Economics of the madhouse.

Average council tax bills in England will increase by 4.5% a year from April.  That’s the news this morning.   

So the councils, because they believe they need more money, simply take it out of other people’s pockets.  And the consequence is people will have less disposable income.  What does that mean?   

Well, like when Derek Mackay and his Scottish Budget the other week, it is very easy.  I have £100.  You take off £40 in tax.  That leaves me £60 to spend on mortgage or rent, rates, utilities, food, clothes, travel to work, mobile phone contract, TV licence, holidays, and the whole host of other things that are essential.  If you have set your budget to do all these things and the local authority comes along and takes away another £5, what are you going to have to cut?  You won’t have an alternative.  Simples!

Governments (national and local) are very good at spending other people’s money.  Not always wisely as can been seen all too frequently.   The result of governments taking more of your money will be less money to send in shops.  Shops will have less income.  Staff will be laid off. They will be unemployed and reliant on the tax payer to fund them.   That is how the economy works.  The productive sector pays for the non productive sector to operate (ie, everyone who works in it from nurses, teachers, police, the people who keep our roads running, et al,) and all the things it wishes to spend money on in what the perceive is the pubic good.

This English tax hike announcement comes a few days after the afore mentioned “Scottish chancellor” Derek Mackay suggested Scotland’s £13 billion deficit could be brought under control within a few years of independence.  How would they do that?  The same as above. Use other peoples money.  As Murdo Fraser, Scottish Conservative finance spokesman pointed out, the idea that a £13 billion deficit could be halved within a few years without austerity was “absurd”.   He is right.  There are only three options available in Mr Mackay's armoury.  1.  Unprecedented cuts to public services. 2. Higher taxes.  3.  More borrowing.  Mr Mackay will be good at 2 and 3.