Taxation and Spending (fiscal) Policy

TAXATION AND SPENDING (Fiscal) POLICY

We need to change the entire

concept of tax,

to a concept of cost.

Summary and Aims of our policy.

We have the simplest fiscal policy in the world. We see one simple answer to the never ending tax and spending debate, everyone pays for exactly what they get, it's just that simple!

How can any fiscal policy have integrity or be acceptable to people, if you do not get what you pay for, why would we ever want such a system? We understand this raises some questions, and many might ask how low earners will afford to pay, however our policies give everyone full opportunity to earn a wage that comfortably meets their costs of the public services they receive along with all their other bills. In summary then the goals of our fiscal policy are as follows:

Simplification of the tax and spending (fiscal) system to a cost based system.
Reduction of wealth inequality.
Accountability: To ensure that what a tax payer pays in, is exactly what they get out.
Transparency: Every tax payer can see easily and exactly, how much tax they have paid, and where it has been spent.

Current unresolved issues.

Our current tax system is one of the most complex in the world, we have numerous taxes, many of which are extremely complex in themselves, such as corporation tax, business rates, and PAYE, and therefore people have little or no accurate knowledge of how they are taxed. Some of our main taxes are as follows: income tax, PAYE, national insurance, VAT, council tax, business rates, corporation tax, inheritance tax, stamp duty, capital gains tax, alcohol duty, fuel duty, road tax, insurance premium tax, dividend tax, tobacco duty, the list goes on and there are over thirty of them!

Once the taxes are collected they mostly get mixed up in a single pot, the treasury. From the treasury, the government then decides how this total tax income is spent on public services, about £1trillion each year or 40% of GDP. We wish to illustrate how mixed up our fiscal system is with an analogy. Imagine that all supermarkets in Britain decided two things; firstly that all prices displayed on the produce were removed, so that no one knows the cost of any food products. Secondly that the supermarkets would decide how much people pay for their groceries, such that some people pay nothing at all, some pay for what they take, and some pay twice as much or more for their groceries than what they actually cost. I think nearly everyone would agree that this would cause endless problems, such as continual conflict about how much people should pay, mistrust of the supermarkets, and chaos in general. I think most people would feel it would be utter madness to run the supermarkets in this way, yet this is essentially exactly how we run our tax system! Given that this way of running the system has existed for centuries if not millennia, not just in Britain, but across the world, it has become a norm that people do not even think to question at all anymore! Would it not be beneficial to operate our fiscal system on a cost based system, in the same way that we operate all other parts of our economy? We explore in more detail the very fundamental problems that our current fiscal system causes as follows:

There is no integrity to our tax system, it lacks any sense of responsibility, and accountability.

As described above taxes are pulled from many different sources, some of which the tax payer receives almost no benefit from, an example of this is business rates as businesses get no services in return for this. Given that nearly all the taxes are mixed up in one pot and then sent to many different public services, this means that everything is being manipulated all the time. By this I mean that government is constantly trying to make one area of taxation pay for another area of spending, that is not related to that area of taxation. So business rates revenue is never spent on benefiting the businesses who pay it, it might be spent on transport, or defence, or social care instead. Exactly the same logic applies to cooperation tax, and companies receive no services in return for this. Where is the integrity in these taxes, what do the businesses get in return for their tax payments? It is also important to realise that business rates simply add cost to products businesses produce, and therefore it is ultimately the consumer that is paying this tax, with little, or more likely no awareness of this, whatsoever? To highlight this point further, there is no mention of any tax on the consumer invoices and receipts we receive when we purchase products. This phenomenon of not getting any direct correspondence between what you pay in tax and what you receive back in public services (or being unaware that you are paying a hidden tax), is a complete lack of integrity, responsibility, and accountability in the tax system. It will always lead to the endless heated fiscal debates and widespread public dissatisfaction with the tax system.

Total disconnection from the reality of tax and spending, resulting in the widescale misunderstanding and disempowering of people:

As explained it is very difficult to understand how you are taxed, unless you are an accountant or similar professional, and it is even more difficult to find out exactly where your money has been spent. We have tried going online and finding these answers, and found it difficult. Because no one generally fully knows how they are taxed and how it is spent, many false ideas regarding tax and spending start to become common.

One idea is that if a public service is offered at no cost, then it is free, clearly nothing is free, someone always pays for it, the tax payer. Other misconceptions are that the government is unfairly withholding funds for itself from public services, or the government is being unnecessarily austere with spending. These ideas are incorrect because generally there is a constant shortage of tax revue for public services, and therefore the government is constantly struggling to find resources. This means everything the government collects in tax, it rapidly spends on some form of public service, and usually more, as debt often rises. Others might believe the government is corrupt and extracting money from the tax system, but we believe the British political system is one of the least corrupt in the world.

