Beginning to See the Light: ‘….and we don’t care’

 

‘Oh don’t pretend ‘cos I don’t care

I don’t believe illusions ‘cos too much is real..’

 
It will come as no surprise that this week we start with the PMs attempt to financially rescue both the NHS and social care. Before looking at his proposals there are several other points that need to be made.

Firstly, whilst C-19 has ravaged both the NHS and social care, the damage to both has been ongoing since the Cameron/Osborne excuse for a government, and their enforced austerity policies.

Secondly, the need to break manifesto promises to raise the requisite funding. Governments have broken, or failed to deliver manifesto promises for as long as I can remember, so what? At least this is a worthy cause.

The final point is how it is to be funded. Running the country is little different to running a household, expect it has rather more noughts. You have X amount of income and Y number of areas to fund. If you want to spend more on one you either reduce spending on another or earn more. As such. I simply cannot understand all the angst about increased tax. We all agree it’s needed; we all stand to benefit from it, what’s the problem?

Despite this are two very real issues.

Firstly, we aren’t very good at collecting taxes. Ordinary people will be hounded mercilessly should they be late in paying their taxes or underpay. However, for the few who are sufficiently wealthy there are myriad schemes for them to mitigate the taxes they pay. Of course, they are usually Tory donors so there is no compunction to close these loopholes.
 

‘Ordinary people will be hounded mercilessly should they be late in paying their taxes or underpay’

 
Another example are large corporates who, whilst doing billions of pounds of business in the UK, appear to make no profits here. For example, Amazon, who’s UK business paid just £3.8m more corporation tax last year than in 2019, even as sales increased by £1.89bn.

Accounts filed this week show that the corporation tax contribution paid by Amazon UK Services (the group’s warehouse and logistics operation) was £18.3m in the year to December 2020, up 26% from £14.5m a year before.

Profits at the division rose by a quarter over the same period to £128m, while sales soared by 64% to £4.85bn.

Amazon’s total 2020 revenues in the UK, from retail, logistics and IT services were £20.63bn, approximately double the takings of Marks & Spencer, an increase of slightly more than 50% from £13.73bn a year before.

The bulk of their UK income goes via Luxembourg, where there is a ‘loss-making’ subsidiary that not only doesn’t pay tax, but also generates enormous tax reliefs that can be used in the future to ensure that little or no tax continues to be paid. Their latest corporate filings in Luxembourg revealed that the company collected record sales income of €44bn (£38bn) in Europe last year but did not have to pay any corporation tax to the Grand Duchy.

It must be noted that Amazon contribute to the UK economy in other ways, e.g., last year they invested £1.6bn in the UK, up from £690m the year before, and employs >55,000 people in the UK, including 10,000 jobs created this year. However, this expenditure is only there to meet rising demand, which equals more revenue but, unfortunately, only little more tax paid.

In fact their demand for staff is such that they are offering £1,000 signing-on fee’s.

Anita Astle, manager at Wren Hall care home near Nottingham, has lost two staff recently to Amazon, and six to better-paid jobs in the NHS, where vaccination is not yet mandatory, and four who quit because they do not want to have the jab. An evening housekeeper on £9.30 an hour left to take a job picking orders in the Amazon warehouse on £13.50 an hour.
 

‘An evening housekeeper on £9.30 an hour left to take a job picking orders in the Amazon warehouse on £13.50 an hour’

 
Three-quarters of care home operators are reporting an increase in staff quitting since April, the key reasons being a desire for less stress and for higher pay, and to avoid mandatory vaccination, which comes into effect on 11 November.

41,000 care home workers in England have still received no vaccine at all, according to the latest NHS data released last week, and 18%, or 87,000, are not yet double-vaccinated. In the last recorded week, only 3,459 carers received their second dose, which means less than half of the remaining staff will have been vaccinated by the deadline, unless the rate picks up.

There were already estimated to be more than 120,000 social care vacancies before the pandemic and the government last month calculated that in a worst-case scenario as many as 68,000 care workers could be lost as a result of the decision to make vaccination a condition of employment in care homes.

Let us now turn to the proposal put forward by the PM yesterday.

From April next year, a 1.25% increase in employers’ and employees’ national insurance contributions, and a 1.25% increase in share dividend tax, will generate an extra £12bn in taxes each financial year: £36bn over the three remaining financial years of this parliament. This will be referred to as a ‘health and social care levy’, as distinct from income tax and NIC.

