Dump the UK debt

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by Hazel Lewry

These are taxing times – they really shouldn’t be. At least, they shouldn’t be this bad. Not in Scotland anyway.

By a reasonable estimation if I walk away from this Union, then I, personally, should immediately be over £900 a year better off through lowered taxes than I am today.

If I choose to stay within this Union, of Scotland and England, my tax payments from everything I generate need to increase by over £10,800 per year just to avoid imminent bankruptcy and still keep the services I have today.

By my estimation, if I’m to pay my debts to this society inside this Union, I need to work almost three full time jobs at an average £29,000 wage per job for the next five years, and basically give the income from two of these jobs to Westminster.

My annual societal debt to Scotland is around 1/3 of what I would have within the UK next year.

This forces me to ask – can anyone supply a convincing factual argument for the United Kingdom, one that does not involve either their own profit or some esoteric “feel good” propaganda?

In a fully autonomous Scotland while paying less tax than I do today it would also appear I could have a better standard of services, potentially a better quality of life, and a free future. Free of outside interference, free of another’s debts, free of imminent bankruptcy.

In an independent Scotland, absent the shackles of Union, the future appears to be bright. To all appearances I certainly have a defensible legal right and a moral obligation to my children to walk away from the Union and its debt load.

In support of the above statements we should first understand approximately what we individually owe Westminster’s treasury under our current oppressive arrangements?

We should also understand that fiscal devastation is apparently looming large on England’s horizon, all Scotland has to determine is if she will share in the pain, for by all appearances our land is powerless [this time] to prevent England’s imminent, Westminster engineered implosion.

What we owe is an interesting question I was asked as I walked up the Royal Mile from Holyrood recently.  What indeed do “I owe” Westminster, specifically “The Treasury”, aka 11 Downing St.  They do get my taxes after all, but is it enough, and if not, how much more do they need?

Actually as the research continued the answer appeared to define itself, it would seem I owe Westminster and Whitehall nothing – if I choose.

It’s that or both personal and national bankruptcy, there really doesn’t appear to be much in the way of middle ground.  Just “walk away”, is that really what I’m recommending – yes because there doesn’t seem to be any other alternative intelligent choice.  Other justifiable numbers might change my opinion.

This question of what I owe reared back to the forefront of thought with last week’s economic data basically showing UK stagnation.  No appreciable growth, Osborne declaring the “Laddie is not for turning” and Cameron still espousing that the deficit will be gone in 2015 – that’s only four years, and with the UK debt levels continuing to increase month on month.

The answers to that “What do I owe” are different for each one of us, but looking closely into what’s allegedly “owed” against an average Scots income brought forth some interesting numbers.

In so far as possible here’s how the numbers obtained break down for Mr. or Ms. Average.

The first question is what’s my (Mr/Ms Average’s) tax burden – what’s my total taxes.  First we need to see where all our taxes are collected and add them up, we’ll be very conservative in estimations where possible.

Let’s start by classifying taxes as any levy that can’t be avoided for items most people would consider a necessity.

Our assessment of taxes therefore included everything from income tax to council tax, from VAT to the TV license fee.  Basically if there’s a law requiring collection, and most of us pay it, then we tried to cover it.

Then we figured the debt load as divided equally amongst taxpayers, as its taxpayers who generate the entirety of the wealth of this nation.  It is immaterial weather these taxpayers are self employed or corporate employees – all earnings and wealth generation are ultimately due to the individual.

We did add in one extra tax – that’s inflation.  Inflation in its most fundamental form is simply a government policy to devalue debt – effectively just another hidden tax.

The first area to look into is just how much, on the average, we Scots earn, taxes like everything are relative.  If the total Westminster levy is less than 20% on average, and the total ongoing levy from all sources less than 30%, we’d consider that fair and reasonable for balanced books under the service set we enjoy.

Salaries have been largely stagnant, if not somewhat recessionary for many since 2008, therefore the BOS 2008 numbers seemed reasonable to use, rounding up to £29,000 as a median Scottish wage.

First is the average tax bill – that has two significant initial break points, income tax and national insurance.  

Income tax gives us a personal allowance of around £7,500, then we’re at 20%, so 20% of £29,000 – £7,500 is £4,300.

National insurance comes hard on the heels of income tax – as closely as can be analyzed it’s 12% above £102 per week, just for the employee share – that gives an annual NI take to Westminster of almost £2,850. I also have to generate the wealth to pay the company share – we’re not counting that.

Council Tax – The average is widely accepted as more than £1000 / year, better than in England where many apparently remain perturbed over Scotland’s tax freeze.  Still it’s another tax bite from the basic wage earner.

