As soon as the money supply was checked house prices had to fall
and there had to be a recession. If property prices collapse
so will the UK banking sector.


6. What is the tax burden?

Everyone who is in full time employment pays Income Tax and makes National Insurance Contributions. The average person is conscious that they can be paying over 40% of their direct income in this way. However all taxes eventually fall on the end user. Companies do not print money they just collect money for the State. When a product or service is purchased all the Income Tax and the National Insurance contributions of everyone in the supply chain are added to the cost of that item. It can also be argued that they are also carrying the Employer's National Insurance contributions as this is money that could be going to the individual if it was not going to the State. In general terms Income Tax and personal National Insurance Contributions now absorb 36 per cent of the average family's income, compared to 34 per cent last year. For high earners the taxman now takes 37 per cent of income, compared to 36 per cent a year ago. If Employer's National Insurance contributions are then added the total direct tax figure exceeds 42%. As about half of the value of goods and services in this country consist of labour and over 40% of that labour cost is Income Tax and National Insurance payments, at least 20% of every product that is purchased is personal tax which has to be added to the total tax bill of any given individual.

The remaining half of the value of any goods or services bought by an individual carries Corporation Tax, business rates, and the various industrial levies which are also passed down the line to the consumer. Combined with business taxes these represent 30% of the 50% of all the goods and services that are not labour. About half the goods and services in Britain carry VAT at a rate of 17.5%. In other words the cost to every person over a year is an additional 9%. In aggregate these taxes means that the total amount of tax that an individual pays is about 84%. Even a person living on a pension is paying about 45% of their income as tax. This figure can be confirmed by looking at the amount of money that is described as State as oppose to private expenditure. The official Government figure for State expenditure as a component of GDP is 42% but this number is achieved by allocating certain items that are clearly the responsibility of the State to the private sector. If the State is in reality responsible for 45% of GDP and the State only spends 'tax' money then the total level of taxation has to be 45% of the 55% that remains or 82%. This is the reason why even a small shift in the price of a commodity on the World market results in such a large shift in the cost of a product. It is the Tax Multiplier Effect. If the price of the wheat that is to be used to make a loaf of bread rises by one penny the price of the finished loaf has to rise by five pence.

There is then the matter of costs forced on business by the State which have to be passed onto consumers. The cost of fulfilling Government regulations and other costs such as minimum wage, equal opportunities, compliance issues etc, place a huge strain on all businesses. Town and Country Planning regulations are a "tax" on everybody and every business because they force up the cost of doing business and the cost of living. An inadequate transport infrastructure adds cost. Even the contributions that a business makes to its pension fund are effectively a tax as far as the individual is concerned.

In the West there are efforts being made to fix carbon dioxide and to store it but this is a very expensive undertaking and will effectively become another tax on British consumers. As the energy demands of the East will continue unchecked it is also a futile gesture. The best it can do is to postpone the inevitable for a year or two. Carbon trading may be very profitable and exciting for some people. However it is pointless and was clearly advanced by people with little awareness of human psychology or biology, and for that matter the parlous state of the economies of the Western Nations. It is a game that can be played in the short term but in the long term it is just that - a game with a considerable cost that will be placed upon Western consumers just as their financial resources are exhausted. Such activities are just another form of 'tax' as far as the consumer is concerned.

The Liberal Democrats keep talking about increasing tax to pay for worthy causes but not many people have a lot of purchasing power left. The inability of British politicians to realise that their actions are just accelerating the collapse of the economy is very worrying.

The natural disparity in incomes and tax allowances means that 50% of all the income tax paid in Britain is paid by 10% of the working population and 80% by 20% of the working population. In other words half the working population pays so little income tax that they can almost be ignored from the equation. This shows how desperate the British Government was when it tried to raise additional revenue by eliminating the 10% basic income tax band. It demonstrates that the notion that maintaining the number of people in full time employment will provide the wealth to care for the elderly is nonsense. It also shows the danger to the country if the British Government were to create a financial environment where multinational companies felt obliged to relocate their headquarters outside the UK. Raising the level of taxation on at least some of the top wage earners would have a similar catastrophic effect.

If successive British Governments had always referenced the economy back to the true rate of inflation over the last forty years wages would be double what they are now and young people would be able to buy a home as they were able to in 1975. However the Government would not have been able to take on all the additional liabilities that it has or to support all the extra pensioners that there are to the standard that they have been accustomed to. More seriously for the Government it would not have been able to demonstrate a continuous improvement in the standard of public services for the general population. As a result it has used the resources that should be available to today's young to boost the standard of living of their parents and grandparents. The outcome of this cynical behaviour is that governments across the Western World have ensured that the bulk of today's pensioners were able to get to retirement with an ever increasing standard of living largely paid for by today's younger generation and by sacrificing the future of their countries. What has been going on has been hidden behind a wall of misinformation made possible by the lack of scrutiny by any group in society and aided by a pliable media.

Published: August 2008