CITY AND SUBURBAN
A small celebration for Tax Freedom Day just you and I and Tony
CHRISTOPHER FILDES
Join me on Saturday for a modest cele- bration. We shall be raising our glasses to Tax Freedom Day, and I rather hope that Tony Blair will look in. We have reached the limit, he tells us, of the public's willing- ness to fund an unreformed welfare state through ever higher taxes. Welcome to the club, Prime Minister. In his heartless pre- decessors' 18 years of penny-pinching rule, the welfare bill went up from £19 billion to £97 billion and looks set to be in 12 figures (11 of them noughts) this year. Even allow- ing for inflation, it has almost doubled. No wonder that we have been slaving for the government all year. It has taken every penny of our income, and not until 24 May, which is Tax Freedom Day, shall we be able to work for ourselves. Note that, for all Kenneth Clarke's vaunted tax cuts, it falls one day later this year. The date depends on the share of the national income that the government collects in tax, and Gabriel Stein works it out for the Adam Smith Institute. If you add in the money the gov- ernment borrows, he says — and borrowing is, of course, no more than tax deferred — then we shall still be slaving away into June. People tease pollsters by telling them that they would gladly pay more tax in support of public services, but Mr Blair may think, as I do, that there are resistance levels at which tax becomes well worth not paying. Value Added Tax has hit that level and has ceased to be the sure-fire money-spinner that the Treasury imagined. He might even care to quote Roy Jenkins, who when he was still a Labour minister said that if free- dom in a pluralistic democracy was to be preserved, there were limits to the propor- tion of the national income which could be spent collectively. That was 21 years ago, when Tax Freedom Day fell (as it hap- pened) on 24 May.
Benefits forgot
I KNEW that the benefit system had got out of hand when, forced to listen to a taxi driver's radio, I heard a new benefit adver- tised. If you drew it, so two actresses explained in chirpy dialogue, this would make it worth your while to go to work, and not just stay at home collecting benefits. This one is a collector's piece, but ministers are never happier than when devising new ones, and benefits are now as much of a jungle as tax is. You would need a benefit accountant to work them all out and to show us how to recover his fees by claiming the appropriate benefit. Now the brave Martin Taylor of Barclays is to pick up his machete and try to hack his way through both these jungles, and I just hope he comes out in one piece. He should begin by asking why the benefit bill keeps on rising in bad years and good, and remember that Milton Friedman likened it to throwing dollar bills at a barn door in the hope that some of them would get through the knot- holes.
Taking it easily
A DICTATOR'S life is hard, and after 32 years of corruption and tyranny he may feel entitled to spend more time with his num- bered accounts. So retirement beckons to Mobutu Sese Seko, father of his battered country. Zaire was once the Belgian Congo, but not even the wicked King Leopold can have taken so much money out of it, and even he did not leave its people poorer than he found them. Anyone still wonder- ing why economic growth has bypassed Africa could make Zaire a case study. It adds a name to the list of the usual suspects — the World Bank, the faceless multina- tionals, the neo-colonialists, the money- lenders and the weather. It shows how Africa has been robbed and cheated by Africans. It offers a textbook example of aid, as defined by Peter Bauer: the transfer of money from poor people in rich coun- tries to rich people in poor countries. These countries are now hopelessly in debt, and the best their creditors can do for them is to make the forgiveness of that debt condi- tional on honest and open government. In Africa — as the World Bank, to do it jus- tice, has now noticed — corruption and poverty have gone together. It is too much to hope that they will leave with Mobutu, but his flight is a start.
Left out of the Act
I HAVE long feared that the only thing worse than the old Financial Services Act would be a new one, and we shall now have the chance to find out. That must go for the Lloyd's Act and the Banking Act, too. They will be swept away in the surge of law-mak- ing which is to give us a new regulatory monolith, with Howard Davies as its grand panjandrum perched on top. What it will look like by the time that a myriad axe- grinding backbenchers have got at it, I dare not imagine. As for the Bank of England, after 18 years of unrewarding effort it can give up supervising banks. Its ever- growing army of box-checkers will get a new brass plate and no doubt a new office to put it on, in some development area that needs a leg-up — Bootle suggests itself — and the relief to the Bank's budget will be almost as great as the blow to its pride. The whole case for putting it in charge of super- vision was that it knew more than anyone about individual banks and bankers, but somehow at BCCI it still missed the smell of bad egg right under its nose, and at the stately house of Barings never noticed the dry rot. It has fuller information these days, but worse intelligence. The powers the Act conferred on it have been as much hindrance as help. Now the Governor will have to go back to raising his eye- brows. For 285 years that worked rather well.
Parking space
THE RELAUNCH of the City as a theme park took a step forward this week, when NatWest took its name off its tallest branch office. Now labelled the International Financial Centre, all its tower needs is tenants. Already NatWest has transformed a marble hall into a gallery of art. Barclays' head office might have been designed as an Islamic cultural centre. The man who spot- ted the potential for all this was Lutyens who, called into the Bank of England by Montagu Norman, remarked, 'What a splendid place for a the dansant.' (Norman was so cross that he hired Herbert Baker instead.) One moral of all this should not be lost on the planners. If they want more bankers to bring their headquarters to Lon- don, they will not need more and taller tow- ers to put them in.
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