Tax Freedom Day was yesterday

So, yesterday was the day on which we stopped working for the government. Put another way, as the Adam Smith Institute does:

Brits work 150 days of the year solely to pay taxes; every day from 1st January to 30th May.

That is, in fact, a day longer than we worked in 2014 and a month longer than they do on the other side of the Pond, where Tax Freedom Day was on April 24.

There is a little bit of good news:

Cost of Government Day, which represents Total Managed Expenditure as a day of the year, falls on 29th June, three days earlier than it fell in 2014. While this suggests a slight improvement over last year, the money borrowed to cover the month-long gap between Tax Freedom Day must eventually be paid off with future taxes.

Those tax cuts are badly needed for the economy and before anyone tells me that tax cuts will mean the government will not be able to afford the great many things it tries (very badly) to run, I may say that it is high time we re-thought what ought to be the state's competence.

They know less than they should

Lord Flight asked a very pertinent question in the House of Lords:

how many people are employed by the European Union institutions; and what assessment they have made of how many of those individuals pay either no tax or reduced tax rates on their remuneration.

Lord Wallace of Saltaire responded on behalf of HMG:

My Lords, the European Union institutions all together employ approximately 55,000 people. EU staff are exempt from national income tax, a similar situation to that found in other international bodies. As in other international bodies, the EU deducts a proportion of salary as a form of extranational taxation, proceeds from which are returned to the EU budget. This is applied progressively, rising from an initial 8% to a 45% marginal rate for the highest-paid. In addition, there is now a special or solidarity levy, which last month was increased from a top rate of 5.5% to 6%; most officials pay an average of 2%. I should declare an interest. My wife was for five years the director of the Robert Schuman Centre in Florence, whose staff regulations were those of the European institutions. We have examined her payslips and established that an average of 28% of her gross salary was deducted in community tax each month.

To the suggestion that civil servants who work for the EU should be taxed at the home rate back home he went into a long discourse about international organizations, residency and non-residency. The next topic raised, by Lord Tomlinson, was an old and tired one and shows that some of our politicos cannot or will not understand how the EU works.

Is the Minister as surprised as I am by the low number of European Union institution employees? How does that figure-I think he said 55,000-compare with a large-scale local authority in the United Kingdom?

The response was:

My Lords, the figures I have are that Paris employs 50,000 people and Birmingham employs 60,000 people, so it is a relatively modest number.

That merely proves that local authorities employ far too many people and some very severe pruning is needed. There is, also the point, rarely raised at times like this that those employees of local councils (and of many other organizations, public and private) spend much of their time implementing EU regulations. However, Lord Wallace went on:

I am sure the noble Lord will admit that the inefficiencies of the Commission-in particular, the rather inadequate personnel policies, the relatively generous allowances and an expatriate allowance which, unlike the NATO expatriate allowance, does not phase out after a number of years and is rather more generous-are things that we should be looking at, particularly when all national budgets within the European Union are being squeezed.

Uh-huh! Well, good luck with that. It would appear that quite a few people, not just the usual suspects are troubled by the expensive nature of the project. Lord Dobbs asked:Will my noble friend help a confused man who has trouble with numbers? We have one

European Union which has two parliaments, three presidents and dozens of employees who earn more than our Prime Minister. I understand that the second parliament in Strasbourg, over the course of the parliamentary cycle, costs our taxpayers €1.5 billion. Do any of those statistics make any sense to him?

Apparently, we all keep campaigning for abolishing the Strasbourg part of the merry-go-round but, so far, with no success whatsoever. That has something to do with the fact that the Strasbourg week was written into the Treaty of Amsterdam and has remained in the subsequent ones. Nobody noticed at the time and nobody is going to be able to change without re-writing the treaties.

That was the last moment of serious or semi-serious (can anything that involves the European Parliament be called serious?) discussion. The following two farcical exchanges took place:

Lord Pearson of Rannoch: My Lords, what is the average annual cost to the taxpayer of Members of your Lordships' House and what is the average annual cost to the taxpayer of Members of the European Parliament, including all the latter's special perks and allowances?

Lord Wallace of Saltaire: My Lords, it may surprise the noble Lord, but I do not have the exact figures to hand. Of course, any international parliament costs a great deal more because of the travel, dual residence and so on that are involved. Members of this House who also attend the Parliamentary Assembly of the Council of Europe or the NATO Assembly also cost rather more than the rest of us.

Lord Howell of Guildford: Does my noble friend have any figures on the European External Action Service? Has he noticed recent criticism that it is not performing very effectively? Does he have any measure of cost versus performance for that body?

Lord Wallace of Saltaire: My Lords, I do not have that. The European External Action Service is still very much in its early stages. It is now performing rather better than when it was originally established. Multinational operations take longer to get going than others-I am looking at various people here who have served in the European Commission-and have a level of built-in efficiency.

One cannot help longing for the days of Lord Bruce of Donington. After an exchange like this he would invariably rumble to his feet and ask whether the noble Minister was aware that he had the figures that the Minister apparently did not. Alas, who is there to replace the great Lord Bruce? Incidentally, he it was who demanded information about the nascent EU diplomatic service and the money that was spent on it, long before its existence was acknowledged.

