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As We’ve Been Saying, We Cannot Afford The Welfare State We’ve Already Got

You’ll have noted that there’s a cry, a clamour, that we’ve got to raise taxes. Raise taxes on all sorts of people because government’s maw simply must have more cash. Well, OK, this may or may not be true. Around here we tend to think that there are quite a lot of things that government currently tries to do which it shouldn’t be trying – for the simple reason that while it tries it doesn’t manage to do – to do. Thus it can and should stop trying and thus divert that pelf already shaken from the pockets of the populace off to what it both can do and also must be done.

But OK, let’s run with this idea that taxes must rise. Why is that, what is the cause here?

A two-year investigation by the Intergenerational Commission, a group sponsored by the Resolution Foundation thinktank, has found that what it calls the “contract between the generations” is at breaking point. It warns that society risks dumping a disproportionate amount of the costs of an ageing population on their shoulders. It’s been going on for some time and now the situation is acute.

In short, the baby-boomer generation – 54-year-olds and above – are making increasing demands on an economic and social system that, after the 2008 financial crash, can barely cope with existing commitments.

The important word there is “existing.”

That reference to 2008 is of course an irrelevance. The country, the people in it, are about as rich, have about the incomes they did, as they were before the crash. If they’re not rich enough to support “existing” commitments now then they weren’t then either.

Which is the point we’re making here. We’re not rich enough to support all the promises we’ve already made about social and health care and pensioners incomes an ‘uman writes and whatever else it is that we’ve promised ourselves through the political process. If you prefer a milder version of the same point then we’ve not being taxing ourselves enough, are not taxing ourselves enough, to have all of those things we’ve promised ourselves. But that’s the same thing.

We cannot, within the bounds of what we either can pay or are willing to pay, have the welfare state we’ve already got. Which is exactly what people like us have been saying for some decades now. We cannot have the welfare state we’ve already got given our own willingness to pay for it.

There’s a certain importance to this observation above and beyond just we told you so. It’s that if we’re not willing to cough up for whatever is already promised then we’d probably not start promising ourselves more goodies. Further, don’t believe those who say that we can because by the time the bill comes due the money will be there. For that’s what they said last time and is the reason we’ve got this tax problem now, isn’t it?

Do note quite how much is necessary in new tax just to pay for those current promises:

The commission and IF say working pensioners should at the very least pay national insurance. We should go beyond this policy and force the retired to pay income tax under a separate regime. This would set the 40p rate at £20,000 (compared with £43,000 for workers) and the 45p rate at £40,000 (against £150,000 for workers).

That’s the bill for what the politicians promised us decades ago. Lordy Knows what the bill for the current promises is going to look like….but, you know, Vote Phillip Inman and find out. Because as sure as eggs is eggs they’ll change the tax system in the future to make you pay for their dreams.

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6 years ago

The welfare system has an inherent bias toward running at its capacity and toward spurring desire for even more, likewise if you stand at a street corner and give out free hamburgers. A “thinktank” doing a “study” that begins with the “contract between the generations” — that is, that one clump of the Human Herd has made a promise to another clump requiring the invigoration of the permanent bureaucracy — is not a “study” but a sales pitch. Even if, in a given week, Trump is immersed in a tweet war with a slutty actress, no one thinks he can… Read more »

6 years ago

In order to fund promises to pensioners we have to tax pensioners. Seems fair enough.

Chester Draws
Chester Draws
6 years ago

What possible measure of fairness would have pensioners taxed at a higher rate than workers? (I presume it is because labour creates “real” value and investments are evil returns on capital. Except people get those investments through saving the fruits of their labour.)

Unless your interest is *wanting* people to not save for retirement, it is perverse beyond measure.

Felipe Grey
Felipe Grey
6 years ago

Move yer pension fund offshore as soon as you can. They’ll be eyeing that next as well cos it was all earned ‘tax free’.

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