UK Budget 2020: How to Deliver on Promises Without Breaking the Bank
Nobody likes paying taxes, that’s understood.
But sometimes, in order to fulfil the promises made during an election — the promises that were made to appease and please those who voted the present government into office! — taxation levels must accordingly increase to provide the things that voters have hired the government to accomplish.
The trick for governments is how to keep their election promises without losing the confidence of voters, and I therefore offer the following well-meant suggestions using the proven example of Canada’s economic miracle during the 1994-2015 timeframe:
- As in Canada, the national GST rate in the UK should be set to 7% and should always hover between 5% and 10% in order to arrive at a zero-deficit budget, year-in and year-out. The GST shouldn’t be required to do anything else except to balance the budget, or, in the best-case scenario, to paydown some amount of government debt during any subsequent economic ‘boom years’ for the economy. That keeps it simple. (Although Canada has strayed from this plan recently and is now beginning to pay a price for its lack of committent to it’s formerly strict budgetary goals).
- The national GST should apply to every single transaction in the UK and only medical items should be exempt, such as female hygiene products, emergency medical kits, plasters/band-aids, prescription medications, and diagnostic imaging equipment like MRI’s and Cat Scan’s etc.
- Other than those exceptions, not one thing should be exempt from the national GST which would raise the total tax take for the government by a significant amount. (This plan worked wonders for Canada when it was in an economic tailspin) See: Jean Chretien: Lessons from Canada’s ‘basket case’ moment.
- Things like fuel (any kind of fuel, such as fuel for aircraft, cars, pleasure boats and ships, locomotives, home heating fuels like kerosene or natural gas, coal, firewood, wood pellets, etc.) and every other thing that is sold in the UK should be GST taxable, including financial transactions of any kind, including fees paid for legal or financial advice, and on the fees to purchase mutual funds, bonds, and other financial instruments, and on homes, cars, lumber, kitchen gadgets, and every item or service sold in the UK.
- Also, part of Canada’s economic miracle which began in the 1990’s was to lower corporate tax rates to 15%, then 14.5% and finally to 14% over a number of years, with a special tax rate of 10% for small-cap companies. This stimulated SME growth in the country that continues to this day, Indeed, Canada barely noticed the global financial crisis of 2007-2009, and it remained the fastest growing G7 economy before, during, and for a time after the U.S. subprime mortgage crisis.
- The other important part of Canada’s economic miracle of the 1990’s and early 2000’s is that the government got rid of wasteful and overlapping government programmes — basically telling every government department that they had 5% “fat” built-in to their annual budgets and that each department (except for the Department of Defence) would be required to submit budget proposals for the next 3-years showing a 5% spending cut from planned spending levels — or the government would simply lop 5% ‘right off the top’ from said department without any further warning or consultation.
- Not only did these things work well, but Canada also managed to make significant payments to paydown the government debt which was negatively affecting the economy and was costing a fortune in annual debt servicing costs. This in turn, allowed the Canadian government more room to manoeuvre from a federal budget perspective in subsequent years as less government revenue was required to service the accumulated deficits (debt) of Canada’s federal government.
- The next government that came into power after Liberal Party of Canada’s Jean Chretien and Paul Martin, was Stephen Harper’s Conservative government which in 2015 implemented a brilliant stimulus package (a home renovation tax credit) that boosted the Canadian economy with only a tiny amount of stimulus. Which, as it happened, put every available tradesperson in the country to work for a full 3-years just to meet the demand. So many Canadians decided to spend more than the allowable $5000. tax credit amount to renovate their homes… that home building centres, home decorating centres, and car dealerships that sell tradesman vans and trucks could barely keep up with demand. It was the perfect solution to boost the economy after years of budget cuts designed to balance the federal government budget.
This image is familiar to Canadian taxpayers as it appears frequently on income tax related documents, showing where each taxation dollar is spent by the federal government of Canada. Image courtesy of Canada Revenue Agency
Rather than trying to reinvent the wheel, the new Chancellor of the Exchequer, Rishi Sunak might consider following the tried-and-true Canadian example of ending the many complicated and difficult to administer taxes throughout the UK economy and roll them into a simplified GST with a 7% rate that taxes everything except medical supplies and equipment, followed by a plan to lower government deficits to zero over 5-years (with legally-enforceable punishments for the government if it fails to meet its zero deficit targets) and by lowering the corporate tax rate to match Canada’s corporate taxation rates to stimulate the economy over the medium term, and by stimulating the economy with a modest tax credit for home renovations where better home insulation is a part of that programme which works for homeowners to lower their electricity bills and further stimulate the economy over the short term.
