I’m So Bored With the USA: What Difference Does It Make? 

 

 

 

“The devil will find work for idle hands to do  

I stole and I lied and why?  

 Because you asked me to.” 

 

 

In answer to Morrisey’s question, clearly none whatsoever.  

 

After last week’s humiliating backdown on their proposed Welfare Bill you would have thought Labour would be keeping their heads down and build bridges with its own backbenchers. Use the next fortnight to regroup, and then it’s Westminster’s six week summer recess. 

No, instead their attention turned to another defenceless group, children, as the education secretary, Bridget Phillipson, refused to guarantee there would be no cuts in her planned changes to special educational needs and disability (Send) provision. This has led to many disability campaigners fearing the worst, with children being treated as cost centres to be downsized, with children diagnosed in the future not being entitled to the same benefits as children with the same level of disability are now. 

Picking on children, after pensioners winter fuel allowance, then adults with disabilities over personal independence payments, it begs the question, what sort of government is this? Clearly, not a Labour one. 

There are C.1.6 million children with a recognised additional learning need in England, a number that continues to increase putting schools and council additional pressure. There is wide agreement that the current trajectory is not sustainable, however, if our plans are centred on removing entitlements to save money, rather than meeting the needs of children by improving schools, they will likely fail. 

 

‘their attention turned to another defenceless group, children’

 

Education, especially for those with special needs, is ground zero in their attempt to build a life for themselves. Put them on the scrapheap now and your are creating a two-tier system with the lower tier guaranteed to fail, leading to yet more inequality. 

Families are fearful that for the future, and want to know how the new “inclusive mainstream” will be defined and judged, and councils want to know what will happens to their £5bn in special needs budget deficits, when the statutory override expires in 2028. Added to this are concerns surrounding the role of private equity in special education. Typically, their involvement will just see the providers benefit to the detriment of everyone else. 

Clearly, ministers have learnt nothing from their failure on welfare, and their inability to consult and build consensus on sensitive changes that affect millions, prefer to try and force their proposals on unwilling backbenchers.  

In general, children have been some of the worst victims of post-GFC Britain. 

Dame Rachel de Souza, the children’s commissioner, said children in England are living in “almost where deprivation has become normalised, as she insisted the two-child benefit limit must be scrapped. 

The Child Poverty Action Group estimates 109 children are pulled into poverty every day by the limit. 

The Institute for Fiscal Studies estimates that axing the policy would cost the government about £3.4bn a year and would lift 500,000 children out of relative poverty. 

De Souza’s report found that young people said they had experienced not having enough water to shower, rats biting through their walls, and mouldy bedrooms, among a number of examples in a report that highlighted the “crisis of hardship” gripping the country. 

In her 4-yrs as commissioner, she noticed a significant shift in how young people talked about their lives, and that “issues that were traditionally seen as ‘adult’ concerns are now keenly felt by children”. 

The report said it was “deeply concerning how often children seemed to accept these inadequate situations as normal, or to have worryingly low expectations for what they should be entitled to”. 

She continued, saying that, in “one of the richest societies in the world”, people in power “should be ashamed that children are growing up knowing their futures are being determined by their financial circumstances”. 

 

‘children are growing up knowing their futures are being determined by their financial circumstances’

 

A record 4.5 million children were living in poverty in the UK in the year to April 2024, according to the latest figures. Labour’s flagship child poverty strategy has been delayed until at least the autumn, as it faces growing pressure to end the two-child limit on universal credit. 

De Souza concluded that whist there was “no quick fix to ending child poverty”, it was “very clear that any child poverty strategy must be built on the foundation of scrapping the two-child limit”. 

Now we turn to the ongoing saga that is the Post Office Horizon IT scandal which, despite all manner of publicity, is conveniently overlooked by the government. 

Volume one of the inquiry into the debacle, led by retired high court judge Sir Wyn Williams, laid bare the “disastrous” human impact. 

Previously, it had been reported that 4 of the victims had committed suicide, this report suggests the number could be 13 and possibly more, as some of the deaths may have not been reported. 

Currently, there are C.10,000 eligible claimants for compensation, but the report finds that this is likely to rise “at least by hundreds, if not more, over the coming months”. To date > £1bn has been paid out to over 7,300. 

