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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Labour 50p Tax Rate Shows Labour Wants Every Street to Become Benefits Street

Politics / Taxes Jan 27, 2014 - 02:35 PM GMT

By: Nadeem_Walayat

Politics

The Labour party appears hell bent on putting the UK economy back into reverse gear, back to where it was during the worst economic collapse since the great depression, back to a state that had the annual budget deficit soaring towards £200 billion per year that manifested itself in an over 5% official inflation rate (Real 8%) as its primary strategy for winning elections is to bribe 80% of voters through means of benefits payments such as housing benefits and tax credits and thus have a vested interest in the expansion of Labours welfare state all the way towards an inevitable hyperinflationary collapse.


In this respect Labours latest baldrick plan is for the reintroduction of the 50p higher tax rate for those earning more than £150,000 that should not come as any surprise as it sets out to only punish the few who are NOT in receipt of any benefits, which sends the message out that Labour punishes those that work the hardest whilst rewarding the most those that actually do no work as illustrated by the benefits for life baby making factories, and that most workers who have also insidiously been turned into benefit claimants as more than 6 million of home are reliant on tax credits and therefore have a vested interest in the benefits culture.

This is despite the fact that countless studies have shown that a 50p higher tax rate raises little or no extra tax revenues than a 45p tax rate as it acts as a disincentive for those that contribute vastly more in taxes per person to work any harder. Instead the likes of Labours Ed Balls spouts nonsense of increasing the tax rate to 50p to cut the deficit this despite the fact that the last Labour government set Britain on an accelerating path towards bankruptcy as the below graph illustrates that the Coalition government has been desperately trying hard to battle against what was Labour's out of control welfare and public spending and as the graph shows that despite all of the hard work to date has so far had limited success, so imagine where Britain would stand if Labour had won in 2010! The deficit would have soared to well over £200 billion per annum resulting in at least an extra £250 billion of debt added to that of the past 4 years.

A closer look at government spending shows Labours voter bribes strategy in action in the form of ever expanding public sector spending black holes because this is how politicians gain control over the people of a nation through the reach of its public sector as they seek to expand this towards an all encompassing state by means of ever expanding mountains of bribes for vested interest workers and voters such as the the 1 million workers and their families that ride the NHS gravy train or the 11.5 million regularly bribed pensioners, or the 6 million reliant on tax credits that ensures that there never ever will be a trend for deflation because the political bribes will ALWAYS expand and as a consequence of which will result in ever higher inflation because that is what happens when governments print money to fill the economic gap generated by unproductive activity i.e. to finance the governments budget deficit.

What stands out from the updated breakdown of spending graph are the large out of control spending departments of Pensions, Social security and local government with the NHS and Education not far behind. The soaring social security spending is in stark contrast to the mass hysteria of benefits cuts in the media and amongst vested interest action groups, because as we can see benefits spending continues to increase which in large part is as a consequence of mass immigration of over 2.5 million low paid workers most of whom are in receipt of tax credits and other in work welfare benefits.

The only departments that have actually seen a cut in spending are the small spending departments of public order, central government and Transport, which have been far out weighed by the spending increase on just the big Pensions spending department alone.

Compared to when Labour took office, the bloated state in real terms is now at least twice as big as it would have been had it just kept pace with inflation and it is under this weight of a continuing huge unproductive public spending that ensures accelerating real inflation consequences against which asset prices such as house prices tend to be leveraged which is why I see this as one of the few asset classes that ordinary people can relatively easily leverage themselves to and profit from over the long-run.

The consequences of funding a bloated unproductive public sector is exponential inflation, where the real inflation truth is far removed from that which the mainstream media tends to focus upon with the annual percentage rates of inflation that masks the truth of what is an exponential inflation mega-trend which is the primary consequences of perpetual money and debt printing monetization programmes that the government is engaged in, in an attempt to buy votes through high deficit spending on a whole host of vested interests of over 70% of the population, an inflation trend that asset prices are leveraged to and oscillate around which currently has UK inflation compounding at the rate of 2% per annum that resolves in the following exponential trend.

UK CPI Inflation Index

Therefore the Labour party is once more sending out the message that if you vote Labour and we will -

a. Punish those working hardest to create jobs and generate wealth who will lose more than half of their annual income in tax and thus encouraging them to engage in complex legal tax avoidance schemes.

b. And we will reward the laziest in society with increases in benefits that will encourage people NOT to work as they will become benefits for life vested interest Labour voters.

Again a higher tax rate does NOT result in a INCREASE in tax revenues. Off course Labour knows this, Ed Balls is not stupid as this is pure propaganda to get the 99% who would not fall into the 50p tax bracket to vote Labour despite the fact it would raise LESS revenue and thus create FEWER jobs.

