The proliferation of quangos under the previous administration contributed hugely to the deficit that has all but crippled public finances in the UK. Funded out of taxes, they were launched without reference to any democratic process, often in the wake of pointless Whitehall requirements or EU directives.
The rash of self-important job creation that gripped town halls was masked, as usual, by the name-changing game: the moment you call the town clerk a “chief executive” he or she will need an absurdly inflated salary, pension benefits and an entourage of functionaries to match that jumped-up status.
The bonfire of the quangos comes not a moment too soon. Yet the original sin lay with the ministers and councils who invented the rash of useless non-jobs, rather than the staff hired to fill them. Take the council, 25 miles from the Olympic site, which decided to employ an “Olympic Liaison Officer” on a salary of £47,000 plus benefits, an office and staff. One can only marvel at the insular mentality that dreamed up a job, would you believe, “to help local employers find Olympic-related business opportunities” – an idea that might just have entered the minds of local businessmen without prompting from the council.
Something radical needed
Hopefully, the latest initiatives to set up independent watchdogs and think-tanks will generate recommendations actually worth translating into statute. But serious reform, notably in the tax field, needs to be taken beyond mere tinkering, to dismantling and principled restructuring.
consider the fiscal futility of operating a tax regime with a top rate of 50%
It becomes obvious that something radical is needed when you consider the fiscal futility of operating a tax regime with a top rate of 50%. When governments, both central and local, think they are better at spending other people’s earnings than people themselves, their conceit is bound to be short-lived. History shows that throwing a political sop, such as penal marginal tax rates, to an angry electorate is always counter-productive in terms of yield.
We now boast an Office of Tax Simplification, but to date there are no signs that its remit to simplify the tax system, ease administration and reduce uncertainty for small businesses will lead to significant changes in the system itself. Merely to streamline reliefs, say, may be a tiny simplification, but it cannot be called reform while most self-employed people remain utterly bemused by the prospect of completing their own tax returns.
In the period between 1997 and 2008 Tolley’s Yellow Tax Handbook grew from 4,958 to 11, 520 pages. Britain has not only the longest tax code in the world, but also the most complicated and opaque. No wonder that HMRC are increasingly plagued by scandalous disclosures of millions of people being under-charged or over-charged under PAYE.
A fresh start
Remember the local yokel’s reply when asked for directions: “Well, if that’s where I was heading, I wouldn’t start from here!” Reform needs a fresh start. What’s the point of trying to make the administrative side run smoothly when the whole ridiculous edifice remains in place?
Government activities must be funded in ways that are transparent and do not compromise the economy’s wealth-generating processes. For example, corporate taxes based on added value would reflect “taxable capacity”, and would therefore remain outside the grasp of those obsessed with redistributing them.
Thinking “outside the box” would even consider the feasibility of a flat-rate tax of say 20% on personal incomes greater than £12,000, below which no income tax would be paid. Above that figure, all exemptions and allowances would be swept away. Thirty years ago only Hong Kong, Jersey and Guernsey had flat rate taxes; now the number is 25, and rising. They all have a low single rate, and in every case there has been economic growth and an increase in tax revenues – exactly as happened in the UK and USA in the ‘80s when top rates were lowered.
Now that would be simplification as well as reform – and just think of all the accountants that could then get a proper job!