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A story in the Times on Sunday drew attention to a report from Oxford Economics. The report analysed the pattern of tax receipts and government spending by 'region' across the UK and came to the conclusion that only in London and the Southeast of England is the balance between the two a positive one. For the rest of the UK (including Wales, of course) the balance is a negative one.
So far, so utterly unsurprising. But the story as reported went beyond the facts by stating that it showed the "the increasing reliance of the country on the capital", and placed the whole story under a headline claiming that "Tax from southeast props up rest of welfare-hungry Britain", as though those conclusions inevitably flow from the hard facts.
It's not as simple as that, however. Let's take the example of a major retailer with stores all over the UK, but with its headquarters in London. The profits come from all of their stores, but most of their staff outside the southeast receive below the average annual salary, whilst most of the HQ staff in London receive salaries above average. As surely as night follows day, the result will be that many of their HQ staff will pay above average tax bills, whilst many of their staff elsewhere will pay low tax bills – and may even be in receipt of working tax credits.
But who's subsidising who here? For sure, that tax on those higher earnings is being used to pay benefits to the lower earners, but the money to pay those higher earners came from all over the UK in the first place. There isn't only one redistributive transfer taking place here; there are two. The first is the one which flows from the decisions taken by private companies about where to site their HQ and how to distribute salaries; the second flows from the tax and benefit system and is an attempt to at least mitigate the first.
But it's only ever the second which comes in for criticism in the media. The problem isn't restricted to the private sector either – it's also reflected in the distribution of higher paid civil service jobs, as well as jobs in all those other government agencies. Why is redistribution considered by so many to be a good thing when it's done by the private sector and when money flows from the poor to the rich, but a bad thing when it flows the other way?
I wonder where the reporters live...
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2 comments:
"Tax from southeast props up rest of welfare-hungry Britain"
This would only be true if the UK didn't have a multi trillion pound deficit and a yearly budget deficit of well over a hundred billion.
Since the UK doesn't have a pot to pop a cliche in then we're all just borrowing money to pay for whatever the south east allows us to do.
'Let's take the example of a major retailer with stores all over the UK, but with its headquarters in London. The profits come from all of their stores, but most of their staff outside the southeast receive below the average annual salary, whilst most of the HQ staff in London receive salaries above average. As surely as night follows day, the result will be that many of their HQ staff will pay above average tax bills, whilst many of their staff elsewhere will pay low tax bills – and may even be in receipt of working tax credits.'
Surely if their HQ and Finance office are both in London, then any profits and taxes paid will be in London, assuming they arent offshore, inflating 'London's' contribution evenmore.
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