Of this £36bn, the NHS will receive £30.6bn extra. This follows the health secretary, Sajid Javid’s, announcement on Monday of an additional £5.4bn for the NHS for the remainder of this current financial year to address extra Covid-19 and backlog costs.

Whilst the additional taxes break the promises made by in the Tory’s 2019 election manifesto, it does go toward delivering on two other promises Johnson made on his first day as PM:
 

1. ‘My job is to make sure you don’t have to wait three weeks to see your GP, and we start work this week with 20 new hospital upgrades, and ensuring that money for the NHS really does get to the frontline.’
2. ‘My job is to protect you or your parents or grandparents from the fear of having to sell your home to pay for the costs of care, and so I am announcing now – on the steps of Downing Street – that we will fix the crisis in social care once and for all with a clear plan we have prepared to give every older person the dignity and security they deserve.’

 
In fairness to the PM this a positive step forward, unfortunately between 2010 and 2019, the NHS had the lowest period of financial growth in its history, meaning that even pre-Covid, NHS waiting lists had increased.

In addition, an attempt to try and maintain patient care by cutting expenditure on capital projects and maintenance has led to backlogs.

I will leave the minutiae of the social care spending reforms to other columns, except to say that the reforms are in-line with what Johnson promised, i.e., preventing people having to sell their homes to pay for their care. As such, it will disproportionately benefit wealthy older people.

In addition, C.50% of social care is for working-age adults: for these people, the proposals offer very little.

To put things into proportion, the 2019 Health Foundation report, ‘What should be done to fix the crisis in social care?’, points out that restoring the access to care services caused by austerity-era cuts to local authorities’ government grants would cost £12.5bn.

As with much that emanates from this government there is little substance to the proposals which are full of ‘can aim to’, ‘should’ and ‘could’, but short on details such as how the quality of current social care provision will be raised, or on how pay and conditions for staff will be improved.
 

‘it’s well intentioned, providing sufficient funding for the NHS to make a decent start on the backlog, but insufficient to improve social care’

 
In summary, it’s well intentioned, providing sufficient funding for the NHS to make a decent start on the backlog, but insufficient to improve social care. As to the plan, what plan?

Returning to the method of funding, the NIC increase, many people have their concerns about the fairness of this.

Firstly, prior to the pandemic, real pay was still below the peak it reached under the last Labour government. Conservative-led governments have delivered a lost decade for earnings, especially for the young.

Secondly, it is hard to support a plan that means young working adults are contributing to increased health and care spending while anyone over the state pension age is exempt as they do not pay NI, even if they are still employed and whatever their earnings and wealth. In addition, NIC is charged at a higher rate on lower earners, therefore it is a regressive tax when compared to income tax.

With wealth and assets, above all residential property, disproportionately concentrated among older people, it would seem unfair to be placing further demands on the young while exempting the rich. The key to dealing with the question of who should meet the cost of looking after us when we are unable to look after ourselves must be fairness.

Of course, politically, the old and rich are more likely to vote Tory, whereas the young predominantly vote Labour. Just saying, like!

Which brings me rather neatly to the governments Election Bill. Or, as Angela Rayner succinctly put it, ‘copied and pasted straight out of the Donald Trump playbook – is a blatant attempt to rig democracy in the favour of the Conservative party by suppressing votes, gagging organised opposition and neutering our independent electoral watchdog.’

The bill aims to introduce voter ID which, the government argues, would combat voter fraud, begging the question, what voter fraud? For all UK elections in 2019, including a general election in which 32m votes were cast, there was just one conviction for voter ‘personation’.  US civil rights groups have warned that the government’s voter ID plans will ‘allow politicians to choose their voters’ as the new measures would disenfranchise millions of voters.

In addition, the bill introduces complex rules around financing ‘joint campaigns’, which will likely have the effect of disincentivising bodies such as trade unions, charities, civil society groups and campaigners from fighting for the same demands as political parties. As the Committee on Standards in Public Life said in 1998, ‘there is absolutely nothing wrong with individuals and organisations engaging in such activities [political campaigning]. On the contrary, a free society demands that they should be able to do so, indeed that they should be encouraged to do so’.

