Who's paying the piper for Gordon's tune?

By Carol Barrie on Oct 30, 08 02:57 PM in Tax

There is an old adage, which rings true in many situations, that 'he who pays the piper calls the tune'. Unfortunately in some situations the old adage does not come true and those who pay the piper definitely do not call the tune.

It gave me no pleasure to read in Jonathan Walker's front page article in Tuesday's Birmingham Post, confirmation of my fears that the Prime Minister will indeed be looking to fund his proposed spending spree from future tax revenue's. (See my previous blog)

The fundamental point made in Jonathan Walker's article is that the proposed 10 Eco Towns will be going ahead in spite of the big slow down.

The cost of building one of these new towns (Middle Quinton) alone will cost around £500m. Ministers have not revealed how much of the cost will be met by the public purse but it is expected to run into hundreds of millions of pounds across all ten towns.

The total bill for bailing out the banks and buying our way out of recession just seems to be going up and up. The problem is that eventually the piper will have to be paid.

Gordon Brown has confirmed that the cost will be met by Government borrowing with the money being repaid once the economy picks up and tax revenues rise.

The problem is that pre-recessionary tax revenues were barely sufficient to balance the books. Even if, therefore, they do revert back to those levels it will not give Gordon Brown any spare funds with which to repay the significant borrowings now being talked about.

What therefore is the bottom line on all this?
Significantly increased tax bills!

On the corporate front Government is already faced with other EU countries bringing their tax rates down in order to attract international business. If, therefore, he wants to further reduce UK corporate tax rates, the entire burden of his spending spree is going to fall firmly on the shoulders of the general public.

One way of spreading the load more widely might be 'windfall' taxes on the gas and oil industries; they seem to be making totally exceptional profits at the public's expense.

Government has however, already shown extreme reluctance to levy a windfall tax on the gas industry so it would seem unlikely that we will have any greater enthusiasm, for clawing back some of the recently announced profits in the oil industry.

The current economic downturn was triggered by Banks lending money to individuals who could not afford the level of borrowing that they were taking out. It seems somewhat ironic, therefore, that Gordon Brown now seems to be borrowing more than we can really afford to repay to get the country out of the mess that the same approach got us into in the first place!

Let us hope that Gordon Brown's policy does not backfire on the country in the same way that the Bank's lending policies have backfired on our own and indeed the world's economy!

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anne greagsby said:

DTR funding tied to eco-town plans
Wednesday, October 29, 2008
The government is in line to make hundreds of millions of pounds from the sale of excess MoD land as part of its eco-town plans despite the property market bottoming out it has been revealed.

The troubled Defence Training Review (DTR) is to be largely funded through the sale of excess MoD land as certain estates close down in order to move facilities to the new training site in St Athan, Wales. Recent news reports and revelations by armed forces minister Bob Ainsworth indicate that the sale of excess land will continue to be a key part of the funding strategy for the DTR.

Many of these soon to be vacant MoD estates will be part of the government’s plan for eco-towns. The Treasury stands to make at least £275m from the sales of 15 vacant land parcels, nearly half of which will come from the MoD. Some of these including a site at Borden are targeted for closure as part of the DTR.

Ainsworth told MPs that due to the property market crisis, valuation of the site at Borden was "prudent." While it is unclear how much the government and the Metrix consortium will make off the sale, other sites including the Royal Engineers depot at Long Marston have already been valued. Sources indicate that the Treasury could collect £84m from the sale of the depot by itself to eco-town developers.

Critics of the programme have argued that the DTR is being moved ahead despite widespread concerns over its viability and affordability in order to fund eco-towns and give profits to the Treasury and MoD.

Meanwhile the DTR programme, which is already £1bn over budget and has been forced to develop a new business plan, will not come under investigation from the National Audit Office or Comptroller, yet. Since the final financing agreement has not yet been formulated, the DTR has yet to enter the MoD accounts. Therefore the NAO cannot investigate the programme’s affordability and financing according to Ainsworth.

I am campaigning to oppose a privatised military academy for St Athan - biggest PFI/PPP ever, with arms dealers Raytheon Serco. John Pilger "a British "School of the Americas" is to be built in Wales, where British soldiers will train killers from all corners of the American empire in the name of "global security". Tony Benn said “The thought of privatising the training for the Armed forces was morally abominable”
I thought you might be interested in this article! I would be intere4sted in your comments.

October 31, 2008 5:27 PM