppress the development of renewables: money spent on a reckless dash for shale gas could provide 7-12GW of offshore wind capacity.

Caroline Lucas MP said: "It's outrageous that the Government is willing to gift yet more tax breaks to companies drilling for hard-to-reach shale - a costly gamble that risks keeping the UK addicted to polluting fossil fuels at precisely the time we should be leaving them in the ground. A Government which really cared about bringing energy bills under control and improving energy security would put its money on renewables - where the costs are predictable and falling - and agree to recycle carbon tax revenue into a jobs-rich energy efficiency programme, rather than deepening our dependence on gas, where prices are set to keep rising. Going all-out for offshore wind, for example, instead would save £20bn by 2030, create 70,000 more jobs, and lead to both lower climate emissions and lower fuel bills. And with the new nuclear facility at Hinkley announced yesterday expected to come with a £14bn price tag, this Government should urgently think again before ploughing ahead with its deeply misguided nuclear strategy. For the cost of one nuclear reactor, it's estimated that 7 million households could be lifted out of fuel poverty. With the negotiations for a strike price for nuclear operators getting on for double the current price of electricity - to be paid by households and businesses already struggling with high bills - it's clear that the main beneficiaries of this policy will be EDF and the French state."

New nuclear: holding the nation to ransom

UK new nuclear is likely to be significantly more expensive per unit of electricity supplied than any other low-carbon energy source and too slow to deploy to meet our pressing energy needs. Furthermore, the costs and dangers of nuclear energy and its waste will be passed on to future generations long after any benefits have been exhausted. 

A Green government would cancel construction of new nuclear stations and nuclear power would not be eligible for feed-in tariffs.