Another common false idea is that people sometimes feel the government should lower tax, and increase public spending; this is clearly completely impossible to sustain, even with increasing debt, as it would bankrupt the country, you cannot continue to spend money which you do not have. News on television quite often shows interviews where people are asked what they think the government should do, and they reply for example 'increase spending on health, and lower income tax'. This does not really represent a realistic understanding of the fiscal system, when has someone said 'I want a better health service and I therefore want to pay more tax for it'. This lack of knowledge fundamentally disempowers people in their everyday lives, as it disconnects them from the importance of the tax they pay, and the benefit it brings to them.

As explained another major area of difficulty is endless debate and argument on what money should be spent where. Because nearly all tax is mixed together in one pot, there is no direct correspondence at all between what an individual pays in tax, and what public services they get in return. It is inevitable that this will create endless dissatisfaction for pretty much everyone in the country, and cause ongoing argument and conflict, just as in our supermarket analogy! This dissatisfaction occurs at all levels, the people of Britain argue with and lobby the government to spend more in certain areas, and tax less in other areas. The political parties endlessly argue amongst themselves about how public money should be spent, the wealthy can feel despondent because they can pay far more into the tax system than the cost of the public services they use, and the honest working person may feel they are paying too much also. Those who do not work, can be funded by others, causing irritation to the tax payer, and disempowering them also, as they are not fully motivated to work, and have the pride of it. Possibly the most irritating thing of all is that some of the wealthiest people pay little or no tax, on account of various tax havens, or living abroad.

A final issue with the tax system is inefficiency: It takes a huge amount of resources to collect many different complex taxes, this is inefficient, and costs a lot of tax payers money. Because the taxes themselves can be extremely complex, this also encourages tax confusion and disputes, some of which run into seven figure court cases. The end result of all of this is that no one ends up feeling proud of the tax they pay, and the public services they create for themselves, and there is a general dread of tax, such that most people try to avoid or minimise their paying of it. We do not feel this is a functional position, and we therefore have policies to resolve all of this.

Our Policy - How it resolve the issues and achieves the aims.

There are two simple, basic features of our fiscal policy. The first is to simplify and replace nearly all tax with a cost based system, indeed we want to largely eliminate the idea of tax altogether and replace it with the concept and understanding of cost. The second is to make all collecting and spending of tax traceable and transparent. Essentially our policy is to straighten everything out and then make it all fair and visible to everyone.

We believe that it is an absolute basic characteristic of any civilised and functional society, that everyone has full responsibility, and accountability, these are two of our core Moral Values that we uphold at all times. This means if an individual wants a service, they pay for that service exactly, no more or less than it costs to provide it to them, this is fair. As we have explained this is not the case at all at the moment.

In our system of tax, most of the taxes where people pay something but get little or nothing in return, would be completely phased out over time. Taxes on businesses such as business rates and corporation tax are ultimately taxes on everyone, as they increase the costs of all the products we buy, and we, the consumers, ultimately end up paying for it. The loss in revenue by phasing these taxes out, would be replaced by people paying directly for the services they use. Similarly where people pay little or no tax, but continue to receive public services, this also would be phased out, thus achieving a completely fair tax system. The basic ways we would achieve this is as follows:

Cost based fiscal system:

Health care (£212 billion annual cost): The total annual costs of health care would be divided by the number of people of working age in the country (33 million), and then everyone will pay this fixed amount. This is an entirely fair system where everyone gets full health care, and everyone pays the same amount for it. (£212 billion divided by 33 million = £6,424 per person per year).

Education (£105 billion annual cost): Everyone adult was educated, therefore these costs will be calculated in the same way as health care, so that it is the same amount for everyone. (£3,181 per person per year).

Defence (£55 billion annual cost): Everyone adult is being defended by the British military, so every adult will pay for this cost. (£1,666 per person per year).

Pensions (£141 billion annual cost): Everyone will have an individual government pension pot, which they individually pay into. What ever they put into this pot, is exactly what they get out of it, anyone can go online and immediately see all payments they have put in, and what their pension is currently worth. There is no directing, or spending of this money elsewhere, your money stays in your pot, an entirely fair system. (£4,272 per person per year).

