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The Budget 2009 – a broader perspective

Tommas Graves takes a step back from considerations of winners, losers and avoiders, and gives a view of the budget from a broader perspective

“Dishonest” says the Economist. Taken together with the steps to deal with the banking crisis, what we can see is the attempt to get the economy back to normal.

NORMAL? But what is normal?

This is our view of a normal economy. A people which takes note of natural law, which realized that land is free, that location value is created by the actions of everybody, and therefore belongs to all, and therefore uses it for the common purposes and only resorts to taxation in exceptional circumstances. So there is no need to take any of the product of work, thus removing theft from the economy.

But what of the normal which is sought by our governments? What we see is a desire to return to the status quo, where location value falls into private hands, thus forcing taxation into existence. This robs those who work of some of their produce, and hits especially at the margin, creating unemployment, creating a growing divide between rich and poor, and taxation then has to increase to look after those who cannot support themselves, and the increased taxation then puts more out of work. A dismal downward spiral. And location value falling into private hands manifests as asset inflation, forcing most to pay unreasonable amounts for a place to live. The price of assets (land) rises until it becomes unaffordable, and suddenly there is a credit crunch. We don’t think this scenario is normal at all, but downright stupid.

With this in mind, what of the provisions of this budget? It already costs an employer about double what the employee gets as a result of his work, setting in train a raft of injustices. Instead of some relief from this, we get an increase in National Insurance from 6th April 2011 of ½% in both employers and employees contributions, giving a new total of 24.8%. From 6th April 2010, incomes over £150,000 will be taxed at 50%, and such people will lose their personal allowance if their income exceeds £112,950. VAT will revert to 17.5% from 1st January 2010, and taxes on alcohol and tobacco also go up.

Pension contributions for those paid over £150,000 are to be restricted and employer top up payments will be taxed to the employee as a benefit in kind. It is thought that this will put the final nail in the coffin of final salary schemes, but as such schemes are avid buyers of Government debt this may not help the finance required to cover the massive debt being built up. There are 270 more pages of legislation, containing many small adjustments to the system. Of course, if you want to tax incomes, you need a huge volume of rules. How much simpler just to return location value to those who created it. The pressure to bring tax havens to heal is a further sign that we have a system out of control, lacking any principles, subject to constant battles between those unjustly taxed and the enforcement agencies.

Perhaps our last word on the subject should be a quotation from Joseph II of Austria-Hungary. In 1780 he said “The land and the soil which nature has given to man to support him is the sole source from which everything comes and to which everything returns, and whose existence remains constant through all the vagaries of time. For this reason it is incontestably true that land alone should provide for the needs of the state.” (Quoted in “The Pursuit of Glory” by Tim Blanning, Penguin 2007)