Williams said there were still more than 3,000 claims outstanding, including 1,500 complex and standard claims which were either in the process of assessment or waiting for the process to begin. In general, compensation schemes have been marred by delay, confusion and red tape. 

Finally, C. 1,000 operators were wrongly convicted. 

 

“wholly unacceptable behaviour”

 

The report was damning of the PO, finding that it should have known the Horizon system was faulty, but “maintained the fiction that its data was always accurate” when prosecuting branch operators, saying: “Although many of the individuals who gave evidence before me were very reluctant to accept it … a number of senior, and not so senior, employees of the Post Office knew or, at the very least, should have known that Legacy Horizon was capable of error.” 

Whilst the inquiry cannot assign legal guilt, it found that both the PO and Fujitsu were to blame and accuses them of “wholly unacceptable behaviour”, saying that complaints were brushed aside, shortfalls were assumed to be theft, and victims were isolated and disbelieved. 

A key part of the report is how many of the victims had begged for help when their Horizon terminals started showing weird shortfalls. One postmistress had made 256 calls to the helpdesk about Horizon problems. She would later be imprisoned and denied contact with her daughter on the latter’s 18th birthday. Her daughter died the following year. 

 

‘She would later be imprisoned and denied contact with her daughter on the latter’s 18th birthday. Her daughter died the following year’

 

From those that can’t hit back to those who can and will, the uber rich. Heartbreakingly, one is struggling to sell a £17m property in Chester Square, Belgravia. 

At the heart of their complaint is the abolition of the centuries-old non-dom regime, which allowed wealthy foreign people to avoid paying tax on money they were earning outside the UK, and avoid paying inheritance tax (“IHT”) on their global assets. 

Put another way, we are no longer a tax haven! These people found us financially convenient, now we aren’t they are starting to leave. Their residence here was simply based on an attractive tax regime, and the lifestyle it afforded them. 

According to HMRC data the number has been consistently falling. In 2008, it was estimated there were 137,000 non-doms,  this had fallen  to 113,000 in ,  91,000 in 2017, and 74,000 in 2023. 

In March 2024, the then Tory chancellor, Jeremy Hunt, changed the rules and from 2025, new arrivals are only able to avoid tax on overseas earnings for the first 4-years of their residency. Hunt allowed them to still shelter overseas assets placed in trusts from IHT. 

Labour have gone one-step further, creating a residence-based system means that meant non-doms  global assets are subject to inheritance tax after 10 years. IHT is levied at 40% and, although it comes with allowances and exemptions, it is one of the highest in the world. 

Due to these changes, the Office for Budget Responsibility (“OBR”) estimates there could be a 12% to 25% decrease in the population of non-doms without trusts. 

Collectively they paid just under £9bn in tax in 2023, according to figures from HMRC. About £6bn of that came from income tax, £2.3bn from national insurance contributions and £400m from CGT. 

The OBR had forecast that the changes to the non-dom regime would generate £33.8bn in revenue for the Treasury over the next five years. However, there is considerable uncertainty around those numbers. 

A report from the Centre for Economics and Business Research found that if a quarter of non-doms left the UK, the net gain to the Treasury would be zero. 

Sean Cockburn, of the advisers Forvis Mazars, said: “There has been an acceptance of higher income and capital gains but the emotional trigger has been inheritance tax. That seems to be the motivator for those moving. But not everyone is leaving the UK entirely. 

“Yes some people have left, some people are considering it, but some people have decided to stay and are broadly accepting of the new rules. In the media there have been very high-profile, very wealthy people leaving who receive a lot of coverage. I personally have not had many clients leaving.” 

The net result is that the government are frightened, and Chancellor Rachel Reeves is reportedly considering softening changes to the inheritance tax aspect of the non-doms clampdown. If so, it wouldn’t find favour with those of the left of the party, and, after the U-turn on its welfare bill, the chancellor is a short a further £5bn. 

Needless to say, Reform have jumped on the bandwagon, promising to “bring back” wealthy foreigners who have left Britain by giving them a full exemption from taxes on their overseas assets in return for a once-a-decade £250,000 fee. 

