And with the latest polls indicating that Reform UK is growing in popularity as economic progress stutters, Reeves launched a broadside at Farage and his party’s lack of fiscal credibility.
“What’s Nigel Farage’s answer on the economy? How is he going to make working people better off? He hasn’t got a clue. How’s he going to grow the economy? He’s not got the faintest,” she said.
Let’s put it this way. I trust Nigel’s basic instincts on economics rather more than I do yours.
As I predicted, Reform UK is moving leftwards on economic policy, calling for the nationalisation of Thames Water and of British Steel’s Scunthorpe plant. So I am not sure how much I would trust their “basic instincts on economics”. Labour’s position is that nationalisation is the least desirable option; Reform’s is that it’s the most desirable option…
He doesn’t need a plan to grow the economy. He can appoint a minister specifically for that if he’s ever made PM. While Reeves . .
Farage defenders can say that he does want peace in Ukraine, easy taxes, and a one tier justice system, which is a pretty good starting point.
“What’s Nigel Farage’s answer on the economy? How is he going to make working people better off? He hasn’t got a clue. How’s he going to grow the economy? He’s not got the faintest,” she said.
I wouldn’t throw stones at that particular glass house, Rachel, but isn’t it interesting that you are rattled enough to discuss him having power…
However, she pledged a renewed focus on growth in the new year
She’s only been in the job for five minutes so what happened with the previous focus on growth?
Theo, from the Reform charter:
1) Basic rate Income tax threshold up to £20,000
2) Freeze on non-essential immigration.
3) Capital Gains tax free allowance of £100,000 for small businesses (no tax on first £100,000 profits).
4) Lifting threshold for VAT to £150k from £90k.
5) Scrap net zero (save £30 billion)
6) Ban transgender bullshit in schools.
7) Increase spending on the NHS by £17billion. (Cons = £1Bn, Lab £2Bn).
8) Scrap HS2.
9) Scrap Sadiq Khans ULEZ in London.
10) Leave the ECHR.
11) Scrap the BBC tax.
Always amusing to get Rachel from Complaints’ take on the economy.
It’s true that Farage has no track record of economic management. Sadly for Reeves, she does.
I’m starting to wonder if 2Tier’s Prime Ministership is just a remake of Yes Prime Minister without Sir Humphrey.
She did go and throw that particular stone, eh? Mmm’kaaaayyy… I
Addolff
The earliest Reform could get into power is 2029/2030. By then it would be pointless to scrap HS2. As for the VAT threshold it might be better to abolish it completely. The issue with it is that a growing business will always hit the threshold eventually and then they have to try and find a way of paying VAT, either through lower profit margins or by passing on the extra cost.
Other than that, I quite like it.
“How is he going to make working people better off? ”
Because that’s what keeps her awake at night. Being a soulless inhuman automaton probably is probably another factor.
“How’s he going to grow the economy?”
Well, stop fiddling with it in attempts to grow it and stand back from it would be my answer.
Of course this is anathema to Labour, since that would reveal that their “work” is counterproductive to this.
Excellent.
These people attacking Reform just reminds people that Reform are the real opposition.
Faster, please.
How’s he going to grow the economy?
Public hangings count towards GDP, think of all the candy floss and ginger beer we’ll sell.
£20 for a selfie with Tony Blair.
“As for the VAT threshold it might be better to abolish it completely.”
The threshold, or the tax? I’ve always said I’ll believe we’ve left the EU when they abolish VAT. Replace it with a simple sales tax if you like, but that bureacratic rats’ nest has to go.
“The earliest Reform could get into power is 2029/2030. By then it would be pointless to scrap HS2.”
As its not planned to be finished until 2033, and that doesn’t include either Euston or Old Oak Common stations I bet cancellation in 2029 would still save a pretty penny. And as the entire project will be useless even if fully completed, there’s no point throwing an extra penny at it, regardless how close to completion it is. Sell it off to private business as a toll motorway or dedicated lorry road instead. Would raise quite a few quid I’ll bet.
“As for the VAT threshold it might be better to abolish it completely.”
