#oct20 – so what is the alternative ?

The TUC protest on October 20th claimed austerity isn’t working. It claimed there was an alternative. It claimed this alternative was workable and realistic.

Firstly – how is austerity not working? Unemployment has fallen for another consecutive month. Youth unemployment fell as well. In fact employment is now at an all time HIGH. Inflation is down dramatically since the coalition came into government. Borrowing figures are falling. Our credit rating has remained at top levels when other European nations saw theirs fall. Confidence in markets has remained roughly in tact – the same cant be said for France where the recently elected Socialist Hollande has caused a chaotic panic amongst investors and business leaders. The UK is on the mend. Austerity isn’t a button you can press for instant results. It takes time. Come 2015 we can judge this governments economic record. I’m confident it wont be as poor as the TUC claim.

Secondly, why the hell was Ted Millington, wait-whats-his-name?!? Ed Milliband there? Addressing a crowd carrying “end all cuts” signs when he himself said Labour would follow through with most of the coalitions spending cuts appears to me like he is protesting against…..himself.

Thirdly, what is this alternative? Tax the rich more? Well, that reminds me of a story my Dad emailed me the other week;

Bar Stool Economics ~ our tax system explained

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100 and If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.)

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your
daily beer by $20.” so drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected…They would still drink for free…But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’…They realized
that $20 divided by six is $3.33…But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer..So,
the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $50 instead of $59 (16% savings).

Each of the six was better off than before…And the first four continued to drink for free…But once outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,”declared the sixth man. He pointed to the tenth man,” but he got $9!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got nine times more than I!” “That’s true!!” shouted the seventh man.
“Why should he get $9 back when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him.

But when it came time to pay the bill, they discovered something important.

They didn’t have enough money between all
of them for even half of the bill!

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being
wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Either way the rally never found that elusive magic money tree and much to the disappointment of bewildered revolutionaries aimlessly walking the streets of Whitehall the government stands another day.

I fail to see what Saturday achieved (bar a colossal policing bill…)

Charlie Winch

(Media & Publicity)

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10 thoughts on “#oct20 – so what is the alternative ?

  1. Do remember that the reason that employment has risen is mainly due to the fact that people are taking huge wage cuts and there are more people working part time or undertaking contractual work (Ie, measures that are completely unworkable in the long run). Full time employment is still behind from four or five years ago. The top line, by and large, are earning the same sums they were four or five years ago.
    Saying the UK is on the mend because they have not had their credit rating diminished is gross over exaggeration , you are talking about a country that entered a double dip recession this year, with output down, household consumption down, investment down and exports down. Any growth announced on Thursday will likely be due to the anomalous instances of the Queen’s Jubilee and the Olympics.
    Spot on about Miliband though. The swine. Go easier on the protesters; social activism has created a more civil society than that in which people lived 50 years ago.

    Also, the bar room analogy is almost too self evidently terrible to warrant a dissection. I’ll invite you firstly to read it back through again and see if you can spot just how stupid it is. If you fail to realise this then I’ll happily provide you with a dissection as to how this is so.

  2. “Socialist Hollande has caused a chaotic panic amongst investors and business leaders. ”

    When he was elected, the French ten year government bond yield was at roughly 2.8%. It’s now 2.2%. This is not an endorsement of all his policies but lets be realistic about panic shall we?

    The bar room analogy has to be the crassest demonstration of economic illiteracy, we’ve seen for quite some time.

    “Tax them too much, attack them for being
    wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.”

    Yes I remember, the likes of Jim Davidson and Paul Daniels saying that if Labour won in 1997, they’d leave the country. Tragically, they’re still here.

  3. Right, where to begin with this economic illiteracy.

    “In fact employment is now at an all time HIGH.” – Well yeah, part time work and people defining themselves as ‘self employed’ (where work is very intermittent) is what’s caused this rise in employment. Tis because most workers can’t find full time work that they’ve resorted to such measures. I would happily provide a link to support this but BUCF has a very long standing tradition of not approving comments on posts that contain links that are different to the author’s argument…so to speak (hell I’m still waiting on approval for a comment I made in ‘Turning the Tide, Part 1’).

    “Inflation is down dramatically since the coalition came into government.” – Nearly. Inflation rose for most of 2011 to over 5%, it’s only in the last 9 months (ish) that’s it come back down to roughly 3-3.5% (I forget exact figure).

    “Borrowing figures are falling.” – Not entirely true. Borrowing was up by £600m in late August. This of course is missing the fact that Osborne will now miss his elimination of the deficit by 2015 by roughly 2 years, despite this being the be all and end all of the Coalition (awkward).

    “how is austerity not working?” – The above aforementioned missing the deficit target in 2015 and the deepest double dip recession in a good long while (again, I forget the exact year).

    Jack’s already dealt with your Hollande assertion, so I wont go into that.