In this way, the UK government can begin its Brexit year on a sound financial footing, losing some confusing and overlapping smallish taxes while dramatically increasing its total taxation revenue, while at the same time it attracts new businesses to the UK and supports existing UK businesses with lower corporate tax levels, and by employing every single tradesperson in the country for at least the next 3-years.
Congratulations and best wishes to the new and highly-esteemed Chancellor of the Exchequer, Mr. Rishi Sunak!
Leaving the Floodplains Will Save Billions & Needless Misery Every Flood Season
Every year in the UK, billions of pounds sterling are spent to repair the damage caused by successive heavy rainfalls accumulating in the low-lying landscapes commonly known as ‘floodplains’…
Isn’t there a better way?
Of course, there is, but do various levels of government have the overall vision, the foresight and the long-term committent to provide the funding to move every floodplain home, business, school, and other building (yes, even listed buildings would need to be disassembled brick-by-brick and carefully reassembled in a new location) up the hill far enough to get them out of the floodplain area?
Flooding costs the UK around £2.2 billion each year: we currently spend around £800 million per annum on flood and coastal defences; and, even with the present flood defences, we experience an average of £1,400 million of damage. — Foresight.Gov.UK (PDF)
Billions are wasted each decade and thousands of British lives are interrupted with devastating floods every year, and with increasing regularity as the climate continues to change.
It seems a no-brainer that the various levels of government would create legislation designed to prohibit construction of any new building in a floodplain, except for soccer fields, golf courses, or parkland and the like.
And it seems even more obvious that private insurance companies and the various levels of government in the UK would benefit from a (large) one-time government spend to move homes and businesses out of the floodplains — in order to save many more billions — over the next 25-years.
Aside from the obvious disruption to the lives of Britons, to local economies and to national GDP, there are the health implications of the millions of gallons of raw sewage that mix with floodwaters that inevitably wind up in people’s basements, high street businesses, factories, and even schools in low-lying areas.
“Over £200 billion worth of assets are at risk around British rivers and coasts and in towns and cities,and we are all vulnerable to the disruption of transport and power when a major flood occurs.” — Sir David King KB ScD FRS Chief Scientific Adviser to HM Government and Head of the Office of Science and Technology
British taxpayers who’ve been allowed by the government to purchase existing buildings or to build new homes in floodplain areas… deserve not only the compensation they receive after each successive flood, they deserve a new piece of land located well above flood prone areas… and to have the entire cost of moving their homes and businesses and reassembling them above the floodplain paid-for by the government they trusted when they purchased those buildings.
Although this would result in a significant one-time cost for the government (but spread over a number of years) it would be cheaper than continuing to pay year-in and year-out for flood damage to homes, businesses, schools and other buildings. Imagine the savings to the country over 25-years!
Billions are spent annually to repair damage caused by successive heavy rainfalls in the UK’s floodplains. Image courtesy of BBC.com
When the government is actively pursuing the well-being of UK citizens instead of merely reacting to such predictable disasters caused by the poor planning of previous governments, taxpayers will finally begin to feel they’re actually getting something of value in exchange for their tax contributions to the UK budget.
Yes, a Brexit trade deal with the EU is very important, but even that isn’t as important as the health and safety of UK citizens. In fact, the underlying reason behind Brexit was to allow the UK government to become more responsive to the legitimate needs of British citizens.
Now’s the time to prove this out in fact and in deed, Mr. Prime Minister!
A BBC for the 21st-Century!
The UK government needs to drop the present funding model for the BBC by 2021 and help the corporation get ready to serve Britons even better than in the 20th-century. Which it did quite remarkably, considering the times and the level of technology available back in the day.
However, it’s a new century now, and even the hallowed institution of the BBC must gear-up for the new media environment that’s only begun to impact the world, and the first thing that needs to change is that the BBC license fee must end by 2021. That’s it. Gone! Just like that.
Of course the BBC will need to fund its programmes and it should sell advertising on all of its websites, TV programmes, radio broadcasts, and on all other media, in the same manner as other media outlets.
There won’t be any problem getting companies to advertise with the BBC as it remains one of the premiere media providers in the world. And, the day the BBC license fee model ends, the BBC should begin funding its programming via advertising.
