Day 30 NaBloPoMo: Tax, benefits and Will Hutton

I can’t get the Will Hutton book out of my head [Them & Us]. I’ve been reading a few pages every night before I go to sleep and he says a lot of things I’ve been thinking for a long time.

The book is about the outcome of the past 25 years of democratically elected government in the UK. It is a critique from a position which is outside the two major parties there- neither Conservative nor Labor, and it’s certainly not in line with those new Democrats who are sharing the helm currently. The theme of the book also matches what has happened in Australia- the left has gone so far to the right, its difficult to tell what they’re in favour of!

I see the crux of the problem, (and WIll Hutton seems to see about the same), as loss of a sense of being a nation or community of human beings. People have become divided into Them and Us- it doesn’t matter if you are the rich Them or the Poor The [or one of the ‘Us’es]. People don’t think of themselves as being part of a whole that includes a whole range of people who, by living under the same government in the same, undivided country have tacitly agreed that the government should try to balance things out between the haves and the have nots. We don’t need any government if we’re going to keep things amongst Us, or they are going to keep everything amongst Them.

Campaign against universal health care

Imagine if a road gets built to the houses with rich enough people to pay for it, but not to the houses who have nobody with enough left over to contribute. In a mixed neighbourhood, which most are unless they are gated, the road would be full of gaps as it passed the houses of the less wealthy people. When the well-off were considering it together, they thought it would work quite nicely, but then they discovered that the nice people next door who had come to their Christmas barbecue for the last 20 years didn’t have enough money left over from their food, mortgage and bills to contribute to road-building. What an affront- they’re certainly NOT going to invite them next year!

We elect governments because they can organise building a road with no gaps by balancing out the contributions of everyone through taxation. Then we are all happy to have a smooth road to drive on, whether we drive a new Lamborghini or an old Volkswagen.

In Hutton’s book he says we have forgotten the real meaning of fairness, so that different groups of people think their ideas are fair, but the ideas of others are not. Everyone protests about possible solutions to funding things by saying “it’s NOT FAIR”. When governments and big polling companies like Gallup and Nielsen do surveys to ask people who should pay taxes and how much according to their current income and jobs, they are really looking for clues to what people might accept from the government.

I think those polls have been asking the wrong questions by not including all the players in the fairness scenario. They tend to ask people “Should people on high salaries, like company directors and medical specialists be asked to contribute more to funding the… (whatever system, eg. health, roads, communications, electricity supply, unemployment benefits), than people on low incomes, eg. cleaners, road labourers, laundry staff.”

I think they should be asking people what the balance should be among contributions by Them, Us and the government itself. Then the pollsters might see that many people, who answer that well-off people should not have to contribute too much more to taxes than they do already, will nominate that the GOVERNMENT should do more instead. What they’re saying is that they don’t understand where a country raises its revenue in order to pay for services for all of us. Personally, I’ve spoken to a lot of people over the years who say “the government should pay for better roads” and “the government should use the health money better than it does” or “the government should pay all the expenses for my grandma’s hip replacement because she’s been a good wife and housekeeper all these years”. People seem to think the government has a magical pile of money that keeps being topped up, no matter what public cause it is spent on; they don’t seem to realise that a government can only expect to collect a fixed amount of revenue from the citizens of the country every year and must borrow the rest on the open market when things are not balancing up in the short term. Then the government has to keep up services the next year AND pay off the loans at the same time- like some people take out a second housing loan for an investment property, but then have to find the money to keep paying off both loans even when they’re not getting rent from the investment.

So the idea of fairness being subjective doesn’t work in the real world of politics and government- it should be something that most people can agree on, or at least not grumble too much about, and it needs to apply to everyone and everything. If you think it’s not fair that your government only pays $X per week as unemployment benefits, you had better rethink your stance on not asking rich people to pay proportionally MORE in tax than poor people. They’re certainly not going to be able to raise all the extra from poorer people, as although there are far more of them, the poor are more likely to become unemployed and need the benefits paid to them instead, because the rich are feeling the pinch! The rich are going to resist mightily becoming unemployed themselves! But if they do become unemployed, most have investments which can pay them a “wage”- but the investment then starts to fall in value, which they’re not very happy about.

On the other hand, the leftists who are currently rather unpopular, think it is natural for the rich to pay heaps more tax, until their incomes are much closer to the poor. This used to happen in Sweden where the richest paid 98% of their raw income in tax! I’m not sure how it works there now- please comment!  I certainly think that the income of the highest paid person in a country should not be much more than about 7 times the lowest standard wage. If only there was a way for a government to enforce this- then they’d say it was a dictatorship, not a democracy- it’s all too hard!! If you ask most high salary earners in the current economic climate whether they deserve what they get (eg. the CEO of the Westpac Bank in Australia) they say of course they do as they are the ones who have attracted the big investors to their funds and they have developed systems for making sure everyone who uses their bank pays decent fees for the service. Many other people, including me and Will Hutton, say that NO ONE is worth 100s of times the salary of the lowest paid worker in their organisation. For instance, there is the Westpac CEO who earns around $10m per annum and her lowest paid worker, say a lower grade clerk with 2 years experience would earn $33 800. The CEO earns 296 times the salary of the clerk. The bank says their CEO is a great manager and earns her salary. I’m sure the clerk is good at her job, too. Is this fair? I don’t think so and I think something needs to be done about it. It’s case of extreme Them and Us and it’s just NOT FAIR!!

I really get on my soap box when people talk about paying for health care. Lately lots of people, whether journalists, doctors, members of the public or economists have been saying in horrified tones that “they’re going to start RATIONING in health care”.

Health Rationing Video

Maybe this sounds devastating to you as well! But come back to earth people- given the above model of the government collecting a fixed amount in taxes, then dividing the booty between different areas or portfolios, roads get a pile and health gets a pile. The pile is fairly limited, although with unexpected windfalls in other areas, a government can “top up” health from say- mining taxes. If you have a fixed amount and you have to estimate how much each citizen will use from the pile in an average year, you are RATIONING the health dollars.It has always happened and it always will- why are people getting so worked up NOW, when health spending is the highest it’s ever been? You tell me.


I’ll leave my rant on so-called rationing of healthcare to another post! Come on, get stuck into me!!


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