Awful idea. Pretty much designed to drive every small business start up into the black economy. The beauty of the VAT threshold is that it makes it easy for one man bands to start, and then allows them to make a decent bit of money before they hit the threshold, by which time they are enmeshed in the tax system anyway. What should be done is make the threshold far higher, £250k say, to encourage small businesses to grow by taking on staff and not having to worry about VAT. And would give small businesses a decent competitive edge over the large ones. More competition, lower prices for the consumer. A small restaurant turning over £200-300k should not be treated the same as Wetherspoons.
@Sam Duncan
Economists generally prefer VAT to sales taxes in principle. VAT is relatively good as taxes go because taxing value-added is less distortionary than taxing e.g. sales revenue. Fwiw a lot of economists think the threshold problem would best be solved by making the threshold lower – in fact the UK threshold is unusually high compared to other countries with VAT. If you’re running anything bigger than a hobby business, you might as well get used to dealing with VAT from the get-go. Otherwise you create another distortionary effect, where micro businesses stay micro because the owners don’t want the hassle of switching tax regime.
A solution to the bureaucratic burden of VAT on small businesses would be to abolish the different rates and most or even all of the exemptions. That way there’s far less fuss about how to classify different goods and services provided and the record-keeping requirements would be drastically simplified. Electorally that would be very unpopular – there are lots of sacred cows about taxing kids’ clothes or large swathes of food items. But it’s those exemptions that increase the burden of costs on businesses per pound the tax raises.
Some EU rules were designed so that member states had a legal obligation that overrode those popular demands, in an effort to keep them on the straight and narrow (and as a get-out-of-jail card for finance ministers facing calls to stop taxing a particular class of goods) but it’s a double-edged sword. Brexit meant the UK could scrap the “tampon tax” for example, and that was pretty popular with 50% of the population. From a democratic point of view that’s the right decision and the sort of minor regulatory action any truly independent sovereign state ought to be able to take if its voters demand it. But a lot of economists groaned at yet another exemption coming into place.
Adolff
7) Increase spending on the NHS by £17billion. (Cons = £1Bn, Lab £2Bn).
As I said, Reform is moving steadily leftwards on economics…
“£20 for a selfie with Tony Blair.”
Why not get a parliamentary decree that he’s a Lutheran and then people can bid for how much they’d pay to pop him on a fire?
Anon at 2:06pm
Nope…. VAT is an awful tax. Distorts the whole economy and is hidden in plain sight, as it were. The product of a French Socialist’s fever dreams. Get rid of it (and all the other distorting transaction taxes) and replace with LVT. Plus a flat income tax .
Mark Wadsworth (RIP) and our host would agree, I think.
@Jim
Sorry, but I really have to disagree with you on HS2. The contracts for this kind of infrastructure typically have clauses covering the payment of compensation if the contract is cancelled by the government. You would not save anything if you cancelled HS2 in 2029. That is only 4 years from 2033 so most of the contracts needed to build HS2 would have been signed.
You could save money by not operating it but you would then have a completed line not being used. Without maintenance, the line would then rot unless it was dismantled. And guess who would have to foot the bill to dismantle it – the tax payer. I suspect the cost of dismantling it would go into the billions.
I know and understand that a lot of people hate HS2 and wish it did not exist. However, at this stage of the game, HS2 is a fact of life. It will be completed and it will go into operation. The public will find a use for it. I suspect that a lot of flats will be built near the Curzon street station to allow for commuting into London. You might also find office space being built near the station too. It would allow businesses to be in a cheaper part fo the country but still have easy access to London for business purposes.
@Shiney
Well a Land Value Tax would be even better of course, pretty much the gold standard in terms of being non-distortionary. Don’t think we’ll ever see it introduced though – or if we do only in some bastardised form, like taxing the property value rather than the “unimproved” value, and hence losing all that non-distortionary goodness. And anyone who raises the idea is going to be condemned for proposing a “garden tax”. (Nothing wrong with taxing gardens – indeed we should, that’s the whole damned point – but the Mail won’t like it.)