Alongside the government’s policing bill, which seeks to impose authoritarian limits on peaceful protest, this seems to be a concerted effort by the government to silence any communities or workers who seek to hold them to account.
 

‘a concerted effort by the government to silence any communities or workers who seek to hold them to account’

 
The government watchdog, the Electoral Commission, whose role is to upholds electoral law and safeguards the integrity and transparency of political parties’ finances, has come under attack. The elections bill seeks proposes to undermine the commission’s role ending any semblance of independence. Coincidentally, the commission is still investigating the financing for the redecoration of Johnson’s Downing Street flat.

Finally, the bill will also carve a loophole into existing political donation laws to allow donors who have lived overseas for decades to bankroll campaigns. The only possible motivation for changing this law is to enable super-rich Tory donors to funnel cash into the Conservative party from their deckchair in an offshore tax haven.

We finish this week with some comments from an article written by the author Dame Hilary Mantel, twice winner of the Booker Prize.

In response to a question about Priti Patel’s rhetoric on migration and asylum seekers and whether it marks the ‘ugliest side of the new ‘global Britain’ post-Brexit’, the writer told the Italian publication, La Repubblica: ‘We see the ugly face of contemporary Britain in the people on the beaches abusing exhausted refugees even as they scramble to the shore. It makes one ashamed.

‘And ashamed, of course, to be living in the nation that elected this government, and allows itself to be led by it.’

The interviewer asked about Boris Johnson, and whether she agreed ‘that he has a much more complicated personality than the stereotyped ‘Brexiter/buffoon/etc’’

Mantel responded, saying; ‘I have met him a number of times, in different settings. I agree he is a complex personality, but this much is simple – he should not be in public life. And I am sure he knows it.’

When asked about whether Britain’s ‘soft power’ could be sustained, she said: ‘Our present government sends mixed signals – boasting of ‘global Britain’, while at the same time diminishing the country’s standing by cutting foreign aid, as if this was a broken little country that couldn’t afford to keep its promises.’

Saving the best to last, when asked about our supposed obsession with the monarchy she said: ‘The popularity of monarchy as an institution is something that baffles me. I don’t want to think that people are naturally slavish, and actually enjoy inequality ‘

Need I say more.
 

‘You’re stumbling in the dark

You’re stumbling in the dark’

 
In his first speech on the steps of No10 in July 2019 Boris Johnson announced that ‘we will fix the crisis in social care once and for all with a clear plan we have prepared’; in this week’s article Philip seems broadly supportive that there is a plan to raise the funding, if details of a ‘clear plan’ are a little sketchy.

Inevitably when the Chancellor rattles the tin – although Boris is clearly taking the lead on this one – the tax affairs of companies such as Amazon are called into question, as is the ability for the super rich to shimmy around any such initiative; that is all the more galling when such vast sums have been trousered by those granted VIP access to government cash.

In a particularly testy exchange LBC’s Nick Ferrari justifiably quizzed health minister Sajid Javid why a cash raise was necessary when according to the propaganda at the time Brexit would free up £350m a week to be ploughed into the NHS; in response, the government played the ‘pandemic card’.

This government’s populism is a recurring theme, as is the pursuit of power at the cost of almost any hollow promise; The New Statesman clearly thinks that the ‘1.25%  manifesto breaking tax hike’ does little to pander to those who ‘lent’ Boris their votes – ‘If you live in the north or earn under £50,000, you’re going to get the worst deal from the government’s social care reforms’.

Coupled with a suspension of the triple lock on pensions, this could be seen as quite a week for mudslingers motivated by broken election promises; admittedly the circumstances have been exceptional but many would have preferred something a little more spunky than Sir Keir’s meek acquiescence.

Whether the additional funding can deliver an effective solution remains to be seen; imposed as a ‘regressive’ tax the levy is unlikely to alleviate tensions between young and old.

Elsewhere the Elections Bill is variously being seen as a clampdown on election fraud or a further erosion of civil liberties – you pays your money and takes your choice; one thing’s for sure, Dame Hilary Mantel will have an opinion, particularly if, as announced yesterday, Priti Patel starts towing dinghies back to France.

Two tracks this week, those naughty boys the Sex Pistols and ‘Pretty Vacant’ and Massive Attack with the haunting ‘Teardrops’. Enjoy!
 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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