It’s acknowledged that the full council tax doesn’t come from every paycheck, but this article is about estimating and guides rather than precise numbers. In the end it’s about a broad sweep of individual and national viability.

Transport taxes – the RAC used 20,000 miles per year in a recent study, that was a little on the high side in our opinion. Other studies showed as few as 5,000 miles depending on the region, so low average seems reasonable.

At nominally 10,000 miles per year per taxpayer there appears justification for a “less than mean” number selection.  We all travel, and the taxes apply to all of us, irrespective of whether we use public or private transport.  Vehicles, buses and trains, roads and rails all need purchased and maintained.

Road Tax – A middle band tax seems to come in around £150 for a small-average vehicle annually, and economy stretches to around 35 mpg.

Fuel Tax – With an average of about 235 gallons used per vehicle (conservatively we’re using a one vehicle per taxpayer family).  There’s in the area of 75p/litre of tax, with petrol hovering around £1.35 / litre we’ll back out the VAT of 20% to realize a Westminster tax shakedown of 48p / litre.  That’s amongst the world’s highest for one of the world’s biggest producers.  North Sea oil is cheaper in most of Europe than in Scotland.

Allowing nominally four litres per gallon that’s about £450 in duty every year, ignoring the transportation costs of almost every item we buy individually and the cumulative tax take there (as much as 60% with VAT, salary tax, NI for drivers / distributors / employees, vehicle taxes, rates, import taxes etc).

New vehicles tax – and irrespective of new or used it’s reflected in the price. There’s the showroom tax averaging around £400. The new car buyer lays this out at an amortized rate of about £80 per year.

Value Added Tax, currently at 20% is a good example of another huge income bite – that’s what gets taken out of the little which remains.

To date our total median income wage earner has paid some £8330 in taxes, leaving £20,670 as a face value useable income.  With VAT running high, and only certain “essential items” exempt that means somewhere around 80% of what’s left is subject to tax at 20% – or another £3,307 a year each.

Inflation operating around 4 percent, with a potential net loss to taxpayers of 2 percent gross, or 2 percent of £29,000 – an invisible £580 tax.

Just tag it on that Westminster mis-management bill.  Fur coats, ermine especially would appear unaffordably expensive in our future.

Other miscellaneous taxes, congestion tax, excise tax, stamp duty, corporate tax, capital gains tax, airport taxes, parking taxes, hotel taxes, environmental taxes, power and utility taxes, telecommunications taxes, television license fees, death duties and inheritance taxes, pre-owned asset tax and taxable interest.  Figures for an average burden on these combined issues vary widely, but alcohol and tobacco alone account for about an extra £2,500 per affected individual, or about £500 each if we average the number out. The miscellaneous taxes in potentia are nominally £2,000 on an average year.

Our total present allocated taxes within the Union are therefore around £14,700 per year (rounding down).

As an income slice that’s over 50%.

That’s ridiculous.

The debt and deficit issue – how big a cheque do we need to write every year to cover it. It doesn’t seem unreasonable to look at Westminster government debt like a car loan or credit card – it’s revolving debt after all.  It’s not Scottish debt – none of it has Scotland’s name on the note.  We weren’t asked about it and couldn’t impact it.  It’s all under the Westminster umbrella.

A 5 year repayment plan seems appropriate for this revolving debt, especially as that’s a year more than Cameron and Osborne are planning; at least it’s what they’re telling us.

The latest figures for the debt were bandied around [officially] at £2 trillion, the “City” estimating it may really be as high as £4 trillion after all “hidden liabilities” are factored in.  A reasonable medium might be considered £3 trillion.  Dividing that between just under 20 million paycheques, we have an apparent tax need of right at £150,000 per paycheque – amortized over a set time (Cameron says four years).

Using our (in comparison) generous five year repayment plan that’s nominally £150,000 principal plus £18,750 in interest (we’ll pay that interest, principal or not) for an approximate annual total of between £3,750 [interest only] to £33,750 principal and interest.

As principal and interest are more than our gross salary we’ll focus on retaining just the interest payment as a tax allocation or “need”.  We might have to pay it forever, but at least we might manage it.  If we try to pay the principal we’re already bankrupt before we start.  That fact alone tells us something rather significant about Westminster.

Meeting these interest payments is simply part of the UK structural deficit, so how big is that structural deficit, and how much more is needed from each of us just to stop the situation getting any worse.

Month over month the UK is running somewhere between £10 billion and £25 billion in the red.  That means an average of potentially around £18 billion.  Accurate data is very hard to obtain, the figure appears deliberately vague from the exchequer.  They tell what they borrowed, but not what the full tally of ongoing liabilities are.  The gross number could easily be double the official number.