This highlights how the current government, alongside its predecessors have struggled to devise and promote policies that substantially redistribute wealth. They are proposing or enacting some modest redistributive reforms to non-doms, imposing VAT on private schools, ending the IHT exemption for farmers, removing the winter fuel allowance from wealthier pensioners and reducing the power imbalance between landlords and tenants. All of which changes have been met with a sea of self-entitlement from the well-off. 

What is surprising is the lack of enthusiasm in general for this downward redistribution, as populism is based on the idea that elites have too much and the majority too little. This is exacerbated by our slow economy, leaving the government under acute financial strain, reducing politics to a zero-sum game, with different interests compete for resources. The British Social Attitudes survey shows that the number of people who believe that “government should redistribute income from the better off to those who are less well off” has risen slowly but steadily over the past 20 years: from under a third to almost half; more than enough to win a convincing electoral majority. 

Th government is just doing more of the same, insisting that state spending and ordinary people’s living standards can be improved by better productivity and economic growth. A policy that has not only failed it has led to increasing inequality. 

We are now at a point where something has to change. Labour was founded on the basis of taking from the more privileged to give to those with less. With spending options fast fading, the only real way forward it to raise more revenue, therefore tax rises for the rich, can no longer be avoided. 

Starmer might be fearful of this plan as a previous Labour  government under Harold Wilson in the mid-1970s, facing a deep financial crisis, imposed a combined income and investment tax rate of 98% on the highest earners. Although tax rates were almost as high under postwar Tory governments, it is Wilson’s that remain infamous. 

Whilst Britons were more financially equal in the mid-1970s than they had ever been before, and ever have been since,  Labour were roundly defeated in the 1979 general election, in 1979 by Margaret Thatcher’s anti-egalitarian Conservatives. 

New Labour’s redistributive policies such as a minimum wage and tax credits for low-paid families were presented as ways to boost the economy and spread the work ethic, rather than also as ways for the wealthy to help the less privileged. Meanwhile, Britain’s economic elites received lavish government praise. “We are intensely relaxed about people getting filthy rich,” said Peter Mandelson in 1998, “as long as they pay their taxes.” 

 

‘this highlights the governments basic problem, it has lost its identity’

 

These polices succeeded because, for their first 10-yrs in government, the economy and tax revenues grew. Other  distributive issues such as the sharply diverging incomes and wealth of Britons, how this polarisation was deepening social divisions, and how these divisions could not be lessened without confronting elites were largely avoided. 

Starmer is governing in much tougher times, and this week, speculation that the government will introduce a wealth tax has prompted both strong denials and more ambiguous signals from Downing Street. Some in Labour favour one; others believe that openly egalitarian policies are never wise in what they see as a naturally deferential, hierarchical country. 

Again this highlights the governments basic problem, it has lost its identity. They are constantly trying to engage with the right, and are forgetting the rest, as a result the government is just directionless. 

 

 

“Amid concrete and clay and general decay / Nature must still find a way” 

 

‘This article looks at the government’s increasing propensity to try and pick-on those that can’t hit back. With  special needs children being their latest victims. Hopefully, we can rely on their backbenchers to keep them honest, as the cabinet seems unable to understand what party they are supposed to represent.

The fact that we have children living in poverty is a sad indictment of the country we have become

Also, we look at the sub-postmasters, who despite all forms of well meaning sentiment, continue to be a can this is kicked down the road. The latest report simply confirms what was already known; the establishment closed ranks and picked-on those who they perceived to be defenceless.

We end with the uber rich denizens of Mayfair and Belgravia, some of whom, having seen the beneficial tax status reduced, are packing their bags.

We are never meant to be a tax haven, which is what we became.

Labour, of course, are now running scared, and we are more likely to restore non-doms tax benefits than we are to impose a much needed wealth tax.

Today’s fall in GDP only confirms the fact that state spending and ordinary people’s living standards won’t be improved by better productivity and economic growth anytime soon.

After only a year the government appears out of ideas and out of time. More austerity coming to a town near you soon!

Lyrically, as the country seems gripped by Oasis mania, we look to Manchester, and the might of The Smiths. We open with “What Difference Does it Make?”, and end with “Stretch Out and Wait“

Still much to enjoy if you’re rich. Philip.’

 

@coldwarsteve

 

 

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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