    While the horrendous analogy has been mostly dealt with, I’d like to chip in my own part. Even if the analogy was partially accurate or good, it misses one misses one inconsistency you may or may not have. Now I don’t like to make generalisations, but I think we can agree in the event of a general strike (or hell even ‘the winter of discontent’) many Tory voters/members would regard this as ‘holding the country to ransom’ (again, not trying to over generalise here and I’ve no idea if you yourself would agree with that sentiment). Now leaving the rights and wrongs aside of any such strike, many would consider this as again, ‘holding the country to ransom’, etc, etc. Yet when it comes to the rich threatening to leave the country if taxes are raised too much, that’s apparently fine and dandy and we should then not threaten these ‘wealth creators’. What we have here is a case of special pleading. If someone finds a general strike (or what ever) to be fundamentally wrong, but fails to recognise rich folks threatening to leave country if taxes are raised too high as ‘holding the country to ransom’. That person would be a first class hypocrite. Like I said this may well be an over generalisation, but it’s still a legit point.

    • Firstly, in regards to the comment approval, I’m unaware of that, and if it is true its certainly not intentional.

      Secondly, in regards to inflation I suggest you update your figures a bit Max…..CPI is currently 2.2% and RPI 2.6%, the lowest since Nov 2009.

      In regards to Hollande, his approval ratings have nose dived. He is now the most unpopular French president EVER at the 100 day mark. As for the panic in business he is causing – http://www.telegraph.co.uk/finance/financialcrisis/9610717/French-business-erupts-in-fury-against-disastrous-Francois-Hollande.html

      As for your final analogy I have a few problems. Firstly I feel the case for action for what is taken away from you is far higher than what is given to you. As a libertarian I’m personally not a massive fan of tight boarders, and feel that individuals should be able to move freely. There should effectively be competition between states – if Britain is not the most attractive to an individual they have the right to leave and take their tax money with them. Holding a country to ransom in a similar manner because what is being GIVEN TO YOU is being reduced doesn’t hold it with me. Tax maximization is actually simple math – a smaller percentage of something is a hell of a lot bigger than a big percentage of nothing. Tax policy should focus on maximizing revenue NOT on punishing success and wealth. Statistical evidence suggests a 50p tax rate would actually LOOSE money in the medium to long run. There is no case for it other than egotistical arrogance and class “revenge”.

      • Fair enough on the inflation, I hadn’t checked that in a while.

        “In regards to Hollande, his approval ratings have nose dived. He is now the most unpopular French president EVER at the 100 day mark.” – I’m not entirely sure how that’s in any way relevant to whether he’s doing a successful job or not. I’ve been through this with you before, popular support has absolutely no bearing on whether something is right or wrong, etc.

        In regards to the article you provided, the title is entirely anecdotal. A lot of the problems it mentions (rising unemployment, sluggish growth, etc) are long-medium term problems, it’s only been what, 4 months (once again I forget exact length time) and even less for when Hollande introduced his first measures as President. He’s not had time to have an effect on the French economy either way.

        “As for your final analogy I have a few problems.” – Well, it’s not an analogy, but moving on.

        In regards to your response to my “analogy” I think you got the wrong end of the stick and I didn’t explain this properly. Right now I’m completely leaving aside the rights and wrongs of the 50p tax rate and the rights and wrongs of a hypothetical general strike (etc etc). What I’m trying to say is that if a general strike was called or if we look back upon the ‘the winter of discontent’ malarkey many on the right would regard this as (and maybe yourself, I don’t know, but I’m not going to put words in your mouth) ‘holding country to ransom’ simply because a section of society threatens a particularly damaging action unless they get their way. But when a group of wealthy individuals and companies threaten to leave the UK if taxes are raised and they don’t get their way (and you can’t deny they do), this is regarded by many on the right (and maybe yourself, but don’t think I’m putting words in your mouth) as not ‘holding the country to ransom’. And not only that, but something we consider when shaping policy. Now I’m not saying either action is right or wrong (right now at least). And I’m not saying right now that if either one is wrong that we should take some sort of action (right now at least). But if someone is comfortable criticising one section of society of threatening the country with a particularly damaging action to the wider economy if they don’t get their way. YET, regard a different section of society who also occasionally threaten the economy with a similarly damaging act if they don’t get their way as something we should take into account and shape policy around. That’s called being inconsistent.

        Hope that clarifies things (and makes some sort of grammatical sense).

  4. regarding france, unemployment there is at an all time high, major french business have left or are in the process of leaving because they are going to be taxed at 80%. Hollande promised few/no spending cuts and in his first budget delievered the harshest budget ever. Fritz the diamond jubilee was why we didnt have growth in the previous quater, the olympics helped in this quaters growth figures 0.7% but it is beleived the the economy would have grown by at least 0.2% anyway

    • “regarding france, unemployment there is at an all time high,” – You haven’t seemed to have read any of the comments have you, as I said earlier Hollande’s only been in the job a few months there’s no chance he could have made a dent in unemployment figures in that amount time.

      “Fritz the diamond jubilee was why we didnt have growth in the previous quater,” – For a lack of a better word, that’s complete bull. One day off is not enough to send an economy back into recession, especially one day where in the days before that saw increased sales in preparation for the celebrations.

  5. I don’t have time to respond to everything, al;though Max has covered most of it any way. But I would draw conservatives’ attention to this quote from the article:

    ” “France needs more fiscal austerity right now like a hole in the head,” said sovereign debt strategist Nicholas Spiro.”

    It seems that many of those criticising Hollande are unlikely to be on the same page as most Tories in Britain.

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