Obviously VAT introduces distortions, particularly due to the exemptions, but the problem is that other taxes tend to be even more distortionary. There’s a whole pyramid of taxes from LVT at the top (good) to godawful taxes at the bottom (Stamp Duty Land Tax for example, wreaking untold damage on the economy, or that bizarre 100%+ marginal tax rate that higher earners go through). Like it or not, the economic consensus – even among tax-slashing neoliberal types – is that VAT is towards the top of that pyramid. Taxing value-added is economically the right thing to do if you don’t want to disrupt economic productivity. It’s not a perfect tax. Exemptions are distortionary, so reduce productive efficiency, and increase the bureaucratic burden. And from an equity point of view, it disproportionately hits those on lower incomes – especially if you remove exemptions on basics like food. (The “correct” answer in neoliberal terms would be to scrap the exemptions anyway but compensate the poor by increased transfers, though that may not be politically feasible on either count.)
This is all well-established stuff, covered in detail in Chapters 6 and 7 of Tax By Design (the Mirrlees Review) which our host regularly recommends people go and read.
https://ifs.org.uk/sites/default/files/output_url_files/taxbydesign.pdf
VAT may be awful but a sales tax is far worse.
Example: Make Steel–>Roll Steel–>Make Parts–>Assemble Car
Performed by one huge vertical monolith, means 1 lot of sales tax on the final car sale.
Want an active, competing ecosystem of innovative suppliers, trading intermediates?
Then that example has 4 sets of sales taxes, 1 each inter-company sale. Cannot compete.
So welcome to 1900 and the railway barons.
Oh, only levy the sales tax on consumer sales, not on trade?
Immediately 70 million people register Joe Bloggs (I’m trade not consumer, honest guv) Ltd.
Actually quite similar to what we’ll need to do to buy ICE vans to keep driving.
Since EV vans are useless/impossible, ICE vans MUST persist.
How to stop the peasants buying them –>trade only!
Sell it [HS2] off to private business as a toll motorway or dedicated lorry road instead.
Railways are too narrow to make a motorway out of: HS2 is only two-track and 19m wide, so you definitely couldn’t fit 6 lanes (min 3.5m each) in there, and that’s without considering tunnels and bridge heights. Might make a decent cycle track.
Re VAT: when my “one man band” was registered, ‘small’ businesses could opt for a fixed percentage rate, rather than the full earnings minus outgoings bit – as my expenses were negligible in comparison to earnings, it would have been close to 15% for me, but the argument was that it simplified accounting. Since my nephew did my books, I didn’t bother with it, and can’t remember what the max earnings limit was.
@Anon
“Like it or not, the economic consensus – even among tax-slashing neoliberal types – is that VAT is towards the top of that pyramid. ”
Yep – economists may like it…. a bit. And saying that ‘if we take away the distortions’ is like your comment about LVT – never going to happen.
“Taxing value-added is economically the right thing to do if you don’t want to disrupt economic productivity.”
MW was an accountant, like me, and understood the huge, and I mean F*****G HUGE, admin burden VAT places on organisations – not something Mirless would understand in the slightest. The amount of wasted time, effort and resources spent on it are a real drag on ACTUAL productivity…. if these costs were ever quantified no one would think it was a practical idea and it would be consigned to theory only.
As has been noted many times, VAT is popular with the government because it makes all organisations account for the tax – as opposed to requiring assessment by HMRC – plus it is the ultimate stealth tax.
“You would not save anything if you cancelled HS2 in 2029”
Bollocks. Its never going to be built on time, or to the existing budget. The builders will soon be back again for more, and if over the next couple of years Reform start looking like winning in 2029 they can start telling the contractors publicly they are on borrowed time so better get out now while the going is good. There will always be some clause the State can invoke to terminate the contracts, fraud or the like. No way a contract that big doesn’t have a few people on the take in it, use that to leverage its downfall. Set HMRC on the companies involved, chances are someone has been up to no good. Start acting more like Trump than nit-picking lawyers (Hi TTK!).
