Deception and taxes

Let's start with a fun quote from Machiavelli:


Of mankind we may say in general they are fickle, hypocritical, and greedy of gain. 
Niccolo Machiavelli 


Do you agree with this statement? So when the Treasury Minister David Gauke states that it is morally wrong to pay cash in hand is he perhaps stating the obvious and that many people are willing to deprive the Government of those precious tax revenues? Perhaps even the attitude from many people likely to be a resounding "sod off you hypocrite!"


I don't think this really is much of an issue on the Govermment's radar at all. It is not a new issue and it has been something that has been known about and managed as best as possible over decades. It is claimed that this low level tax avoidance is costing the Government £2 billion a year. Considering that the major tax avoidance wheezes are being done by corporations and rich individuals and this is costing the Government trillions. That is where the attention should be going. 


So why is this non-story suddenly newsworthy? Time for another quote from Machiavelli:


One who deceives will always find those who allow themselves to be deceived. 
Niccolo Machiavelli 


This cash in hand story is only to deflect attention from the whole issue of corporation tax avoidance. Can we really blame rich people and corporations from seeking ways to reduce their tax bill? It is a simple fact that no one likes paying taxes. They do so because they have to and hopefully because they believe it is the right thing to do because they directly and indirectly benefit from it. Yet what if they feel that they do not benefit and that governments of all political colours squanders it and is too corrupt to manage it properly? How resentful must those people feel to pay those at the top who enrich themselves and their friends/political donors at public expense?

The whole issue of tax avoidance is squarely the Government's fault. It happens because it allows tax avoidance of all shades to happen through poor or slack legislation and enforcement. Furthermore, people don't trust politicians and they definitely don't trust them to spend the money wisely. Thus a political atmosphere of resentment is being created and the only way people can fight back is to withhold their taxes through covert means. Protest against the government is meaningless and worse still risks people losing their jobs, violence is an extreme method of protest and withholding your taxes overtly gets you put in jail.

I do not claim tax avoidance is directly linked to political protest, but I do claim that a subconsious culture is being created where those who can avoid tax do and don't feel guilty about it because they don't feel the Government deserves their money. It should definitely be an issue of concern to the Government and I fear obviously hypocritical comments by Treasury Ministers is not going to improve the situation. Everyone knows who the real tax avoiders are and it is not those builders/plumbers/decorators.

Bread and circuses

Many will be familiar with the old trick of the Roman emperors to dispense free bread and to hold circuses to maintain their hold on power. To a lesser extent a similar idea remains in use today through the use of big sporting events. It is well documented that politicians try to use major sporting achievements such as winning world cups to boost the ‘feel good feeling’ in voters. So it must be rather depressing for the coalition as they really do not seem to be having much luck on that front this year.

The only hero they have at this stage is Bradley Wiggins. The England football team did not do anything spectacular, Murray didn’t win Wimbledon and now the whole Olympics thing is becoming a political mess. And the Queen’s diamond jubilee did so well at getting things warmed up, what a waste! Brits are perhaps a particularly cynical lot and hard to please, but it cannot escape political notice that far from ‘distracting the masses’ the Olympics are displaying in all its ugly glory the nasty side of corporate sponsorship and the perils of outsourcing. All at a time when MP expenses scandals remain fresh, with Levenson constantly chipping away at the political foundations in the background and with the Libor scandal in full flow. No wonder the economy is not growing, the British voter does not have much to be confident about right now.

The secret to economic growth these days is not really anything to do with actually making things, investing in the future or through the use of money making the world a better place. No, it is all about confidence. People need to feel sort of good about their lot, willing to spend money in the knowledge they will get more of it and feel a desire to buy things with that money. Any basic economics course will teach its students that confidence, a very intangible thing, is the most important concept in any economy. Money has value because people believe it does. A company can make huge profits yet go to the wall if people lose confidence in it. The same is true for governments and any currency such as the Euro or US Dollar. Thus even though the Olympics being in London is thanks to Labour not the coalition or Boris, Cameron can be seen desperately talking it up with outlandish claims of how much better off Britain will be thanks to the Games. You only need to look over towards Greece and the well documented failure how hosting their Olympics failed to improve their economy, to know that Cameron must be getting pretty desperate to make those sorts of claims! Yet the reality remains that the British political leadership, along with European leaders, are failing to show leadership, improve confidence and thus inspire their voters to generate economic growth. Cameron needs the circus to distract the mob, slip into the shadow of sporting heros and get people feeling good about things again. Will it work?

