Debt, debt, debt, that’s what modern democracies are all about. The UK’s public debt stands at a handsome £910.1 billion, which is 60.1% of the GDP. Well, actually it’s even more ‘impressive’ than that. If you include all the financial sector ‘interventions’ (e.g. bailouts of Royal Bank of Scotland and Lloyds), which I don’t see any rational reason not to, the figure is £2252.9 billion, or 148.9% of the GDP.
According to the Institute of Economic Affairs the cost of tax collection in the UK is £15-20 billion and the UK’s tax code is the longest in the developed world at 8,300 pages of primary legislation. Quite absurd. The IEA also says, “The costs of tax collection bear approximately sixteen times more heavily on the smallest businesses than on the largest. This acts as an impediment to competition and to the expansion of employment among small firms.”
So, is all this the proud, sacrificial and necessary cost of ‘freedom’? Or the brutal, inevitable economic effects of tax slavery? What government has done since the ‘credit crunch’ gives us our answer to this question.
If government decisions and actions were driven by the goal of the long-term well being of its citizens, then we might reasonably expect it to cut its borrowing drastically and to reduce its costs to working people.
If a father, say, had accumulated so much debt that it was threatening the welfare of his family we would expect him, if he was truly primarily concerned for them, to stop borrowing or at least reduce his borrowing by a significant amount. If his debt continued to increase or he only decreased his borrowing by a few percent we would certainly question his motives and his supposed concern for his family. We might rightfully conclude that his primary concern is not for their welfare, but for something else.
So, has government reduced the immense cost of tax collection? No and this was never an option, which is like the father flatly refusing to sell his BMW for a cheaper car or cut-down on going to expensive restaurants.
Did government stop borrowing or at least reduce its amount of borrowing in any meaningful way? No, and according to the Office of National Statistics, public sector net borrowing (excluding financial interventions) was £27.4 billion in the year to date, up from £25.9 billion in the same period last year.
In the last month or so, however, government has decreased its borrowing and in May 2011, there was net borrowing (excluding financial interventions) of £17.4 billion, which is less than the borrowing of £18.5 billion in May 2010. But this represents a decrease in borrowing of just 3.2%. If the father in our analogy had been borrowing, say, £10,000 a year and declared to his family he was going to cut his borrowing by 3.2%, this would amount to a decrease of £320 a year. The father may claim to care for the welfare of his family, but his actions say otherwise, for £320 less borrowing a year is not going to improve his family’s situation in any meaningful way; it would merely delay the inevitable. If he was truly primarily concerned for their well-being he would take responsibility for his own actions, leave them well-alone and declare bankruptcy.
Will government, which we are taught exists to serve the people, even do this? Not a chance. In fact it declared that the only way out of this mess that the previous ‘irresponsible’ government have left us in (as if that government was somehow something fundamentally different to this one) was to raise costs to citizens by raising taxes and VAT! It did that quick smart by implementing a 50% tax on earnings over £150,000 and increasing VAT to 20%. And there’s no sign of government cutting down on borrowing in the long-term either as, according to the BBC, government debt is actually forecast to double by 2013.
The negative economic impact of the £20 billion cost of tax collection consists not only of the cost itself to workers, but also the £20 billion’s worth of potential goods, services and investment that are denied existence. The former is obvious and easily recognised, the latter intangible and requiring of abstract thought but no less real or important.
So is this (the world we have today) the socialist dream? Because this is socialism, the UK is unequivocally a decades-long experiment in socialism, and democracy is debt. Lots and lots of debt, which every person being born as you read this will have no choice, no choice, but to pay for via inflation and higher taxes. Is that the dream?
The socialist dream is the nightmare.