A couple of weeks ago, Art Uncut carried out a peaceful protest at Glastonbury against U2 for putting their money through foreign banks to avoid taxes.  While the Guardian reported a heavy-handed response by the festivals private security, I was also intrigued by the public response.

Watching on television, I could hear the cheering from the crowd as the security removed the banner.  There were also news interviews with festival-goers who didn’t agree with the protests and on the Guardian’s comments section I found one post which summed up the negative comments: “So U2 moved their tax affairs to the Netherlands? So what? I challenge any person here to say that they wouldn’t pay less tax if they could.”

It’s easy to dismiss this as fans just wanting to see a band play and not really being interested in taxation, but I think there is a more worrying side to this.  It’s easy to find posts all over the internet critical about UK Uncut actions, such as this sarcastic one about Topshop and Vodafone protests: “Yeah, right. Let’s all pay the maximum amount tax due, let’s all stop using entirely legal ways to reduce our tax bill. Who’s first? Nobody? Thought so.”

The argument is that it’s hypocritical to campaign against tax evasion because none of us volunteer to pay more taxes than we have to and, if popular brands like U2 and Topshop aren’t breaking the law, then they are not fair game for protests.

If we are surrounded in day-to-day life by likeminded people we like to assume that the anti-cuts movement is supported by everyone, but I fear that these pro-cut anti-tax beliefs are more widely held than I’d like to believe. And all too often the popularity of brands like U2 and Topshop overwhelms the messages of the anti-cuts movement.

And I blame politicians.  In particular mainstream left of centre Members of Parliament who know that taxing the rich would bring millions of pounds in to the public sector which could save essential services from being cut, but how often do you hear them say this in public? Politicians are in a unique position to get this debate out to the public – they have access to the media, and ability to build profile of campaigns, in way that organisations like UK Uncut really need.

Politicians are also the only people who can deal with the hypocrite accusation.  Simply, the fact this kind of tax-evasion remains legal gives the public impression that it is fair practice. Politicians should be arguing for laws to be changed to make businesses trading in the UK pay fair taxes.

When Topshop -owner Sir Philip Green’s wife received a £1.2 billion tax-free dividend in 2005, all Labour MPs should have been publicly up in arms. Tax law should have been changed to stop this kind of money from being moved out of businesses trading in the UK without tax penalties, I’m sure there are a number of ways this could be done. And politicians should have been using their media presence to explain that this is not the same as a middle class person taking advantage of any regular tax-breaks. This is like a tax-break specifically for the mega–rich and it’s grossly unfair.

Photo courtesy of Guardian Edinburgh via flickr
While we’ve rightly been focussed so far national campaigns, defending welfare and education, we mustn’t overlook the fact that many of the cuts we are likely to face over the next few years will not be imposed directly from Westminster but by our own local councils.

Opposition to cuts at council level will be hard to coordinate nationally as those cuts will obviously be different in different places. There will, however, likely be common themes to which we can form common responses. Councils will undoubtedly claim they have no choice, they have to set balanced budgets, so if their funding is cut they have no choice but to pass that on.

To an extent that’s true but it isn’t the whole truth, either. They do have options, council tax, whilst regressive and in need of replacement, could be raised. Through a process called Tax Increment Financing (TIF) councils can borrow money to finance investment in infrastructure and capital projects. If projects are expected to stimulate the local economy, and hence increase the future tax take, that money can be borrowed against now, with the future income paying off the loan. Or councils could form their own energy service companies to raise revenue, increase renewables and reduce energy bills. New revenue streams and ways to leverage new money can be found if councillors are willing to think creatively.

Councils need to persuaded, too, of the necessity of longer term costs and benefits over the, apparent, short term requirements. They need to consider the wider impact of their spending decisions. Cuts in one place may lead to higher spending elsewhere, and not just in the future but right now. If youth centres are cut, for example, crime might increase, leading to higher overall costs. Costs not borne by the council perhaps, but still borne by tax payers.

Where cuts do have to be made, front-line services must be protected and spending on things like corporate branding could be cut. Edinburgh council, for example, spends hundreds of thousands of pounds every year on it’s ‘inspiring capital’ branding, to little obvious effect.

