A consensus seems to have emerged in public life that our deficit is an enormous problem and the only way to clear it is by cutting vital public services. You so seldom hear a well constructed alternative argument. Professor Greg Philo, of the highly respected Glasgow University Media Group, has a different perspective. Here is an unpublished letter he sent to a national newspaper.
Each time I turn on the BBC I hear that difficult decisions have to be made, by whoever is elected. This comes down to: Do we want to give all our money to pay for the bankers this year or would we rather wait a bit? In all this debate no one has asked the obvious questions of how much wealth there is in the country, and who is best able to pay.
The focus groups which we conduct, light up when such issues are raised, but heaven forbid that politicians should be asked about such indelicate topics. The total UK wealth is £ 9 thousand billion, the top 20% own between 5 and 6 thousand billion of this, nearly all in property and pensions.*
Remember in a single year the denizens of the city paid themselves £21 billion in bonus payments and now we know where these went. The deficit is a mere £150 billion or thereabouts. But instead of discussing who could pay without missing it too much, public debate is constrained to issues like vat rises, which would hurt the poorest, who have no wealth, only debts.
Or alternatively we can choose if we want less schools and hospitals or more potholes. The class who caused all this will not be bothered in the least by the consequences of their actions, let alone be told on the BBC that they should pay for them.
Professor Greg Philo
Glasgow University Media Group
The focus groups which we conduct, light up when such issues are raised, but heaven forbid that politicians should be asked about such indelicate topics. The total UK wealth is £ 9 thousand billion, the top 20% own between 5 and 6 thousand billion of this, nearly all in property and pensions.*
Remember in a single year the denizens of the city paid themselves £21 billion in bonus payments and now we know where these went. The deficit is a mere £150 billion or thereabouts. But instead of discussing who could pay without missing it too much, public debate is constrained to issues like vat rises, which would hurt the poorest, who have no wealth, only debts.
Or alternatively we can choose if we want less schools and hospitals or more potholes. The class who caused all this will not be bothered in the least by the consequences of their actions, let alone be told on the BBC that they should pay for them.
Professor Greg Philo
Glasgow University Media Group
countries unless they cut. He points out that these agencies gave top marks to financial institutions who gambled away other people's money and required the state to bail them out. The ratings agencies are funded by those same banks. Am I the only person to feel queazy as young analysts from The City tell TV viewers "prepare to suffer" - or the market will punish you.
As Gary puts it so well
It's as though you borrowed money against your home to save a wayward relative from penury only to have them roll up a week later in a brand new Porsche and tell you to cut your food bill or they'll repossess the property.
Whilst I agree absolutely with the sentiment of Greg Philo's letter, with regard to this wealth being held in property values - how does he suppose this can be captured by the state to pay for the debt incurred?
One way would be to confiscate the property and sell it on the market. The original owners couldn't buy it back (they obviously no longer have their wealth) so it would really have to be sold to foreign investors. This doesn't sound politically feasible (partly because such things are never discussed of course).
The other way that is initially more imaginable is to tax this property wealth. However, if owning property attracts a tax, the value of the property falls (*). The full value of this wealth is therefore not available for the government to capture - and any attempt to do so would reduce the nominal value of this supposed £9Tr wealth.
Taxing wealth would, I believe, provide a far superior "steady state" situation for us all. However the dynamics of moving from a situation where we tax income to one where we tax wealth are pretty uncertain. Interestingly, under Calman we'd have responsibility for land taxes, but given the trumpetting the council tax freeze has been given, I don't see property taxes being prioritised in the near future.
(*)[e.g. suppose a house provides a stream of "housing services benefits" worth £1000 per year to the owner, who discounts this income stream at 0.5%p.a. The value of the house to the owner will therefore be £200,000. Suppose this is also the market value of the house and the government proposes a wealth tax of 0.1%p.a. i.e. £200 per year in this case. The benefit stream would then only be £800p.a. and the market value of the house would be £160,000.]
Posted by: dcomerf | May 13, 2010 at 02:21 PM