Housing and unemployment (£136 billion annual cost): No person capable of working will receive any benefits, unless they pay for them. Jobs will be made available to anyone out of work at their local job centre mainly from the civil services or local businesses, and with these wages they will be able to pay for all their living costs. This is a key area of our policy which is a result of accountability. We believe everyone should be empowered to create what they want in their life from their own effort, not from other people's efforts. Providing benefits to, or paying people, when they are not working, fundamentally undermines responsibility and accountability throughout the entire country, and is one of the most disempowering things of all, as it takes pride, self belief, purpose, and fulfilment away from individuals. This is something we will never seek to do, as it is completely contrary to our mission statement of Empowering Everyone.

Transport (£44 billion annual cost): Transport will be paid for by the people who use transport, so there will be a tax on fuel, and electric car charging, which exactly and proportionately matches the amount of use a person has of the transport system, and the costs of it. The bus and rail network will be cost based also. This tax will reflect the environmental implications and costs of electric transport, versus polluting transport. Again this tax will not be directed, or spent elsewhere, meaning it is entirely fair.

Policing, and criminal justice system (£44 billion annual cost): These costs will be paid for entirely by people who break the law, not the tax payer, meaning it is entirely fair. See our Criminal Justice Policy. and our Prison & Rehabilitation Policy.

Interest on national debt (£97 billion annual cost): Our policy is to reduce national debt to zero, as we do not believe using tax payers money to pay interest is the correct policy.

Alcohol and tobacco: Currently there are taxes on these products, we would continue with this at a level that correctly reflects the costs they incur. By this we mean the extra costs to the NHS from the adverse health effects of alcohol and tobacco, which would be calculated and then added as a tax to these products, and spent directly in the NHS, and no where else (this would decrease the health care costs quoted below). In this way people have the total freedom to drink and smoke what they wish, but in line with our core values and policies, they will have the full accountability of it also, this is a fair system that has full integrity.

Other services: All the other services we have would all be funded on similar cost based approaches as above, and in these ways they would all be fair and have full integrity.

Tax collection:

Given the system above, the idea of tax is almost eliminated, and instead you have cost. Nearly all the taxes people and businesses pay would be phased out. Most people would not pay any tax at all in general, do we call our electricity or phone bill a tax? No, we call it a cost as we understand that these services cost money to provide. Every adult will receive an itemised bill for their costs of the public services they use, the annual public services bill would look like something like this and be paid in monthly instalments:

Health care £6,424

Education £3,181

Defence £1,666

Pension £4,272

Total £15,543

Many people may find these costs alarming, however the simple fact is that this is exactly what the tax payer is paying on average, it is the truth! This bill puts people in the truth of what things really cost, it means what they pay for is exactly what they get, it therefore has total responsibility and accountability. The public services bill may look like a great increase in tax, but as we have explained, there are many taxes that everyone pays, many of which go unnoticed, and when you reveal the truth of this, you get to the figures quoted above, this is what the tax payer is really paying currently. Most people are largely unaware of the VAT, business rates, and corporation tax they are effectively paying when they buy products and services, and there are many other unnoticed taxes. So people are generally paying much more tax than they realise, this disempowers everyone, as they do not understand what things really cost, and how they are paying for them. We want to change all of this and make the whole system fair and transparent so that people know what they are paying, and they are proud to do so.

In order to pay the public services bill, the minimum wage will have to be raised significantly (see below), people may think that this will put greater burden on businesses and the economy, but again this is not true, as total tax revenue raised is not changing. All that is changing is the way you collect tax, and the transparency of it. Instead of collecting unnoticed taxes that most people are unaware of, all revenue is collected completely transparently on a cost basis. Not only will people be proud to pay in this way, as their costs will be matched exactly by the quality public services they receive, it strongly encourages them to take care of all public services, so that ultimately we pay less for them. This is a crucial part of accountability which we wish to encourage, when we know exactly what we are paying for and how much it costs, we value and take care of that service much more, this benefits everyone.

We will progressively increase the national minimum wage, so that anyone can comfortably pay their public services costs. We believe that there needs to be a greater equity in how we value peoples work, we believe there are many low paid jobs which undervalue the people in them, and there are high paid jobs where people are over valued. We wish to bring this into a more equitable balance, so that everyone is highly motivated and professional in their work, and is rewarded well for it. Parents will be fully supported in our fiscal policy through the early years of their children's lives, see our Parenting Policy.