Even former Labour ministers understand it is an economically stupid idea - Former Labour government minister Lord Myners said: ‘We need to encourage productive enterprise and effort rather than resort to predatory taxation. It’s not clear how this is going to help the UK economy compete with the world’s growth economies.'

'The UK already has an income tax system that is more progressive than most of our international competitors.’

In terms of fairness, what's fair about the top 1% paying 30% of all income tax. Do they use the NHS and public services more or less than the rest ? Clearly the answer is a lot less. This is purely the politics of envy, a simple message for the foaming at the mouth Labour Zombie voters to understand.

In my opinion the only way to end Britain's economic death wish with the welfare state is to only to allow those in work to vote. This would result in a huge sea change in the policies of all political parties that result in governments focusing on employment creation and maintenance activities rather than have 9 million lazy adults of working age sat getting fat on benefits for life that the 1% of tax payers fund the life styles of to the tune of £50 billion a year with the rest of the approx £50 billion additional cost covered by printed funny money (QE monetization and debt that is never repaid).

The below real unemployment graph illustrates the magnitude of the last Labour governments incomptenance following the early 1990's recession where not only did real unemployment fail fall but steadily rose under Labours boom years as the benefits culture took hold as over 1 million foreign workers performed the jobs that unemployed Britain's were not prepared to do as they were far more comfortable living off tax payers as vested interests in Labours benefits for life culture, thus Labour engineered an extra 2 million positive voter balance i.e. 1 million more benefit claimants coupled with 1 million low paid immigrant workers that continued to increase long after the boom had ended, a trend that only started to reverse during late 2011.

UK Real Unemployment

Understand this, if Labour wins the next election then they will try to turn virtually EVERY street into BENEFITS STREET, so that only the 1% are expected to work hard for a tax rate that will have been ratcheted upto 99%! That is the Labour voter bribes with benefits mentality!

A Fat and Skinny Dee coming to a street near you!

Source and Comments: http://www.marketoracle.co.uk/Article44148.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2014 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

chairmanchand123
27 Jan 14, 15:51
Labour will Win

Labour will win by a LANDSLIDE! Not only for reversing the millionaire's tax cut, but imposing a meaningful tax on bankers bonuses and the Bank Levy! The people complaining are in the top 2 or 3 % of earners. There is a zero chance of damaging the growth prospects! Huge distortion and exageraion by people who do not understand Economics! UK Taxation is a very marginal issue: the key determinants of growth will be the recovery in the USA, Europe and Asia, global commodity prices, and whether Russia, India, Brazil, Indonesia and Turkey can make the reforms necessary. The top rate of 50 pence should bring in £ 3 Billion extra IF loopholes are closed, off shore concessions abolished, avoidance criminalised. We need G20 action to combat the "Wolves" in the global economy/ financial markets.


Lankylad
27 Jan 14, 16:13
Labour's History

A bit of history to help folk realise what Labour and all lefties support?

1939 to 1945,a TORYwho had been complaining (alone) about the 1930s appeasers,led the nation, to victory. His main opponents, (even whilst we were at war, were the LEFT!!).

In 1945 GB bankrupt,Labour won 1945 election.

They embarked in a bankrupt nation on copying"Uncle Joe"Stalins USSR by nationalising everything and creating the NHS. Today we see that construct crashing around us.The USSR crashed spectacularly in 1989/90,under the weight of socialist/Communist top down everyone equal mandatory rule from the centre.

History shows us the lessons of totalitarian communist/socialist control.No democracy no freedom of choice,only a small political elite with freedom and cash!

Now,Mr Balls states he favours the USSR approach to government? Democracy WON the cold war. What a shame that the penny has not yet dropped for labour.libdems and other anti democratic hangers on still hankering to control all our lives!


NBeale
27 Jan 14, 19:56
Labour Clobbering Business

I suppose Ed and Ed figure that having shown they are completely anti-business with the Energy Price Freeze Stunt etc.. they might as well go the whole hog and demonstrate that THEY WANT TO CLOBBER SUCCESSFUL BUSINESS PEOPLE.

They imagine that they can win the election by keeping their Base on side because the Right is split, and this was a bone to the Left to help them swallow the "we will balance the budget" line.


charlesmortlock
01 Feb 14, 21:02
Votes for Workers

''In my opinion the only way to end Britain's economic death wish with the welfare state is to only to allow those in work to vote. This would result in a huge sea change in the policies of all political parties''

spot on nadeem

My wife is from the philipines, they pay high taxes there if you are paye. The government take from the workers and give to their friends just the same as here. In the phils its to friends in government who can help them retain power and here it is to bribe the benefite dependent constituency of the electrorate but its the same principle, spreading other peoples money around to keep yourself in power.

Its how democracies degenerate into dictatorships but its disguised


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