“You could save money by not operating it but you would then have a completed line not being used. Without maintenance, the line would then rot unless it was dismantled. ”
And the problem with that is? Rotting doesn’t cost the taxpayer a penny. Sell it off, the real estate value alone will be worth billions. Someone will find a productive use for it, rather than a train set that will cost the taxpayers a fortune in subsidies every year and constantly be held to ransom by the unions.
…if over the next couple of years Reform start looking like winning in 2029…
Reform could win the next GE; but the barriers to a Reform victory remain enormous and for four reasons:-
1. To win outright, Farage would need to double the party’s vote share and see both Labour and Tory support collapse. Reform now lies in second place in 98 constituencies, 89 of which have a Labour MP. The Tories, meanwhile, are in second place in 292 seats, 218 of which have a Labour MP.
2. Reform are peaking too early in the electoral cycle…
3. The electoral market for a party that is socially conservative but left-of-centre economically is limited to a maximum of c.30%. The electoral market for a party that is socially conservative but Thatcherite economically is even more limited.
4. There is no precedent in the UK to support the idea that Reform can go from five MPs to a majority in one term. The Labour Party won its first seats in 1900. By 1918 it had increased its representation to 57 seats and then 142 in 1922, when it finished second for the first time with 30% of the vote. Still, it was not until 1923 that Ramsay MacDonald became prime minister at the head of a minority administration, and 1945 before Labour won a majority.
@Shiney
The difference is that an “LVT” levied only on the property value, i.e. the improved value of the land, is taxing completely the wrong thing from a conceptual point of view, so the whole point of it is ruined. It goes from being a non-distortionary tax to one that is wholly distortionary. In fact it wouldn’t be a true LVT at all, in the Georgist sense. VAT is distorted by exemptions but at least it’s still an attempt at taxing value-added. Despite its flaws, that makes it less distortionary and more “efficient” (in the sense of not harming productive efficiency) than most of the other taxes out there, and certainly the ones which raise any serious amount of money.
The Mirrlees review was not the work of one person. Nor was it the work of idiots. Laypeople are often very aware of the cost of a tax in terms of the administrative burden it imposes. And how that admin gets shared out between government officials and households/companies doesn’t matter so much in the grand scheme of things: either way, those bureaucratic costs makes us collectively poorer.
What I think laypeople appreciate less is how MINDBOGGLINGLY expensive distortions to economic incentives are – a far less visible cost than someone having to fill in a pile of stupid paperwork. In fact they’re often about someone not doing something. Not buying a good or service, not working overtime, not going for that job that pays more but you won’t notice it because most of the extra will disappear to the taxman’s pocket, not bothering to perform improvements on their land… other times it’s about making a choice between options but their distorted incentives push them towards the one that ought to be considered sub-optimal. All that is a hammer blow to economic productivity. I think we all have a decent idea of how countries fall into distinct tiers of wealth and standard of living. Cocking up or sorting out productivity is what moves countries up and down entire tiers. It’s not a small thing at all even though you can rarely see it. There’s a reason economists care about this stuff and it’s not because they’re all short-sighted morons who are blind to what admin costs look like.
“There is no precedent in the UK to support the idea that Reform can go from five MPs to a majority in one term. ”
I bet there was no precedent for a party that won an 80 seat majority going on to concede a 174 seat majority to its opponents 5 years later either.
And actually there is a precedent for a party going from a small number of seats to the massive majority of them in consecutive elections, the SNP won 6 Scottish Westminster seats in 2010, and got 56 in 2015.
We don’t live in the world of the 1920s, 40s, 60s, 80s or even 2000s any more. We live in an era of hyper global communication, mass disillusion with traditional politicians, huge volatility in voting patterns, and the abject failure of the Western political class to listen to the public (who have noticed). We are rapidly approaching the point where people will vote for anyone, as long as they are not the usual suspects. The Tories have cooked their goose, Labour are cooking theirs on Gas Mark 100 at the moment, so what does that leave? Regardless of whether Reform would be any good or not they are the next in line for the public to look at and think ‘Well we’ve tried the other two, lets give you a spin, it can’t be any worse’. And the effects of the FPTP system means that while its hard for small parties to break into the HoC, once they get past a certain barrier that effect works for them not against them. If Labour can win 411 seats on 34% of the vote, Reform can be the largest party (or even outright winners) on a similar vote %.