We’ll go with the “official” number.

An average £18 billion a month is £10,800 per year, per taxpayer.  That’s the deficit after the taxes already being paid.

We know it doesn’t all come from the individual, but as its individuals who fundamentally create national wealth, it is reasonable to assess it against the individual.  In the end, the individual pays.

UK PLC requires the current taxes collected from each Scots taxpayer’s generated wealth, currently around £14,700 to increase by an additional £10,800 per taxpayer, per annum, just to cover the operational deficit.

Naturally some of that £10,800 extra Mr Osborne needs from me personally includes the £3,750 to pay the existing interest on the outstanding debt – remembering it’s only that low a number if we were are not actually paying down the principal.

Right away, in an independent Scotland, I’m going to see I’ll be better off by £10,800 every year.  No interest payments, no structural deficit.  In the meantime the UK is largely ignoring that £10,800.  For the UK that number is compounding rapidly.

The way these numbers read is that UK PLC is bankrupt.  David Cameron and George Osborne are apparently two of the biggest con-men to ever actually walk these shores.   I will of course apologize if the debt is gone by 2014 without my average taxes being increased in any way.  But somehow I don’t see myself having to do so.

Acknowledging an average salary of £29,000 (it would be nice) already sees over £14,700 go to George Osborne’s folks.  I now fully understand that Osborne, to balance the books, needs an equivalent of £10,800 more from me, on top of what his department already gets, ditto for everyone like me.  It’s either I pay, he gets it somewhere else, indirectly from the wealth I generate, or my children pay and their children after them.

If I’m to continue to live in UK PLC then I must pay £25,500 – my current £14,700 tax bite and that £10,800 operational deficit a year from my £29,000 salary.  And that’s not touching the principal, that’s just to balance the books.  I’ve only got £4,500 left.  Trident?  Not in any sane world.

And as that deficit is increasing – the tax take from my generated wealth must increase. What I get to keep must reduce even more.

That absolutely doesn’t include paying off any debt – it simply stops more being accumulated.

After the books are balanced, Cameron and Osborne need to think about the debt.

Anyone getting “benefits” in this Scotland of ours, no matter how genuine the need, had better have a “plan B” – it is very likely they will need it as the suffering is spread through all levels of society.  Cameron and Osborne may not even want to do this – they will simply have no choice.  They have shown a preference for hitting the weakest amongst us at Westminster though.

To eliminate Westminster’s debt it looks like my “take home” has to be reduced by another £30,000 [on a longer repayment schedule than Westminster says we’re on] this from my remaining salary of £4,500.

There’s a wee bit of a problem here.

At day’s end the £4,500 I had left becomes -£25,500 I still owe to the treasury. Removing what little salary I had remaining it means for UK PLC to become solvent in the next electoral cycle they require my entire paycheck plus £25,500.

To pay off the equivalent of my share of UK debt in the Cameron/Osborne timeframe, and still have a reasonable standard of living I need to work almost twice as many hours as I currently do simply to pay Westminster, then I need to work more again to feed my family.

In an independent Scotland, in the immediate future, I can expect to pay less taxes for the same level of services and benefits I currently enjoy, know my children will be free, not just of another nations influence, but potentially of debt as well.

Scotland’s nominally £1.5 billion declared surplus means an immediate potential tax reduction of over £900 / year (spread over 1.6 million taxpayers).  If we contributed strongly to Westminster’s debt I would advocate that we take our share.  We didn’t.  And I don’t.

Scotland as a net contributor to UK throughout the majority of its existence, certainly this debt cycle, and being democratically deficit in decision making (¬600 votes to 50 against) should categorically follow the path of nations such as Australia and Canada, after independence.  When UK PLC demanded they pay a share of UK debt, they simply said “No”.  It should not follow the punitive previously unheard of restrictions placed upon Newfoundland in the 1930’s.

Voiding the 1707 treaty in advance, or at least showing its flaws strengthens that argument, giving us the potential of unqualifiedly making it Scotland’s choice.  It would effectively remove the Westminster argument that the “Union is voluntary”.

There was nothing whatsoever Whitehall, Westminster, or the Crown could do about these independent nations refusing Westminster debt.  These nations still retained many “joint” assets.  Scotland in effect as a net contributor would be entitled to an asset claim in line with her contributions – watch out for a tussle there.

Through the combination of our democratic deficit and fiscal surplus, Scotland’s course should be identical to Canada’s, Australia’s.  We should take no share of UK debt.

My purse tells me where my vote must go.

 

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