Quick question: is it only Lib Dems who believe in Land Value Tax, or do Labour party members like it as well?  Why is it such a Lib Dem Cause? (see ALTER) I haven’t had a chance to search LabourList on this . . .

Tim Leunig has weighed into the question of whether the Lib Dems’ internal democracy is compatible with the UK’s actual democracy.  Surprisingly to me, most of the comments below hint agreement with his view that it isn’t.  Good.

And the always excellent Flip Chart Fairytales provides further detail on Cameron’s earlier, surprising recognition that Thatcher never really cut spending:

It’s become a bit of a cliché to say that we are in uncharted waters but the public spending cuts being drawn up by politicians and civil servants really are unprecedented. Even the government’s relatively modest 9.3% real-terms cut over four years means that all public sector organisations will have their budgets significantly reduced year by year. Many public sector managers will simply have to manage with less cash. This has never happened before.

I made a very similar point in A Balancing Act (see this chart).  These are Darling’s current plans. spendingcuts

It is going to be a huge shock to most sensibilities, and the debate needs to start now in order to prevent the shock producing irrational denial behaviour when it will really matter.

On public spending and tax, I would not normally agree with Mark Wadsworth.  But I’m really glad he agrees on Martin Wolf’s excellent column today (see 2 posts ago).


2 thoughts on “Public Spending, the cold bath to come . . . part XXIX

  1. Ta for link.

    I’m not sure why anybody would disagree with me on public spending – a tiny bit is on core functions (where the issue is not how much the government spends but whether it does its job, and it could clearly do a much better job); merit goods (health and education) where it spends one-and-a-half times as it needs to for mediocre results; welfare (where I’m not quibbling with the amount but all the complications and means testing) and about a quarter of all government spending is on waste, i.e. three million completely superfluous public sector workers (including hundreds of thousands of quangista in health and education) and windmills and subsidies for this that and the other.

    I am perfectly aware that our dominant economic ideology – i.e. Home-Owner-Ism – is passionately against any form or land or property value tax, on that most people do disagree with me (but not you, obviously). I also seem to be the only one pointing out that VAT (or any other sales or turnover tax) is the worst kind of tax.

  2. On Public spending – I would give ‘weak agreement’ in that we would not start from here – I think Vince’s zero-based principle might agree with you there too – but I am always surprised by how much more important the public spending is when you confront some of the recipients of it. So your zero-based calculations would invariabily be ratcheted up as you came to examine cases in closer detail.

    For example, social care: sending people round to help old people out of bed (had to chair an event on this last week). However, I suspect that as countries get wealthier, they also often demand more products that are well-provided by public means (primary education, roads, parks etc). The problem is finding a liberal way of delivering on this – and, now, doing it with 10% less.

    I’m sorry I have no more to say about VAT.

    It’s not the same as gross margin tax. If VAT were 100% there would still be profits, just higher prices for consumers. If gross margin tax were 100% there would not be profits, and nothing would be invested to provide future goods for consumers. I must be missing something, I know you know your taxes – but I’m glad I have the OECD on my side.

    If some future govt announced it was going to gradually raise VAT to 30% to repay the debt, I would not flee the country. If they announceed a steady doubling of corporate and Cap Gains taxes, not so sure.

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