Addolff,
1) Basic rate Income tax threshold up to £20,000. Sounds good to me.
2) Freeze on non-essential immigration. No. This is how you get into the mess of importing care workers, because someone decides that’s “essential”. You get into the moronic thing of government deciding what are important jobs. Just set a salary cap or wealth limit. Somewhere above the sort of level where they make us richer. We want people like Alfonso Cuaron, Madonna and Ellen deGeneres coming here. It’s not like they’re going to be living on housing benefit.
3) Capital Gains tax free allowance of £100,000 for small businesses (no tax on first £100,000 profits). Maybe.
4) Lifting threshold for VAT to £150k from £90k. No. Just scrap VAT. Scrap it completely. Whatever it collects, collect through income tax, rates, whatever. It is a completely stupid tax.
5) Scrap net zero (save £30 billion). Just do the Pigou thing, and let the market figure it out.
6) Ban transgender bullshit in schools. Privatise schools. Let parents easily take their kids out and into another one, and watch the school bullshit disappear quickly as they become bankrupt.
7) Increase spending on the NHS by £17billion. (Cons = £1Bn, Lab £2Bn). No. Give people a tax break for going private and make the NHS the basic service.
8) Scrap HS2. Privatise rail and do it properly. One company, running trains and track and signals. They can scrap routes and services as they please. And if a town or city wants a non-viable service, they can cough up for it with locals money going into it.
9) Scrap Sadiq Khans ULEZ in London. Nope. I’m all in favour of localism. Vote for the cunt, you get cunt policies. Maybe next time, you’ll not vote for the cunt.
10) Leave the ECHR. Yup.
11) Scrap the BBC tax. Yup.
Back in 2010, the collation government wanted to save money by cancelling the two aircraft carriers. However, examination of the contracts indicated that cancelling the carriers would cost as much as continuing with the contract. In the end, the construction of the carriers went ahead, for better or worse. This is how government contracts for big ticket items works. This is partly because of how the companies involved negotiate and partly because politicians want to ensure that projects go ahead in case they are voted out of office. On top of that, the companies involved will lobby Reform like there is no tomorrow if they think for a second that Reform could win a general election. And these companies know how to win politicians to their side.
Also bear in mind that HS2 was authorised through an act of parliament in 2017. So a government cannot simply cancel the contracts. Those contract exist because British law states that the contracts have to exist. You would first need to repeal the legislation. The more I look at it, the more I think that someone really wanted HS2 to go ahead and made sure that it would go ahead.
Jim,
“We don’t live in the world of the 1920s, 40s, 60s, 80s or even 2000s any more. We live in an era of hyper global communication, mass disillusion with traditional politicians, huge volatility in voting patterns, and the abject failure of the Western political class to listen to the public (who have noticed). We are rapidly approaching the point where people will vote for anyone, as long as they are not the usual suspects. The Tories have cooked their goose, Labour are cooking theirs on Gas Mark 100 at the moment, so what does that leave? Regardless of whether Reform would be any good or not they are the next in line for the public to look at and think ‘Well we’ve tried the other two, lets give you a spin, it can’t be any worse’. And the effects of the FPTP system means that while its hard for small parties to break into the HoC, once they get past a certain barrier that effect works for them not against them.”
The problem for the Conservatives is that they don’t like being what they are supposed to be. This goes back to Theresa May’s “nasty party” speech. Where she didn’t grasp that that’s what you’re supposed to be. Not exactly “nasty” but the grown ups, the responsible party, the people who believe in The Little Red Hen. There’s various parasites who want the Little Red Hen’s bread despite not doing any work to get it and they vote Labour, Lib Dem and Green. But of course, the people who are the Little Red Hen want a party that stops the parasites getting it.