I suppose Cameron could always stand up and imitate Blair for the party faithful with a rallying cry of, “confidence, confidence and confidence!” Such an intangible concept, with no firm rules on how to obtain it and yet so important and its effects easily seen. Even if the Olympics are a success, I suspect it will be very much perceived that politics played little in achieving this and all the other negative issues will overwhelm any political benefit to be gained.

Looks like bread and circuses on their own are not quite enough. But of course, the Roman emperors had the Praetorian Guard to intimidate the population, thank goodness the army won’t be doing the same for the Olympics…

The electoral reform that never was

Students of politics should do a case study into the formulation of the coalition agreement of 2010. The insights about how this unique (to the UK ) document came about and the results that we have seen from it make for fascinating study. For this post, I am going to focus on the failed referendum for electoral reform because I find it interesting and because the whole tale greatly amuses me.

Rewind back to the heady days of March 2010 with the election results in, Gordon Brown having agreed to step down and the Liberal Democrats living the dream of being the ‘king maker’. (Oh how things have changed since then, but I digress)  Top of the Lib Dem agenda was the issue of electoral reform, something they have wanted for so long. Opposite them was the Conservative Party, conservative by name, conservative by nature, entrenched by self-interest and thus not in favour of political reform. Personally I think our current First Past the Post System is a mess (mainly due to the control of the two big political parties and the way UK voters are wedded to voting in a tribal way) and so I was looking forward to the Lib Dems bringing in some much needed reform.

And then there was the huge mistake upon which the Lib Dems have had plenty of time to regret and which I, with years of experience at conducting political negotiations, instantly recognised as a mistake at the time. They sacrificed their strong position for a compromised position. The Lib Dems agreed to a referendum to a named alternative electoral system, the Alternative Vote. Why oh why were they so naïve as to have agreed to this? I can only admire the cleverness of the Conservative negotiation, they bluffed and took a gamble and it paid off. Generally speaking compromising during a negotiation can be a good thing, but you should never do so at the expense of your core objectives or ‘red line issues’ as we call it in the office.

What the Lib Dems should have done was to insist that the referendum question would be agnostic about which system to reform to, but would merely establish whether the UK population wanted electoral reform with the specific system to be decided at a later date, probably through a second referendum. They had the trump card, “agree to this or we shall go and speak to Labour about forming a coalition.” They could have said this and I am sure the Conservatives would have had no choice but to accept it. Instead, they handed the Conservatives the ability to criticise a political system that no one really wanted, it was just too easy! It stifled the debate and shut down the opportunity for proponents of the other potential systems to make their (much stronger) case. I can only imagine that these thoughts were going through Vince Cable’s mind when he described the Conservatives as “ruthless, calculating and tribal”. He knew they had blown it and he knew Lib Dem naivety several months back was the cause.

It was a much needed jolt in the arm for the Lib Dems, exposing one of their many political flaws. It also very pointedly represents the cause of their current problems, they look weak on the red line issues that matter to Lib Dem voters. The obvious lesson from this incident is not to agree to something you know that neither you nor your opposite number actually want. Unfortunately in learning this lesson, the Lib Dem blew the chance at the electoral reform that they had always dreamed of and thus along with it a genuine chance at cleaning up the current political mess that Westminster is in. Politics is a dirty and nasty game and people don’t often get second chances. For those who really wish things would be better, you will have to dream a little longer I am afraid…

Reforming the House of Lords (just the concept)

With the Liberal Democrats now having their chance to be part of government, the issue of reform of the House of Lords is now firmly on the political agenda. Truthfully, it is something that should have been reformed a long time ago, but with the main political parties having benefitted so extensively from the power of patronage (or cronyism as called anywhere else), there has been little to no political will to do so. However, the House of Lords as it stands today should not be seen as a completely pointless body. Without it, many bad laws would have been passed unchecked. It is ironic that the most undemocratic part of British democracy is actually one of the best defenders of our rights and freedoms. This strength is in part because it is unelected and many of its occupants are professionals in their fields and willing to exercise independence from the political parties, this is completely in contrast to the House of Commons.

That said, the House of Lords has a very uneasy position being a concept that is at odds with how a functioning democracy should look like and so reform does remain necessary. The trick is not to create further shortcomings or to simply replicate the shortcomings of the House of Commons. This means that having another body of elected politicians controlled by political parties has to be seen as a bad thing. Yet by the same token, there needs to be a politically legitimate body that can challenge the government of the day and stand up for the interests of the voters. How is this to be done? Well funny enough, I have some ideas on this issue that I have wanted to articulate for a while.

