The Impossibility Of 'Progressive' Spending Cuts

Only the very most stupid continue to argue that large spending cuts to address the dreadful black hole that the Coalition government inherited in May are unnecessary. However, the main line of argument against the spending cuts is itself a nonsense. Left-wing critics argue that low income groups will be most affected. But is there a permutation of government spending cuts which would not be regressive?

Of course, many elements of government expenditure are targeted at the poorest, but for illustrative purposes let's assume that the benefit of government spending is evenly distributed.

Let's imagine that in this theoretical nation, the highest earning half of the population segment have average take home pay of £30,000 and the lowest half £10,000. Say there is £10,000 of government spending per head and an across the board of 10% reduction is announced. The £1,000 cut in government expenditure represents 3.3% for the richest and 10% for the poorest. As it is obviously the case that poorer people have more spent on them by the government, a large scale expenditure reduction is always going to have a bigger percentage effect on the poorest than the richest.

Speaking on TV, Carl Emmerson, the acting director of the IFS suggests on the one hand that the cuts may not be sufficient but complains that the cuts are regressive. You can't have it both ways. To support spending cuts but argue against regressive cuts is demanding the impossible.

What Is The Housing Crisis?

When house prices spiral out of the reach of the average family, they call it a housing crisis, now there are signs of price slippage, the message is similar. Tails, they win, heads, we lose. Some commentators appear to place the blame firmly with the Great British Public castigating our apparent obsession with owning a home for our ills, (See Note below) but I don't agree.

The housing crisis isn't about the level of house prices, significant as that is for aspiring and actual home-owners, but rather the housing shortage. The most relevant symptom of the UK housing crisis is the 5 million people on the council house waiting list. This is a record and a friend of mine who is in the sector tells me that many of these people will never get to the top of this particular 'waiting list'. Please don't go away with the idea that I am advocating a massive council house-building programme. Surveys show that most people would like to live in their own homes so what is the point of spending money we don't have, on things people don't want.

Instead, reflect on the incentives created by our current system of property taxes. In my apartment block of 20 flats, I reckon we spend £25,000 a year on council tax. If a similar-sized plot next door was derelict scrub, it would not attract any taxes. Seems strange that land put to productive use is highly taxed, but that in relative terms, owners of semi-abandoned land are rewarded. But this is just one feature of a British property tax system which penalises built property (council tax, rates, VAT etc) and property transactions (capital gains, stamp duty and inheritance tax).

Let us the consider the relative outcomes that arise from different ways of organising taxes on properties.

Taxes On Built Property - Taxes On Land

Housing Shortages - No Housing Shortages

Unaffordable Housing - Affordable Housing

Narrow Property Ownership - Wide Property Ownership

Poverty Trap - Incentives To Progress

Sclerotic Property Market - Dynamic Property Market

What's not to like?

Note re British obsession with owning a house - 1. I don't detect a relative lack of appetite in other countries to own a home 2. For a family the alternative to owning a home is living on a council state or depending on a private landlord. Neither is an appetising prospect.

Katherine Birbalsingh

In my sidebar links under education, I link to "To Miss With Love" a teacher who has been blogging for years about how the poorest kids are badly let down by the educational system and culture. I found and so have others, that there comes a point when you run a successful blog when you have said all you have to say to your online audience and want to find a way to make a greater impact in the real world. For the author of "To Miss With Love", Katherine Birbalsingh that epiphany came recently.

So the other day she stopped blogging and appeared on the main stage at Conservative Party Conference. She brought the house down with an insightful testimony into how education was failing and what needed to be changed. Click to 1.17 for her impassioned speech. Well, naturally enough, she has now been asked to stay away from her work as deputy head at St Michael and All Angels Academy C of E in Southwark, London.

Cranmer's got the story by the scruff of the neck as have some of the nationals. Some people suggest that she should work in the private sector or help Michael Gove with helping to reform education. I would humbly submit that it isn't in those areas where there is a lack of talent or an excess of wrong-headedness. No. She should remain as teacher in the state sector.

She hasn't been punished by her school for speaking against the establishment but rather, for doing so effectively. She should keep her job and the people who punished her for exercising freedom of speech need to go. This is the sort of battle we need to win.

Update

The battle has been won. Katharine has been reinstated. However, in the fight against the left-wing establishment, Katharine may need our support again, so please join this facebook group.

During conference, I am blogging for the Birmingham Post. Check out my daily blogs here



Here's a picture of me with a rather more famous Tory. Phillip Blond, an academic pioneer promoting localism and the Big Society is the Red Tory.