A fairer tax

The ConDems tell us that they want taxation to be fairer. It is widely assumed that they will increase VAT, perhaps to 20%. But the Office for National Statistics has reported that VAT as a percentage of disposable income is paid disproportionately by people on lower incomes. The ONS explains that "those in higher income groups tend to channel a larger proportion of their income into savings and mortgage payments, which do not attract indirect taxes".

I suggest that instead of a VAT increase, the government should introduce a tax on mortgage interest payments (more precisely, i suggest a tax on all personal secured loan interest) at the same rate of VAT. This would have the following advantages:

- it would compensate for the regressive nature of VAT
- it would tend to suppress the sort of house price bubble Vince Cable warned about in a Commons question in 2003 (this question has been cited to support the false claim that he "predicted the crisis").
- it would raise relatively little money now, with interest rates so low, but increasing amounts as the economy recovers and interest rates rise. So it would give the markets confidence that the deficit will be reduced, without imperilling the uk's fragile economic recovery.
- the tax would be paid by mortgage borrowers currently enjoying a windfall gain from the extraordinarily low interest rates brought in to boost the economy.

It would be easy enough to collect, simply by making secured loans, including mortgages, unenforceable unless they are registered with HMRC.

Pay up Pompey

I posted this on Matt Slater's blog:

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Portsmouth fans want to enjoy good results, like the FA cup win a couple of years ago, and disclaim all responsibility for the financial misdeeds that financed those results. But the two go together.

The proper thing for a fan to do is to withdraw support from a team that has stolen its success. Yes, I know that a true fan can't switch allegiance. But imagine if your wife stole large sums of money. Would you applaud her as she paraded the bling she'd bought with it? I disagree with Matt and everyone else who wished Portsmouth all the best for the FA Cup Final. They deserved to lose.

The PL and the FL need to take responsibility too. The priorities should be to stop leveraged buyouts and to stop uncontrolled debts to HMRC. So there should be a rule to stop any team starting a season in the leagues with debts above a certain proportion of their turnover. And a rule to stop any team starting a season in the leagues owing payments to HMRC that are more than 3 months overdue. There would have to be an exception to the first rule allowing teams with large pre-existing debts to continue, subject to a stringent agreed schedule of repayments.

The leagues were quick enough to bring in the rule about footballing creditors. So why are they sitting on their hands regarding the other financial problems hurting football?