And if acceptable savings can’t be found, and tax increases or other revenue sources cannot cover the shortfall, real cost budgets could be produced, where the council refuses to implement cuts or set a balanced budget and instead sets one according to the needs of their area. Councillors who genuinely oppose cuts should not be forced to implement them and accept the responsibility and blame.

It’s often responded that if councils don’t set balanced budgets, central government will step in and the cuts will be far worse, but if councils do refuse to help implement cuts and force that take over that sends a very powerful message. If that stance can be coordinated with workers in the affected councils taking strike action or with occupations or good work strikes, it could be very difficult for the coalition to implement their policies. I accept that would require a great deal of cooperation and to happen on a large enough scale, but we need to think creatively and optimistically about our ability to resist. Simply trying to make awful cuts merely very bad risks reducing our power to oppose the broader issues and leaves us reliant on someone else forming that extra-parliamentary movement that must be essential if we want to have any real success.

As I say if we can make significant saving through efficiency then we should do that. I don’t know about England and Wales and Northern Ireland but I do know that here in Scotland councils have already been forced to find efficiency savings every year over the last few years and I don’t know how much more can realistically be found. I’m happy to cut pay a the top too, but how much does that really raise? If there’s not going to be a major difference between cuts we (as Greens and the broader left) impose and those central government would, then what’s the risk?

Consultations

Of course, just as Westminster has passed much of it’s cutting onto councils, councils themselves may try to pass the buck for cuts further to local people. In Edinburgh we had a consultation from the council last year asking us to choose which cuts to make. And it was which cuts to make, there were very limited options, with very clearly leading questions, false dichotomies. Tax rises and outright opposition were not encouraged.

We need to ensure that there is real debate at a local level, that ordinary citizens are given a meaningful say in what happens to their communities. We need to take the opportunity to try out new forms of organisation. Methods like participatory budgeting, recently trialled where I live, in Leith, give people a direct say in how their money is spent. The first project was hugely successful, with a great turnout, lots of applications for funding and most people generally happy with the results. The trial only covered a small amount of money, and for community projects not core services but it shows genuine engagement and direct democracy is possible in our society.

We need to make these sort of schemes much more widespread. People will be looking for alternatives to austerity and cuts and the untrustworthy politicians enforcing them. We need to take the chance to show there are other ways to organise our economy and our society. Not just politics but economics can be democratised. As Adam pointed out at the start of the year, democratic reform needs to go far beyond electoral reform. Participatory economics won’t magically give councils more money to spend, but it would allow local people a real say over how what money there is spent. And if people have real control over how their money is spent and can see where it goes and how much it costs to provide the services they use that could be truly transformative.

Empty business premises attract substantial discounts on Universal Business Rates – the equivalent of Council Tax for commercial property. Generally, this means paying no rates at all for the first three months, then only half rates thereafter.

Patrick Harvie is proposing that Scotland should make the same changes made by England in the Rating (Empty Properties) Act 2007, giving vacant properties a 50% discount for the first six months, then levying the full value of business rates.

We’ve seen the search for new sources of revenue to reduce the impact of ConDem cuts emerge as the theme of the Green MSPs’ approach to this Budget, and it appears likely to continue as a central plank of the election campaign. In this Budget process, the Greens have also argued against a national Council Tax freeze, and for a hotel bed tax, as well as the Green flagship of Land Value Tax.

The changes proposed by the Greens could raise over £75m per year, or around 6% of the £1.3bn Budget cut imposed on Scotland by George Osborne.

In addition to the cuts-blunting potential of the move, it would have the effect of discouraging the land-banking of empty properties, getting them onto the market ad back in the hands of active businesses sooner. This could be expected to reduce the cost of business start-up and expansion, stimulating economic recovery.

