There are two
people. One works for the private
sector. The other works for the public
sector. Both get paid £100. And both are taxed at 30%. Which one is more vital to the economy?
Now I know it’s a bit of a false question. But I ask it because I met one of these public sector workers the other week. A responsible position. Managing seriously big budgets. And the conversation turned to civil service salaries and who funds them. "We all pay taxes”, was the reply. "But who made up the 70% of your salary that your own taxes don't pay for?", I asked. It seemed a logical question given an individual public sector worker can’t fund their own salary through their own taxes. So where will that money come from? It has to come from somewhere.
What surprised me was that this individual had no understanding that this was the reality. Their whole career in the public sector had them simply dealing with budgets, very big ones in this persons case.
Now don’t get me wrong. We need people in what economists would call the non-productive sector. Being non productive doesn't mean you don't do anything. It simply means that in economic terms a nurse will never pay herself out of her own taxes.
So where will that 70% of money come from to fund the nurse? Only one place. The private sector.
So, yes, we all pay taxes. But it is the taxes of the private sector that fund the activities of the public sector. And that’s good. But let’s not forget who lays the golden egg.
So every time a politician argues that we need to add 1% more in public expenditure, ask them where it’s going to come from. If they say "borrowing", ask them how we can borrow our way out of debt. If they say "taxation", ask them why they think it’s a good thing to tax more the people who are creating the recovery, the private sector. And given businesses will then have less money available to spend, ask them where they think these companies will find the money to invest in growth of their businesses.
Now I know it’s a bit of a false question. But I ask it because I met one of these public sector workers the other week. A responsible position. Managing seriously big budgets. And the conversation turned to civil service salaries and who funds them. "We all pay taxes”, was the reply. "But who made up the 70% of your salary that your own taxes don't pay for?", I asked. It seemed a logical question given an individual public sector worker can’t fund their own salary through their own taxes. So where will that money come from? It has to come from somewhere.
What surprised me was that this individual had no understanding that this was the reality. Their whole career in the public sector had them simply dealing with budgets, very big ones in this persons case.
Now don’t get me wrong. We need people in what economists would call the non-productive sector. Being non productive doesn't mean you don't do anything. It simply means that in economic terms a nurse will never pay herself out of her own taxes.
So where will that 70% of money come from to fund the nurse? Only one place. The private sector.
So, yes, we all pay taxes. But it is the taxes of the private sector that fund the activities of the public sector. And that’s good. But let’s not forget who lays the golden egg.
So every time a politician argues that we need to add 1% more in public expenditure, ask them where it’s going to come from. If they say "borrowing", ask them how we can borrow our way out of debt. If they say "taxation", ask them why they think it’s a good thing to tax more the people who are creating the recovery, the private sector. And given businesses will then have less money available to spend, ask them where they think these companies will find the money to invest in growth of their businesses.
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