The UK government should consider taking a page out of the Canadian government’s book when it moved the Canadian Broadcasting Corporation (the CBC is Canada’s national broadcaster) from 100% government control to a more arm’s length relationship with the Canadian government. Until the 1990’s, the CBC didn’t run ads unless the adverts were government advertising of some sort (during elections, or to provide public information, etc.) thereby making the CBC 100% dependent upon the government for their funding. Not the best way to build a free-from-government-control media empire…
The really smart thing the Canadian government did was insist that the CBC provide 50% Canadian content (CANCON) in its programming. That is, half of the programmes that aired on CBC TV or CBC Radio were required to have significant numbers of Canadian actors, hosts, Canadian news, or even if an American host was conducting the interview the interviewee had to be a Canadian in order to qualify for supplementary funding from the government.
This so-called CANCON requirement allowed Canadian programming to flourish — even though the gigantic American media machine lived right next door to Canada which could’ve easily subsumed Canada’s entire media establishment had they wanted to.
In exchange for providing CANadian CONtent, the CBC received supplementary CANCON funding from the government for Canadian programming on a per show or (sometimes) on a per series basis.
In some cases, the Canadian government paid up to half the cost of Canadian programmes, depending upon how many Canadian actors appeared on a show or series, and depending upon where the story took place. More CANCON funding was paid when the shoot was in Toronto than if shot in New York city, for example. A little complicated, but apparently not that onerous.
The Canadian film industry loved the new arrangement — and it saved the Canadian government millions of dollars per year — as the cost of running the entire CBC was no longer borne by the government, rather, they paid only for the portion of the programming that was considered Canadian content.
It was a win for the Canadian government which saved millions per year and got the taxpayers off their backs, it was a win for Canadian actors, directors, producers and theatre houses because they got rapid access to the massive (massive for Canada, that is) CBC which was suddenly hungry for Canadian content, and it was a win for Canadian viewers who got to see more programmes that interested them and fewer American shows that were less relevant to the Canadian experience.
Yes, the one downside was that Canadians had to suffer through commercials. (Oh, the agony!)
But there likely isn’t one Canadian who’d willingly go back to the old days of wall-to-wall American TV shows (mostly about crime) and American news (also, mostly about crime) and American soap operas (also, mostly about crime) with only bits of Canadian content scattered here and there.
CBC News, CBC Sports, and CBC Documentaries are of exceptional quality nowadays, and are broadcast and rebroadcast on many channels around the world. And even with that said, all of it seems to have improved every year since the Canadian government gave the CBC an independent mandate.
Yet, at the time the model was unilaterally changed by the Canadian government, some old-school CBC hosts tut-tutted the change, complaining that ‘Canadian television would never be the same’. And in a way, they were right, it’s even better now!
Today, as a result of the Canadian government’s foresightedness, the Canadian movie industry is booming and Hollywood movies are often shot in Canadian cities because the economics work so well. Even Hollywood film makers can qualify for CANCON funding when they shoot in Canada, and that’s in addition to the savings due to the Canadian dollar presently pegged at 75 cents to the American dollar.
Based on the successful CBC example, the BBC could break free from government funding and control, from the bad press surrounding the BBC license-fee, add more revenue to their operations via typical advertising, and gain additional funding from the government whenever it creates a made-in-the-UK film, series, documentary, news programme, or other UK-based programming.
To be fair to smaller centres, the BBC should receive slightly more funding per capita from the government for creating programming set in or geared towards Northern Ireland, Wales and Scotland, or in any economically depressed town or region of the country. For one example: What could a television series that is shot in the Orkney Islands do for the economy there? And for another example, what could a new BBC production centre mean for Blackburn?
There are plenty of spectacular landscapes in the UK and millions of fascinating stories to tell — one only needs to watch Escape to the Country to get a sense of the history of the UK and of the interesting people hiding in plain sight all over the country.
In short, the UK government needs to simplify the BBC’s funding model, it needs to lower its total spend on the BBC while rewarding it for producing UK-created content, it needs to drop the abhorrent BBC license fee, it needs to allow the BBC to advertise, and it needs to provide supplementary funding to the BBC and film makers hailing from Hollywood, Bollywood, or from anywhere in the world that film movies, documentaries, or series anywhere in the UK, especially in economically depressed regions.
That’s a BBC model that will allow the corporation and its great people to succeed even better in the 21st-century than it did when it was founded in 1922 and every year since.
Letter to Britain 