The report does actually have some sensible ideas; it quite accurately identifies a number of problems with our current welfare system. They tell us “It is almost impossible to understand, with over 50 different benefits, all with different rules and taper rates and a total of 8,690 pages of guidance for DWP benefits alone.” That take up rates can be “as low as 57 per cent in some instances” for some benefits. That “[p]eople who want to work and progress in work are financially penalised. A claimant who loses Housing Benefit, Council Tax Benefit and tax credits, at the same time as paying income tax and NICs, faces a marginal tax and benefit withdrawal rate of 95.5 per cent. Over 2.5 million non-disabled working-age households face a marginal tax and benefit withdrawal rate of over 60 per cent.” And that despite the number of children living in households on less than 60 per cent of the national median income falling, the number of people “living in households with less than 40 per cent of median income, has actually increased from around 5 per cent of households a decade ago to around 6 per cent today.”

These are all serious issues, and ones we need to deal with. The problem comes in their solutions. First of all, they claim it is impossible to do more than two of the three following objectives: “directly raise the incomes of the poor, increase the employment of the poor and reduce welfare spending”. They don’t seem to give much of convincing explanation for this assertion. They also decide that given that choice the most important objectives need to be increasing employment and reducing spending. And so they set out five criteria for an effective welfare system:

1. The state should provide a basic minimum to all citizens of working age, and through them, to all children, at an affordable cost to taxpayers.
2. Work should not be discouraged by excessive benefit taper rates.
3. There should not be too many people on middle or higher incomes unnecessarily receiving means-tested benefits.
4. The welfare system should be comprehensible for people to understand and to navigate.
5. The welfare system should be responsive to changes in people’s circumstances without a high level of fraud and error.”

Which actually all seem pretty reasonable, perhaps to the point of meaninglessness. You won’t find many people arguing for an unaffordable, incomprehensible and unresponsive system.

The TPA’s solution to all this is a negative income tax paid at either 50, 55 or 60 per cent of national median income (after tax and NIC) with taper rates of either 50, 60 or 70 per cent. Relative poverty is currently defined as 60 per cent of the median income. The TPA, in rejecting any proposal, that by their calculation, costs more than we pay now, favour a negative tax set at 50 per cent of the national median income with a 55 per cent taper rate. The taper rate is the effective tax rate you would face once you started earning until your net income (after negative tax but before other taxes) equalled your gross income (before all taxes). So a 50% taper rate means for every pound you earn you lose 50p of benefits.

At zero earned income you receive the full value of the negative income tax (NIT), as you earn it tapers away till it disappears at some threshold.

They suggest that you could have all other income tax and national insurance starting only after the negative tax had tapered out but that this would be “unaffordable” so the negative tax would have to run alongside other taxes. Like the Lib Dems, though, they’d be in favour of raising the tax allowance. All this together means that the marginal rate of taxation could actually be pretty high for low income earners. Certainly higher than the marginal rates on higher earners in our supposedly progressive taxation system. At the start of their report the TPA point out that the excessive marginal rates at low incomes is a failing of our current system, yet their alternative could be almost as bad.

They do, partially, address this, suggesting at one point that the taper rate could vary over time, so those newly in work would face a rate of, perhaps, just 25 per cent, while those who had been in a low paid job for a number of months, would see their rate gradually rise and settle out at 65 per cent. Conversely, those just leaving work would have to wait a while before all their benefits came back again. That’s to make sure if you’re offered a short term contract you’ve more incentive to take it. There’s less detail on their final time based effect, perhaps because, as they admit it would be rather controversial. That’s to time limit some part of you negative tax benefit. So those out of work, over 6 months, maybe, would see their benefits drop.

It’s here, past the executive summary and into the real details of how their proposal works that you start to see the real problems. The basic idea of a simplified system isn’t a bad one, and a negative income tax isn’t, necessarily, much different to our suggestion for a citizens income. But where citizens income is designed to give you more freedom, to allow people not to take work if they don’t want it, to take time to study, or care or change their lifestyle, the TPA’s suggestion is designed to force you into work. Low paying work, short term work, any kind of work you can find, or you’ll be punished.