We have some way to go

The Adam Smith Institute reminds us that today is Tax Freedom Day in America. Of course, in some states (the more successful ones) that day came a little earlier in the year and I am not convinced it has yet hit New York or California. The ASI says:

Today, average Americans, who have been working every day for the sole benefit of the tax authorities, can finally have a beer and rejoice that, for the rest of the year they are working for themselves. It means Americans have to work 107 days of the year to earn enough money to pay this year's federal, state and local taxes.

Well, lucky Americans. For we have a way to go before we can start working for ourselves.

Tax Freedom Day in the Britain, calculated annually by the Adam Smith Institute, does not come round for another six weeks – not until the 29th of May, to be precise. That means the average person in the UK will spend 149 days this year working for Chancellor George Osborne's tax gatherers. Including the extra Leap Year day, that is two whole days more slave labour than last year, when Tax Freedom Day fell on the 28th of May. (According to the Treasury's adjusted figures.)

We also have a government that believes that the money we earn rightly belongs to them and anything we keep is a sign of their generosity. So, I suppose, we should be grateful that we have a Tax Freedom Day at all.

These are NOT voluntary organizations

I spent part of yesterday in journeying to and from Oxford and reading an elegantly short book edited by the highly distinguished Tom G. Palmer (full disclosure: he is a friend of long standing and we both love cats), entitled The Morality of Capitalism.

The essays are uneven but I do recommend the book to all either because they might find pithy arguments to back their own opinions or because they might find it interesting to read arguments that oppose their opinions and undermine their emotions. As John Milton, one of this blog's patron saints, explained some centuries ago, one reason why speech must not be controlled is because even people who are in the right (and he thought there were people in the right) need to be able to test their opinions against opposing ones.

I shall try to do several postings about the book and the various essays, some more critical than others and some that will use the essays as a starting point, a little like sermon texts. (Yes, you can stop reading now, if you wish to.)

Today's "text" comes from David Boaz's excellent piece Competition and Cooperation (on page 31), which argues the to me irrefutable point that a free economy (not the crony capitalism and regulatory statism we have) relies on competition but cannot exist without co-operation that involves our free participation.

In particular, the author differentiates between all organizations that are "voluntary", whether they are businesses that need to make profits or charities that do not, and those created by the states, who, obviously enough, enforces our participation in them.

Some analysts distinguish between commercial and nonprofit organizations, arguing that businesses are part of the market, not of civil society; but I follow the tradition that the real distinction is between associations that are coercive — the state — and those that are natural or voluntary—everything else. Whether a particular association is established to make a profit or to achieve some other purpose, the key characteristic is that our participation in it is voluntarily chosen.

This clarity of division has been muddied, probably deliberately, by the change in terminology. The trouble, particularly in Britain, lies with the expression "voluntary organizations". In many cases this term has replaced the old word "charity" as the bodies in question are not precisely charities: they do not raise money from private donors, either individual or corporate, for specific and clearly understood aims. Instead they receive money from the state. They are not, therefore, accountable to the donors in the way they spend that money, pursuing a particular charitable purpose.

In fact, they are, despite their preferred description, not voluntary organizations. As they are funded by local or central government with, in the case of the larger ones, the occasional grant from some transnational body, they are actually part of the state machinery and rely on hand-outs that are taken from that patient milch-cow, the taxpayer, whose participation in the funding is far from voluntary. They are also, controlled in their aims and activity by the state, its minions and its political ideas.

The subject has been much in evidence in the fairly vehement discussions in my borough, where the Council has managed to reduce local tax for the third year running without, they say, reducing essential services. So far as I can make it out, they are not wrong though there is some debate going on about Meals-on-Wheels. As I don't know the rights and wrongs of it, I cannot comment.

I can, however, comment about another and far more vociferous complaint. It seems that the Council has saved money by cutting back on its grants to "voluntary organizations", who appear unable to function without hand-outs from taxes, and by selling a rather fine but somewhat dilapidated building where a number of these organizations had offices for which they, presumably, paid no rent. The building is going to become a free school, which is yet another good idea.

Over twenty "voluntary organizations", we are told in tones of horror, will have to close. What will happen to their clients? Well, what indeed.

My immediate question was about the number. Why on earth do we need that many "voluntary organizations"? After all, if twenty-plus will close, many more will remain open and functioning at the Council's that is our expense. Do we really have that many different vulnerable groups who need all this help? Is there not, perhaps, some overlap between the various groups and their activity, with money going out more than once for the same purpose? Could they not, perhaps, be inventing problems and vulnerabilities in order to survive and keep claiming money?

Neither I nor anyone else knows the answer to those questions but I strongly suspect that if these organizations were really voluntary (and there is nothing to stop them from becoming that now); if they had to present proper plans and well defined aims to potential donors and be evaluated by the people who might voluntarily give them money rather rather than tick boxes on forms created by local councils and civil servants on the basis of their own priorities, we would find out those answers. We would probably find out exactly how useful these "voluntary organizations" are to anyone except the people who work in them either for money or for free.