Country has been living well beyond its means

Joseph Bulmer

SIR - I smiled at the Communist Party’s letter in October 27th’s Gazette saying there was no need to slash services. Unfortunately, they seem to be living in another world!

The country has been living well beyond its means and we have to bring things back to reality or face an even worse future.

The explosion of public sector jobs under Labour (1 million extra) without them being funded, as well as the situation which saw us spending more on benefits alone than was received in tax revenues earlier this year (for the first time ever) couldn’t continue but even with the projected cuts, government spending will only be back to 2006/7 levels and we’re still borrowing billions extra, every year.

Do they really think that one in three households in the South West now on benefits is a good legacy from a profligate Socialist policy? I don’t, it’s demeaning to those very people who need help and just printing ever diminishing-in-value cash to pretend it’s alright is no solution.

As for taxes on the rich, the problem is that the higher the taxes go, the more those suffering them do their utmost to avoid paying them (avoidance is quite legitimate, remember, that’s financial actions encouraged by government as being beneficial to the State and rewarded thus in the tax system) – studies have shown that the best way of collecting most higher rate income tax is to charge a top rate of about 40 per cent which is enough to not disincentivise people from taking risks to create wealth and jobs for others and not to go out of their way to try to reduce their overall personal tax burden.

We have already seen some companies relocate to Switzerland for the lower tax regime – we don’t gain the extra two per cent or so tax we hoped for from an increase and instead, we lose all the tax they would have paid otherwise. Some higher rate taxpayers who can do their trade from anywhere in the world will go too and we’ll lose all their tax (and supported jobs) – and their spending in our economy (and VAT and so on). That’s not a good policy.

As for the banks – is it because ‘we all’ enjoyed the party funded by them that we’re in the mess we are – far too big loans on home values which were pushed to ludicrous levels and a State sector based on this artificial growth and now we’re all paying for it.

Who wanted to regulate the end of the party where ‘we all’ enjoyed the spoils? It may be an unpopular thought but it could well be the financial sector (primarily in the City, which still has a major international significance) which again comes to all of our rescues in this country – as it thrives again and starts making profits and paying lots of tax.

So, don’t try to drive them overseas by oppressive tax levels because that’s what will happen (more). Mr Sables tackles the monopoly industries – if they put their prices up to pay his monopoly taxes then it will be the poor who suffer the most as these are mainly utility companies. It’s common sense really, not capitalism versus Communism. Greece is now paying almost 11 per cent for its ten year government debt so we don’t want to ‘slip’ like that – and where’s Cuba’s economic miracle, Mr Sables? Up with the puff of smoke of those unhealthy Cuban cigars, I suspect!

Philip J Milton,