The first issue is that of elected peers. Election in a representative democracy is supposed to be good and democratic, yet I always think back to that great quote by Plato, the ancient Greek philosopher, “the problem with democracy is that the winner is not chosen by ability, but on who shouts the loudest.” Sounds an awful lot like the House of Commons! Even the politicians at Westminster admit they do not want a duplicate chamber. If we look at the US system, the dangers are obvious, either both houses have the same political party dominating and thus laws get rubberstamped, or they have different political parties in charge and so a huge amount of wasteful horse trading is required to get laws passed. At least in the US , they have checks and balances, in the UK such an arrangement would concede far too much power to the Prime Minister as they effectively control the House of Commons through the whips. That is bad enough, worse still if they could do this to both chambers.

And so I would argue that we need a second chamber elected in a very different way, one not based on everyone in the country voting as a one off event, but rather a system where political interests are openly acknowledged and harnessed in a constructive way. This would fall into the delegative democracy system and it is actually quite simple. Each peer would be elected on a 6-8 year term on a staggered basis. Something like one third or one quarter are elected every two years. However, these are not general elections, but rather closed ones with a variety of selection criteria.

Let’s start with regional peers. Each region in the UK ( Wales , Scotland , South West, North East etc) gets to vote one in one peer each. They represent their geographical region and only people living in those regions can vote for them. Then lets have major industry peers (rail industry, retail, finance, manufacturing etc) they get selected by their peers in those professions. So for example all manufacturing companies can be registered to have one vote each and they select a peer specifically to represent their interests. Now let’s have one peer for each government department, voted for by that department. Their job is to scrutinise their respective departments and to challenge governments about any mistakes made in running it or on the policies coming out. Each of the major religions can have one peer each. We also want peers for the voluntary sector and we want peers representing disabled people, poor people, gay people and so on. I can already imagine the question of how would their election be managed and how does one select which groups are represented, but please bear with me and gloss over this part as I want to talk about the principle of the idea rather than the detail of its implementation. Finally, the government would appoint a number of peers to answer questions. This has to happen because the government needs channels by which they can be held accountable and so a small number of appointed peers (who are also ministers in government departments) allows this to happen. They, however, are only in office for as long as the government is rather than adhering to the normal peer terms.

And so the end result is a second chamber designed deliberately to have few career politicians in it, a very diverse population (not full of white middle aged men educated at Eton or Oxbridge), as representative of the full UK population and industries as much as practically possible and those representatives are knowledgeable about their elected area. If they do a bad job, there should be rules to enable them to be impeached. Thus we have a chamber with political and professional credibility in a completely different way to the Commons. If the peer for poor people stands up and says government policy disadvantages their constituents or a doctor criticising NHS reform, the odds are that they will know what they are talking about. They are also not in the pay of political parties and they will not have a political axe to grind. Where the government has a good policy, but some flaws in its implementation, those peers would want to help them make it work. Thus the second chamber is there to help government, not just to hinder. If the government cannot mobilise the support of these professions then it must be pushing for a pretty bad law.

I am aware that this system will mean people will get represented by more than one peer, but I would argue this is a good thing. You may have not elected your MP, but they are your only representative no matter whether you hate them as personalities or their policies. With this peer system, everyone would have someone they can contact about their interests. It is much more inclusive and with the current political apathy gripping UK politics, this has to be a good thing. These peers don’t even have to take political bribes or hide support from special interests, it is their job to represent those interests. So if businesses gives peers people to help run their offices, this needs only be declared rather than glossed over as is the current case with Parliament. Above all, it is transparent.

I have not read of this sort of idea anywhere else and to my knowledge, no one elects their politicians this way. I think this is an idea well worth exploring and could well propel the UK into the forefront of democracies for trying something new and interesting. I fear however, that it is the last sort of thing that those in power want. With this system, there will be little opportunity for patronage. Worse of all, the second chamber would know more than the politicians in government, we can’t have that! It is a pity really, I fear the reality will be more politicians, more arguing, more cronyism and little in the way of political reform that would genuinely make the lives of UK people better. It would have been nice to have proved Plato wrong on the issue of democracy.

Also: Since I genuinely do not know if this idea has been voice before, I intend to apply some copyright, specifically the Creative Commons Licence below. If people wish to circulate this idea further (with attribution) they are welcome to do so. If they want to discuss it or even to flag up where it or a similar idea has been raised before, again they are welcome to do so.

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.