The Institute for Fiscal Studies is rightly one of Britain’s most respected and forensic think-tanks. Yet each time its esteemed director Paul Johnson appears in the media, the message is the same.
If Britain wants sustainable public services to meet the needs of an ageing population, taxes will have to rise.
But is that really the case? People doubtless will point to Birmingham and other prisons as evidence that budget cuts have gone too far. One would suggest that is as much to do with the serial incompetences of G4S (remember the London Olympics security debacle) as anything else.
‘The extra spend on the NHS could be achieved without shifting the tax goalposts at all’
In fact, as the International Monetary Fund’s fiscal monitor noted last year, the UK tax system is good at reducing inequalities and does better that those much admired Scandinavian nations Denmark, Sweden and Finland. Perhaps we shouldn’t allow the facts to get in the way of a good narrative.
Among the reasons why we are meant to favour a tax rise is to support the beloved NHS. Put to one side questions about whether NHS money is well spent, what is evident is the tax system looks as if it should be able to generate the income needed to provide the extra £16.4billion of spending on the NHS pledged by Theresa May over the next five years.
The public finances are improving at a greater pace than the Office for Budget responsibility forecast. There was a thumping surplus of £2billion in July and in the first four months of this year the deficit shrunk to £12.8billion some 40 per cent less than at this stage last year. If this trend continues, the extra spend on the NHS could be achieved without shifting the tax goalposts at all.
Without wishing to sound like a swivel-eyed, supply-side economist this is largely down to the impact of healthy growth in the labour market.
With so many more people in jobs, taxes on income and wealth climbed by 6.4 per cent in July continuing a trend seen since last year.
The hot summer and World Cup was hopeless for goods sales as House of Fraser would testify. But despite a lack of carbon dioxide to make drinks fizz, the tax take from alcohol duty rose by £300million or 7.4 per cent in July. Bottoms up.
Much of the narrative surrounding the proposed £7.3billion merger between supermarket groups Sainsbury’s and Asda is based around the digital challenge.
Ocado is already established. Amazon is readying itself to ramp up its grocery offer and Google has ambitions in the space.
Nor should anyone discount the competition from prepared food delivery disrupters such as Just Eat.
Sainsbury’s may be bottom of the table among the established players, but it still gained 1.2%
It is possible to get a wholly different picture from the latest Kantar market research for the last three months. Contrary to the case made by Sainsbury’s for its merger with Asda, the grocery market does not look in dire trouble.
In fact all the players enjoyed an increase in sales in the last quarter. Tesco up 1.8 per cent and Morrisons up 2.7 per cent are doing particularly well. Both groups are bouncing back from past missteps.
Sainsbury’s may be bottom of the table among the established players, but it still gained 1.2 per cent. The company also has traction online with its still-settling acquisition of Argos and increasing ability to push new lines, such as its Tu fashion range, through the same platform.
If there is a bigger worry on the horizon it is German no-frills retailers Aldi and Lidl.
Their growth is off the page because of new store openings and market share is on the march. At 13 per cent between the two brands they outpace Morrisons at 10 per cent.
Yet these two players are largely unaccountable. They are controlled by private companies and supply, taxation and other information is scanty.
That must be unfair competition.
If central bankers were short of topics to discuss when they gather at the exclusive Jackson Hole conference in Wyoming tomorrow, then Donald Trump has given them food for thought.
Can the central bankers afford to ignore pleadings by their political masters?
President Trump’s criticism of his own pick to head the Federal Reserve, Jerome Powell, for raising interest rates too quickly, bodes well. It indicates Powell is not a placeman.
If you overrule central bankers you risk market mayhem. Just look at the shot credibility of Venezuela and Turkey.