There’s a suggestion that we should be using the tax collected upon frozen Libyan assets to compensate victims of IRA attacks. Attacks made, so it is said, by the Libyan provision of funding and weapons to the IRA, the thing which led to the freezing of the assets. To which the answer is No. And also nope and no way.
The point here being that whether or not there should be compensation is one question. Whether or not there is taxation of those frozen assets is another. The two simply are not connected in any reasonable manner. And further, to make such a linkage is hypothecation of taxation – not a good idea and something that we Brits historically just haven’t done.
The government is coming under pressure to use tax collected on £12bn in frozen Libyan assets to compensate IRA victims. The NI Affairs Committee said the money should be used to set up a fund for victims of Libyan-supplied Semtex. It claims the government could be levying a significant amount of tax on frozen Libyan assets.
We have always run on the basis that we collect tax where we must and may. We spend where we should and must. But there is no logical connection whatsoever between how much tax we can raise from one activity and what should be spent upon another. Or, even, upon the same thing that is being taxed. Thus we always just do put all the money into one pot and then allocate it out of that same pot.
This is why NHS spending is not limited to what is or can be raised through national insurance contributions.
So, here. Sure, those damaged by the IRA should receive compensation. And sure enough, if Libya is responsible for those damages then they should pay. But that’s different from the tax take being used.
For example, what about those damaged by the PIRA. Or the 32 County peeps. Umm, Omagh, wasn’t that them? Or the CIRA? Is their compensation to be denied because Libya didn’t fund them? Well, yes, in terms of getting a payout from the Libyans, yes. That’s the way it works. But in gaining something from the tax pot? Nope, why should it? The tax pot is us providing a welfare safety net to us, isn’t it? Thus whether tax gets used to provide such a safety net depends upon the need for that net, not on who was responsible for the damage.
So, no, don’t start to hypothecate monies in this manner. As, traditionally, we haven’t and for the same reason. Tax is collected where we can and spent where we should.