Cameron and Merkel fail to progress

The pair's smiles couldn't disguise the level of disagreement.

After this week's war of words over an EU Robin Hood Tax, David Cameron and Angela Merkel were all smiles at their press conference in Berlin. But their avowals of friendship ("we are very good friends," said Cameron, protesting rather too much) couldn't disguise the level of disagreement between the pair. On the Tobin tax itself, Merkel admitted that while they both favoured a global transactions tax they had made "no progress" on a European version. Unlike the German Chancellor, Cameron and George Osborne, who has described the proposed EU tax as "a bullet aimed at the heart of London", remain unwilling to introduce it without the agreement of China and the US.

Worse, Merkel restated Germany's opposition to the use of the European Central Bank as a lender of last resort. She spoke of the need for European leaders to use all available "weapons" to defend the single currency but added: "one should also not pretend to be more powerful than one is"

Cameron spoke simply of the need for all eurozone countries to show a "commitment to fiscal discipline", refusing to acknowledge that austerity has failed in Europe. As historian Richard J Evans argues in his magisterial essay in this week's New Statesman: "German-style fiscal discipline is all very well but it is not going to solve anything in the short run." But both Cameron and Merkel remain unwilling to grasp the nettle.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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Autumn Statement 2015: whatever you hear, don't forget - there is an alternative

The goverment's programme of cuts is a choice, not a certainty, says Jolyon Maugham.

Later today you will hear George Osborne say there is no alternative to his plan to slash a further £20bn from lean public services by 2020-21. He will also say that there is no alternative to £9bn cuts to tax credits, cuts that will hit the poorest hardest, cuts of thousands of pounds per annum to the incomes of millions of households.

But there is.

As I outlined here the Conservatives plan future tax cuts which benefit, disproportionately or exclusively, the wealthy. Suspending those future tax cuts for the wealthy would say, by 2020-21, £9.3bn per annum.

I also explained here that a mere 50 of our 1,156 tax reliefs cost us over £100bn per annum. We don't know how much the other 1,106 reliefs cost us - because Government doesn't monitor them. And we don't know what public benefit they deliver - because Government doesn't check.

What we do know, as I explained here, is that they disproportionately and regressively benefit the wealthy: an average of £190,400 per annum for the wealthiest.

And we know, too, that they include (amongst the more than 1,000 uncosted reliefs) the £1bn plus “Rights for Shares Scheme” - badged by the Chancellor as for workers but identified by a leading law firm as designed for the wealthiest.

Simply by asking a question that the Chancellor chooses to ignore - do these 1,156 reliefs deliver value for money - it is entirely possible that £10bn or more extra in taxes could be collected without any loss of  public benefit

To this £19bn, we might add the indiscriminate provision - both direct and indirect - of public money to wealthy pensioners.

Those above basic state pension age enjoy a tax subsidy of up to 12% on earned income.

Moreover, this Office for National Statistics data (see Table 18) reveals that the 10% of wealthiest retired households - some 714,000 households - have gross pre-tax and pre-benefit private income of on average £43,983. Yet still they enjoy average cash benefits from government of £11,500 per annum.

Means testing benefits to exclude that top 10 per cent of retired households would save £8.2bn per annum. And why, you might wonder aloud, should means testing be thought by the government appropriate for the working age population, yet a heresy for retired households?

Add in abolition of that unprincipled tax subsidy and you'll save even more. 

So there are alternatives. Clear alternatives. Good alternatives. Alternatives that enable those with the broadest shoulders to bear some share of the pain. Don't allow yourself to be persuaded otherwise.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.