And it’s a much deeper problem than just fucking up. Incompetence, you can replace the leaders and fix the problem. But being ideological unsound is far worse. Because if people get the impression that you’re paying lipservice to low taxes and reducing immigration, then voters realise there is no hope at all. And here’s this bloke with a fag and a pint who didn’t have to be dragged to addressing immigration, he’s the firestarter, the guy who blew the whole thing up so even if he’s shit at it, I think we all have some confidence that he’s going to try and fix it.
And yes, FPTP is a bit like gravity. The larger you become, the more you drag voters towards you as they feel you have more of a chance, which draws even more in.
Like in Thurrock, Reform finished second, So Reform isn’t the “heart” option and Conservatives as the “head”. Reform are both. And there are something like 80 Reform second places.
Don’t forget, that was 80 second places on around 14% of the vote. Since then, the polls have consistently boosted Reform’s share: mostly at the expense of labour and with the tories stagnant.
“The problem for the Conservatives is that they don’t like being what they are supposed to be. ”
Precisely. Even if you like the cut of Kemi Badenoch’s jib (and I do, she’s got something about her) the fact remains that half her MPs are as wet as dishrags. And will fight to stop her doing anything radical (or popular). Far too many Tory MPs could be Lib Dems or Labour quite easily. At least with Reform you don’t get the impression that half of them are thinking ‘Hey Nige, tone it down, how about raising taxes, bringing more immigrants in and introducing more regulations on everything?’
The best thing that could happen is all the sound Tory MPs jump ship to Reform and leave the Wets to flounder on alone as the Lab Dems.
What we need is free markets – not more regulation, and I see no evidence of that from Reform. In fact, one of their most prominent policies is opposing immigration. We should be letting the market take care of that. And a scan through the party policy document (from https://www.reformparty.uk/policies) shows pretty feeble support for free market policies and clear evidence of being yet another party in favour of central planning and management.
For example about infrastructure, on p. 19: “Launch a new model that brings 50% of each utility into public ownership. The other 50% would be owned by UK pension funds, benefiting from new expertise and better management. We will ensure standing charges are capped to help low users and pensioners.”
For example about farming, on p. 20: “Grant powers to the Competitions and Markets Authority to ensure fair pricing.” and “Taxpayer funded organisations should source 75% of their food from the UK.”
We already have as many left-wing anti-market parties as we need. In fact, we have far too many, as we only really need one to give a contrast between sensible policies and left-wing policies.
“For example about infrastructure, on p. 19: “Launch a new model that brings 50% of each utility into public ownership. The other 50% would be owned by UK pension funds, benefiting from new expertise and better management. We will ensure standing charges are capped to help low users and pensioners.””
Its no more of a sh*t idea than letting a bunch of Australian hedge fund types take it over, pay themselves a fortune in dividends financed with debts, and then selling it to a bigger idiot, all in the name of ‘free markets’.
“We should be letting the market take care of that[immigration]’
And how exactly does that work then? A free for all? Anyone who rocks up at Dover can come in? And can all use the NHS, State schools, benefits system, free housing etc etc?
“For example about farming, on p. 20: “Grant powers to the Competitions and Markets Authority to ensure fair pricing.” and “Taxpayer funded organisations should source 75% of their food from the UK.””
Farming makes a return on capital of about 0.5%. Tesco makes a long term average of about 8%. But hey, they’re not profiteering at all.
@Jim – “And how exactly does that work then? A free for all? Anyone who rocks up at Dover can come in?”
Yes.
– “And can all use the NHS, State schools, benefits system, free housing etc etc? ”
No.
– “Farming makes a return on capital of about 0.5%. Tesco makes a long term average of about 8%. But hey, they’re not profiteering at all.”
If Tesco can make a return of 8%, that’s nice. The only restraint on that should be Aldi, Lidl, Morrisons, Sainsbury’s, Waitrose, etc. If farmers cannot get more than 0.5%, and are unhappy with this, the remedy is for them to quit that business.
“– “And can all use the NHS, State schools, benefits system, free housing etc etc? ”
No.”
Good luck getting the State’s employees to stop giving away free stuff to every foreigner who wanders up a beach.
Or indeed good luck stopping the State’s employees (loads of whom will be foreigners themselves) giving ‘State goodie cards’ to all their mates straight off the boat.