Wednesday, 6 March 2013

Ed Miliband: Incompetent & Honest or Clever & Dishonest?

Sometimes I just sit open-mouthed at what political groups come out with - the ideas are so bad that one must conclude that either they are hopelessly incompetent, dreadfully dishonest, or a bit of both.  Some of what we've seen recently can only lead me to believe that they don't have much of a clue about economics, or that they do know their stuff, but they think the general public is utterly clueless about these issues.  Or maybe, just maybe, Ed Miliband has worked out a way to be clever with this one, particularly when one considers that the issue up for discussion here was one of the key factors in Labour doing so poorly in the last election. 

Ed Miliband's 10p proposal is among the many examples of flawed thinking - it is one of those policies that treats the tax system as though it is one singular part, rather than a complex whole (Denis Healey and Gordon Brown anyone?).  Almost any blanket tax initiative is going to be costly somewhere, because in a nation of varying work situations, while some will benefit, others won’t so much.  It’s a bit like a doctor giving everyone viagra in a population where only some people are impotent.  That’s ok if everyone has enough, but when those that need it are short because those that have it needlessly take up supplies, it shows the doctor’s idea to be impotent (pun intended).

Here’s why the viagra analogy is telling; many people on low incomes are not particularly poor – a significant proportion of them are part of a two-income team, with them being the low earner behind a relatively high earner.  Thus it is much more prudent to increase the benefits of the single income low earners, and not simply reinstall a blanket 10p lower rate of income tax, because many ‘beneficiaries’ are having money that the poorer people need more. . 

This is basic GCSE economics – so don’t you think it’s odd that Labour is trying to grab the attention with this obviously ineffectual policy?  I can think of three reasons why Mr Miliband might be trying this:

1) Ed Miliband hasn’t given enough thought to how taxes operate best

2) Ed Miliband has given thought to how taxes operate best, but thinks the lower earning voters are economically illiterate enough to believe they are being targeted favourably

3) Ed Miliband realises that in reinstating something Gordon Brown abolished, he might be able to symbolically distance himself from the much criticised Labour Government that held office for so long in recent years, and brand his current party as being more in touch with the old leftist brands of yesteryear.

None of these seem commendable – but then again, despite deserving the opprobrium of the masses (which is what I hope will happen), one might argue that Ed Miliband is only doing what opposition leaders have to do these days to win elections; criticise the current Government and make their policies seem flawed; announce headline-grabbing policies that sound progressive to those looking for an economic carrot; and distance their party from the legacy of the past failures.  If he genuinely thinks he’s got a good tax policy here, then I suspect he’s probably being incompetent and honest.  If he knows he hasn’t then he’s probably being clever and dishonest.  Were he to increase the benefits of the single income low earners, ditch blanket tax proposals, and employ an intelligent case by case analysis that ensures tax breaks go to those that need it most - he would be doing something both clever and honest.