The Great Debate UK

The politicians we deserve?

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Laurence Copeland- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

The unending saga of MPs’ expenses has to be seen in perspective. Of all the dishonest things that politicians do, inflating their expenses is about the least damaging. At their worst, they lie to us whenever they think it politic to do so and knowingly favour policies which suit their own interests rather than those of the country. How can this happen? After all, in a democracy the interests of government are supposed to be aligned with those of the electorate, aren’t they?

It might work if we were all rational, but alas, we are not. Only too often, we want the best of both worlds. Nobody is offering us endless sunshine with no hosepipe bans. But there are always politicians prepared to tell us we can have low taxes without reducing government spending, longer sentences without overcrowded jails, near-total job security without high unemployment (the French are especially keen on this), and so on. Why do democratic politicians repeatedly make these promises which they know to be impossible? And why do we keep believing them, election after election, in spite of the repeated failure of politicians to deliver the impossible?

The question is as topical now as ever. In spite of their frightening levels of indebtedness, neither the UK nor the U.S. government has yet said how it proposes to pay off debts in the future – in fact, Gordon Brown is adamant that spending will carry on more or less unaffected. Yet surely voters on both sides of the Atlantic can see that at some point they will have to pay higher taxes and/or accept substantial cuts in Government spending? If so, why do politicians persist with the charade?

Ireland’s euro pain

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REUTERS– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –

LONDON, April 9 (Reuters) – Ireland’s budget is painful, but insufficient.
Brian Lenihan, the finance minister, is taking an additional 3.25 billion euros out of the economy each year, largely in higher taxes. But that will simply trim the budget deficit to 10.75 percent of national income. The 3 percent eurozone target is a distant dream.

from The Great Debate:

Will Obama raise fuel taxes?

John Kemp Great DebateJohn Kemp is a Reuters columnist. The views expressed are his own.

LONDON, Dec 8 (Reuters) - China's decision on Friday to link domestic fuel prices to the international price of crude oil, but increase consumption taxes on gasoline and diesel sharply to spur more efficient use of energy in the medium term, raises the question whether the incoming Obama administration might be tempted to do the same.

China is taking advantage of a cyclical pull back in energy to push through a permanent structural increase in taxes and prices. The aim is to combine a short-term boost to the economy with longer-term and more consistent incentives for improving energy efficiency.

Pre-budget report: Who wins and who will pay for it?

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Mark Schofield is a  tax partner at PricewaterhouseCoopers LLP. The views expressed are his own.

mark-schofieldThere were a number of initiatives unveiled to kick start the UK economy which will increase the budget deficit for 2009/2010 to £118 billion. The Chancellor assured the House of Commons that finances would be back in balance by 2013/14 at which point the country “will only be borrowing to fund investment”. By that year the net UK government debt will be over £1 trillion representing 57.4% of GDP, compared with an estimate of £602 billion, 39.4%, for 2008/9.

Doubts over whether pre-budget measures will prevent recession

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Roger Bootle is economic adviser to Deloitte. The views expressed are his own.

The Chancellor was right to try to give some help to the economy but, while the scale of the increase in future borrowing is huge, the economic effect of the reduction in VAT will be tiny.

The size of the PBR package, about £9 billion this year, rising to £16bn next year, was roughly equal to what had been mooted in the media. But the scale of the measures, although they sound large, is in fact small.

from UK News:

A lifeline or a time bomb?

Chancellor Alistair Darling has delivered a 20 billion pound fiscal stimulus package to get the nation spending again and mitigate the worst effects of the downturn.

He cut VAT to 15 from 17.5 percent just in time for Christmas shopping -- a move he said would put some 12.5 billion pounds in consumers' pockets over 13 months. Other measures include well-leaked plans to help homeowners, small businesses, parents and pensioners.

from UK News:

A profound shift in party politics

David Cameron's decision to ditch a major Conservative pledge to match Labour spending plans pound for pound was hailed by commentators as an important step in the politics of the recession, opening up a clear gulf between the two main parties' economic policies but exposing the Tories to considerable risk.

Labour is expected to cut taxes, accelerate public spending and announce more borrowing in Monday's pre-budget report. Now their supporters can revive the spectre of "Tory cuts" to funding for schools and hospitals which helped the Conservatives lose the last two elections.

from UK News:

Boosting the economy: lower taxes, higher spending or both?

Prime Minister Gordon Brown has suggested he will push expansionary fiscal policies to help boost the economy. Brown's comments were the latest in a series from him and Chancellor Alistair Darling stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

Bank of England Governor Mervyn King has also put his weight behind "some fiscal stimulus", just as the Bank predicted in its quarterly inflation report that the economy would shrink sharply next year.

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