We would continue to have only two taxes and that would be income tax, and inheritance tax. The starting threshold for income tax would be increased to reflect the restructuring of the fiscal system, so that only high earners pay income tax, most people would not pay any income tax at all. The reason we would continue with these two taxes is because we have a policy of reducing wealth inequality, and discouraging excessive consumerism and consumption, as we don't believe this is functional. We believe it is essential to encourage our entrepreneurs as they drive industry, create jobs, and therefore create wealth for everyone, and they should be rewarded for this valuable service to society, but we do not want to create huge wealth inequality with excessive consumerism, of an ultra rich class. Income tax for high earners therefore must be balanced; not to low, but also not so high that it drives all of the entrepreneurs and their essential skills and ideas, out of our economy. Our fiscal policy along with our other business and economic policies creates an environment which encourages, and makes it much easier, for anyone to setup a new business and be successful, without any tax burden at all, this is extremely important because healthy businesses means more jobs and wealth for everyone. Only when businesses are fully established, and making larger profits will they begin paying income tax on higher earnings drawn from the business by it's owners. A similar policy applies with inheritance tax. Without inheritance tax, very wealthy families can keep passing assets from generation to generation, and keep building more wealth. This encourages the formation of ultra rich dynasties, more wealth inequality, and excessive consumerism. It also can discourage people from pursuing their personal passions and fulfilling their ambitions in life, as great wealth is given to them. Our policy is to allow wealth to be inherited without taxation up to a certain value, but after this to have a balanced rate of inheritance tax.

The final feature of our fiscal policy is public consultation. We wish to place key decisions in the hands of the public. One of the issues we highlighted above, is the constant debates and arguments over how much we spend on public services. We want to resolve these debates permanently, so that the people of Britain get what they want. The way we would do this is by simply explaining what the different parts of public services cost, and then ask people if they want to have these services or not, through referendums. For example, do people want an all inclusive NHS that provides the entirety of all the physical, mental, and community health care people need, and therefore pay the higher costs of it, or do they want a reduced service? The same principle would be applied to pensions, and other services. So we believe it is time we stopped arguing about things like this, and decided once and for all, as doing so will be highly beneficial to everyone.

The move to our fiscal policy, would need to be done progressively in carefully planned stages, so that the shock of change is minimised, and the benefits of change are maximised. Our policy and figures here are very basic, and there are many details we have not explained, such as the step by step plan. However we hope that this makes clear the basic principles of how we will run the fiscal system. All figures at this stage are indicative only as a full analysis of the fiscal system would be premature at this point in our party's journey. A summary of our fiscal policy is as follows:

The change from a tax based system to a cost based system, in which nearly all taxes are phased out over time, and replaced with cost based billing for all public services.
Income and inheritance tax to be the only taxes that remain, income tax threshold to start at £150,000, and inheritance tax threshold to start at £5million, with increasing percentage rates at higher thresholds.
Increase in minimum wage to approximately £17/hour to reflect the restructuring from hidden taxation to cost based billing.
Full transparency of all parts of the fiscal system, see our Transparent Banking Policy and our Public Database Policy.
Public consultation to decide upon key spending issues on public services.
A progressive change from the old system to the new over a period of years, in carefully planned stages.

Achieving the entirety of our fiscal policy, and its supporting policies, would represent a total change in the work and fiscal consciousness of society. Everyone will be fully empowered, they will wake up on Monday morning being eager to go to work, they would be proud of everything they do at work, knowing they will be rewarded well. They will be happy to pay their costs of public services, and have the pride of doing so, knowing that what they pay for, they will exactly get back in quality services. Everyone will take great care of, protect, and value, the public services we have, making them much better places to work in, and use, and we will finally have a fiscal and public services system that everyone is happy with!

Wellbeing and cost benefits of this policy.

We are unable to find the costs of collecting all tax in this country, but they are very significant indeed. For example every council in the country has a business rates office, with numerous people rating buildings and collecting the business rates tax. Additionally to this 66,000 people work in HMRC collecting tax costing maybe £2.5 billion per year, and many other people work in other areas of tax in the civil service. Nearly all of these would go in our system, and be replaced with a simple computer system and maybe 1000 people working in tax collection , see our Automatic Accounting & Taxation Policy. This saves billions in costs for the British people, and the civil servants who are liberated can then do value adding work such as careers in public services, and industry. There would be many other associated cost savings such as accountancy costs, all the costs of tax avoidance, disputes and their resolution, etc. All the many stresses caused by tax collection will be greatly reduced, and people will be happy with the fiscal system, brining great wellbeing benefits to everyone.

Supporting policies.

Automatic Accounting & Taxation Policy

Transparent Banking Policy

Public Database Policy

Fair Minimum Wage

Supreme Law Policy

Parenting Policy

Education Policy

Standardisation & Simplification Policy

Simple World Solutions Policy

Criminal Justice Policy.

Prison & Rehabilitation Policy.