Welfare reform is going to be a major issue in the coming years, the government are going to be after ways to reduce costs whilst appearing progressive. A universal scheme that makes things simpler and eliminates some of the worst of the marginal rates facing people as they go back into employment may well look very appealing. We have to take the time to understand where the problems really are and to be clear on the alternatives. Otherwise we risk having nothing to offer in the debate and leaving the TPA an open goal

This particular one caught my attention:

@carolinelucas @jasonkitcat How wld you pay 4 ur policies on scrapping VAT + NI:£130bn, green jobs £44bn + transport £10bn?so £184bn.No rush

so I replied:

@charlottev dunno bout @carolinelucas @jasonkitcat, I’d pay for them by not trashing the economy with job cuts. #publicspendingpaysforitself

Her response:

@AdamRamsay Thanks Adam. Erm, public spending costs money and that is why I am trying to establish where it is coming from.

So I outlined the three reasons that public spending pays for itself – it is generally investments rather than diminishing value capital costs (unless it’s roads), the multiplier effect, and the fact that it’s cheaper to borrow and spend than to allow the economy to be trashed by recession:

@CharlotteV – a pretty simplistic understanding of economics. Public spending is recuperated each time its re-spent. #gpconf #keynes

@CharlotteV – a pretty simplistic understanding of economics: public spending tends to mean investments that save cash later #gpconf #keynes

@CharlotteV – a pretty simplistic understanding: public spending multiplies good bits of the economy = more cash to spend. #gpconf #keynes

Anyway, we went too and fro, with me arguing that Tory job cuts would be more expensive as they would send us into an economic nosedive, and her arguing that:

@AdamRamsay We simply do not have any more money to spend. BTW, they tried that in the 1930s – it didn’t work = Depression.

which I thought was an amusing understanding of, erm, time & chronology.

and

@AdamRamsay And doubling the annual amount to borrow – credit markets would laugh.

which is amusing given that Mervyn King has now said that Britain’s credit rating is not at risk.

But then she said something I hadn’t heard before. When I said they were going to cut jobs, she said Tories would generate an environment for more jobs. I asked how, she said:

@AdamRamsay Low interest rates, lower corporation tax, cutting red tape, increasing skills availability – good for job creation?

I was astounded. I know Tories are always wanting to cut taxes for big business, but is this really their policy when they are claiming the deficit is the biggest problem we face? Will they really cut taxes for RBS while university courses are being closed?

So, on questioning, she clarified:

@AdamRamsay Conservative policy is there will be corporation tax cuts, partic small co rate to 20%. Corp tax is disincentive to employment

So, that seems to be our answer. The Tories think there is no money. They simply have to cut universities (in whom every person employed multiplies up to an extra 2.5 jobs, according to a study by Edinburgh Uni last year) so that they can give a tax break to their mates at RBS (in whom every person employed only multiplies up to 1.5 extra jobs, according to the same study) and Tesco.

Flabbergasted, two of my Bright Green Scotland colleagues joined in:

garydunion @CharlotteV Where’s the money coming from for your tax cut? You told @AdamRamsay that “there simply isn’t any money.”

and

loota @CharlotteV @adamramsay Surely the money that funds your corporation tax cut could be used for Universities,or other public services instead

And she replied:

CharlotteV @garydunion Funded by simplication of tax reliefs and capital allowances. Leaving more money in a co will mean they employ more people.

Now, there is possibly a tiny extent to which simplification saves bureaucracy, and so a little money, but, a) again, if the Tories can save some money, are they really going to spend it on tax breaks for banks and supermarkets at the same time as they are enacting savage cuts to the vital public services our economy needs? b) If you are going to genuinely raise serious money by ‘simplification of tax reliefs’, surely this means some people getting less relief? In other words, the proposal is to introduce higher taxes for some people who currently get tax relief, and to cut public services so that they can cut taxes for big companies.

I may have got the wrong end of the stick with this. But are the Tories genuinely proposing tax cuts for big business at the same time as swinging cuts in public services? Why haven’t I heard that before?

Darling tells us that we should “do everything we can to develop the oil and gas on our continental shelf”. Those defending Darling might point out there are also subsidies for renewables. But this somewhat misses the point. In order to avert dangerous climate change, we can’t just produce more renewable electricity on top of what we already have. We must leave some oil in the ground.

If the wealthy UK insists on extracting every last drop, then how can we ask others to do differently? How, for example, can we expect much less well off  Ecuador to continue to support politicians who choose to leave their reserves untapped?

Alas, it seems, it’s back to backing big business as usual. How depressing.