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As I see it – Charlotte-Anne Schreiber

Regular readers will recall that we were pleased to welcome a highly respected economist and financial journalist – Charlotte-Anne Schreiber – to our team of writers. Although still under 35 she already has a distinguished career with several international organisations and is at present an Associate with a leading firm of management consultants. (See ‘Who we are’ for full details)

In the first of her weekly columns following the formation of the election Charlotte-Anne gives a penetrating analysis of some key aspects facing the new Coalition Government.

So New Labour has been finally swept under the carpet and the new brooms can get down to some much overdue spring cleaning. That means dusting the trophy cupboard and the mantelpiece. As we all know, there is something missing from the trophy cupboard. There are Silver and Bronze medals a plenty but the Gold has gone – sold off at a rock bottom price by Mr Boom & Bust Brown. And in a search among the clutter on the mantelpiece I would expect to find a faded invitation from the President of the EU inviting Mr Brown to a party to join the launch of the Euro. Did he forget to RSVP or was it deliberately stuffed behind the clock? We shall probably never know.

But let me get serious. Almost before the Cameron-Clegg wedding reception had started the new powerhouse leaked its intention to raise the tax threshold for the lower paid and give them perhaps £700 more in their pockets. I’m sorry, but this is a bad move, in my opinion. Clearly Osborne and Laws have forgotten why the burden of taxation falls most heavily on the poor and low paid. It is simply that we do not trust them to spend their money wisely. Much better to reduce their take home pay to the bare minimum, and let the State decide how the money should be spent. We need well-funded public services and taxes to pay for a raft of benefits. My worry is that this cash give away will be frittered on more booze, fags and holidays in the sun. The Chancellor should look again at this handout. He is not Dame Bountiful.

Another doubtful policy is the idea of raising Capital Gains Tax from 18% to 40%. This created uproar among a group of accountants who suggested in no uncertain terms that such a hike would amount to ‘legalised theft’. This is interesting because it raises the question ‘is all tax legalised theft?’ They could have a point. I intend to return to the subject of taxation and where it should be levied on a future occasion.

But in the meantime I strongly suggest the accountants cool it. The danger here is that the working class might put two and two together and start to think that rent is legalised theft. Clearly this is ridiculous as landlords provide access to the means of production and must be rewarded for their public-spirited generosity. Where on earth would we be without land? The general public have become so far removed from the reality of land being the source of all wealth that most of them think that potatoes grow on supermarket shelves.

Now I cannot finish this report without some reference to the banks. There has been a lot of animosity in this area – particularly regarding bonus payments – which I consider unfair and unfounded. We seem to have forgotten that banks create wealth and because they are generous, dedicated people they agree to buy government debt and lend money to businesses and individuals. And as for bonuses, it is only fair that if employees use their skills to bet on dodgy financial instruments they don’t understand, ‘short’ on currency exchanges and are prepared to sell their own country down the river they deserve rewards far exceeding the average Joe’s wildest dreams.

What particularly annoys me is the accusation that bank lending was responsible for the house price crash. It is everyone’s dream to get to the top of the property ladder – it is the best way to get rich without working. You simply wait for the price to rise and cash in. Simple. And if you haven’t got your foot on the first rung by the time you are 20 years old you might as well get a council flat. Everyone knows that ladders are built so that you can go up and down on them. That is what a ladder is for. If some people throw caution to the wind and take two steps up instead of one at a time then they are bound to loose their balance – and bank balance – when they miss their footing. That’s life!

Anybody would think that house prices are immune from market forces. They are not. It is quite plain to me that the area of land in England is a fixed amount. So when there is an increase in demand the price goes up, just like a shortage in any other traded commodity. Now I know there are some people – cranks mostly – who claim this situation is akin to a monopoly. You can’t make more land, which means that the current owners are sitting on a nest egg and laughing all the way to the next speculative development. I don’t share this view.

Finally, let me remind readers of the three bastions of our society – banks, shareholders and landowners – and their role in the economic process. Banks are the pillars of economic activity. They create wealth and provide the means for the providers of jobs to get established so the workers can pay their taxes and mortgage debt.

Shareholders make a conscious decision to sacrifice their savings and instead buy shares in a public company. They invest. Quite rightly they deserve a share of the produce called dividends. These are actually taken from the wages of those who work in the company, but this is not generally appreciated. Let us not forget that without the shareholders – or secondary claimants, as I prefer to call them – there would be no pension schemes and no Stock Exchange. Thousands of highly skilled traders would end up on the dole. Not good, in my opinion.

Finally, landowners – a select group of people who allow others to use their god-given right to the ownership of the soil in exchange for rent. Landowners provide land for houses and the facilities for business to flourish. It is only right that they should charge retailers for the location they enjoy. The better the site, due to the infrastructure paid by society out of taxation, the higher the rent. Seems fair to me.

So I hope in this brief analysis I have given you something to think about. If you have any comments or suggestions for a further analysis, I would be very pleased to hear from you. I shall certainly be watching the actions taken by Jack Straw as he examines the poverty situation. As a principal stock in trade of mine, poverty always stirs my enthusiasm.

Charlotte-Anne Schreiber