Thursday, November 01, 2012

The EU Budget Vote

So - Labour actually pulled it off. A bold decision to back the Tory MP Mark Reckless' amendment calling for a cut in the EU budget actually resulted in the first defeat in the Commons for Cameron and Co. And on an issue where he is vulnerable.

It's left lots of Tories feeling puzzled. Why did Labour vote the way they did? The first reason is rather obvious - with our people suffering badly from the Tory austerity, how could we vote to send money to the EU that just gets paid out to benefit scrounger Tory landlords like Cameron's father-in-law in the form of CAP? It was a no-brainer that if the ordinary people are suffering, the EU and wealthy landowners must take a haircut too. That's why europhiles like Dennis MacShane walked into the lobby to back the rebel amendment.

Cameron's inability to understand this is down to the same foggy brain that prompted him to approve the cut in the 50% tax to 45% while simultaneously raising taxes on everyone else, and then feeling puzzled that his popularity fell as a result. Maybe they don't teach them what "we are all in this together" really means at Eton.

The second reason is that with the eurozone crisis giving birth to euro-federalism, Britain may be out of the EU anyway.

For example Labour opposes the proposal that the ECB acts as the head and regulator of all the banks in the EU, regardless of whether they are in the eurozone. It's not that we oppose banking regulation - our issue is that we have ZERO control over the ECB, we don't even have a member sitting on it's board, and in addition it appears to be completely unaccountable, even to the European Parliament. Put a big chunk of our economy into the hands of people not accountable to elected Labour MP's in Parliament? Never. Can we prevent it happening while being within the EU? Unlikely, especially with the incompetent Cameron as Britain's representative.

The Germans seem to be pushing full on for federalisation of the eurozone and the French seem too weak to stop them. It's not in Britain's interests to be locked into an EU system dominated by a monolith that can outvote us every time.

So, our exit is on the cards unless the southern states of the EU decide to get out of the euro and pull away from Germany's dominance, at which point the old equilibrium in the EU will be restored.

With this vote in Parliament Labour is simply preparing the way for a possible decision on Brexit.

There is a further left-wing rationale for supporting Brexit, which has to do with corporation tax. Back in 2005 Treasury officials were puzzled that while the economy was doing nicely, tax revenues were falling well behind what they should have been - and it was down to corporation tax avoidance. Thanks to Margaret Thatcher's Single European Act, a company like Google can make the bulk of it's sales in the UK market, but pay no tax here because they are head-quartered in Ireland.

How would Brexit change this? Simple - while we'd have a free trade agreement with the rest of the EU in the way Switzerland does, we would not be bound by the Single Act's regulations, and could therefore pass a bill on Nexus Tax, similar to the one the Americans have.

"Nexus" simply means "connection" and a Nexus tax is levied when it is clear you are not an exporter but have a local connection, be it offices, employees, agents or affiliates. Once a nexus is established, then you are liable to be taxed on the sales generated within the state. So while Google could still route all their other European tax liabilities through Ireland, a Nexus tax would be levied on their sales in the UK, thanks to to the presence of Google agents here.

Would other Europeans mind? I doubt it as most of the corporations routing their affairs through Ireland or Luxembourg are American. Those two states might object that their parasitical practice of diverting our tax take to themselves has come to a halt, but they are too small to do anything about it. The big cheeses in these firms might object, but they donate to the Tories not us, so we can ignore them. There arn't a lot of jobs at stake with these companies either. The risk lies more with them losing all their UK sales rather than us losing a few jobs.

We can only enact a Nexus corporation tax if we were out of the EU however. The benefits to a Labour govt budget would be huge, which would give us the ability to protect the vulnerable while relieving the tax burden on the working and lower middle classes.

The eurocrisis and the global recession has created a whole new world, and Labour would do well to adjust to the new reality. In her autobiograhy Thatcher boasted that most of the ideas in the Single European Act that facilitated on tax avoidance came from her and she imposed them on the rest. It would be ironical indeed if we could escape them while the others were stuck with the old biddy's mad ideas.


DevonChap said...

But in 2007 you said wanting to leave the EU was a sign of a bunker mentality. Oh yes, that only applies to Tories, not Labour who are never wrong.

Still unable to see people, just labels

snowflake5 said...

In 2007 we liked the EU as it was. It's now 2012 and it's changed utterly. No way is a Labour govt going to put up with bonkers austerity and banking supervision dictated by the Germans.

Another reason Labour will want to leave the EU is because it may be the only way to unwind the changes to the NHS.

Cameron LIED when he said he wouldn't re-organise the NHS. He's now gone and given up the NHS's exemption under EU law and made it subject to the Single European Act.

If it's a question of defending the NHS or staying in the EU of course Labour is going to choose the NHS!!!

Our exit might have unpleasant implications for all those Tories who have got used to collecting CAP and all those fat cat CEOs who use the Single Act to avoid tax - but your lot should have thought about that before you interfered with the NHS.