Sunday, 8 February 2009

Hapless Jacqui performs a public service at last

One of the most important aspects of the rule of law is that we are all entitled to use the law to our best advantage. The most obvious example of this is probably tax law in which there is a clear difference between minimising your tax liability by taking advantages of exemptions allowed by law (known as tax avoidance) and simply fiddling the figures thereby not paying tax that is due by law (tax evasion). Arguments surface from time to time whether it is morally reprehensible to take advantage of so-called "loopholes", and predictable positions are taken according to political belief. Those who believe in big government see it as a disgrace that government should be deprived of a single penny it might otherwise receive, those who believe in the rule of law say any objection to avoidance must be addressed by changing the law to remove the loophole.

There has long been a fine irony thrown up by such a debate. Those who argue against avoidance generally use the technicalities of the law to their advantage and the advantage of causes they support in all fields other than tax, and those who say "if you don't like it, change the law" are often first in line to tut-tut at alleged criminals escaping conviction by relying on the Human Rights Act or technical "loopholes" in the laws under which they are prosecuted.

Of particular interest to me are the more radical elements of the left who know every rule book of every organisation they wish to infiltrate and take systematic advantage of the rules to get their way. Somehow their hypocrisy over tax avoidance is particularly stark because they fight hardest to use "loopholes" to their benefit and argue loudest against others doing the same.

Apparently an advertising leaflet used by the government to attract the most politically-correct to fill specious non-jobs also prints editorial opinions and is campaigning against companies avoiding tax despite doing exactly the same itself. It is a fine example of the absurdity that arises when there is no principle behind a so-called point of principle. What possible objection can there be to individuals or companies only paying the amount of tax the law requires them to pay? I can't see one. Any who think they themselves should pay more tax can make additional voluntary payments or pay a lump sum to a charity of their choice in order to both assuage their consciences and be seen to be practising what they preach.

There is only one point of principle here, that everyone is bound by the law. Either we have defined laws or we have arbitrary rules applied according to the whim of public officials. We have chosen the former course for very good reason. If you want to argue for the latter option, by all means do so but be ready to be a victim of it yourself when the government of the day is no longer your government of choice.

We see similar lines of argument arising over MPs' expenses, in particular their right to claim certain housing costs. Today the hapless Home Secretary is exposed as taking fat financial advantage of laxly defined rules. Despite her utter unsuitability for the high office she holds, hapless Jacqui Smith is unlikely to be so stupid as to have broken the rules, time will tell. My addled brain wonders whether there is a difference in principle between what she has done and what a lawful tax-avoider does. Assuming she has kept within the rules, each has used the current law to their personal advantage and in doing so has affected the size of the Treasury's black hole. But maybe there is a difference.

When asking how much we should take from our pockets and give to poor Gordon, the natural starting point is that what we have received belongs to us unless the law says otherwise. From that starting point, a close investigation of the immensely complex web of tax legislation and regulations can be undertaken to see exactly how much we are obliged to hand over. In the absence of a legal obligation to pay poor Gordon, our position stays as it was, namely that our money remains our money. In a way it is no different from going to the butcher and asking the price of a pound of chuck steak, he defines how much it costs and we pay that much. Tax law is just a very complex price list.

When it comes to MP's expenses the position is different in one respect. Their expenses fall into two categories. There are genuine expenses such as stationery and telephone costs where the MP has to write letters and make calls in order to do his job properly and the costs of doing so are just like the expenses any employed person might incur in the performance of their job. Some have to write more letters and make more calls than others and it would be unfair if it had to come out of the basic salary. The murky side of things arises in relation to allowances. As I understand it these are sums which MPs may spend if they wish but which they are under no obligation to spend. Top of the murk parade is the second home allowance. Those whose constituencies are not within very very easy commuting distance to London may claim the cost of a second home, up to a maximum annual figure. We can debate whether an MP for a constituency in, say, Hampshire really needs a London home when the train service is so good they can get door-to-door in less time than it takes by car to cover ten miles in the London rush hour, but that is not the point of this piece.

The allowance exists and it is up to each MP to decide whether to use it and, if so, to what extent. In this respect it is different from tax avoidance. Tax avoidance is about people investigating how much (more accurately, how little) they are obliged by law to pay from their own pocket. MPs' second home allowances are about how much the MP requires the taxpayer to pay. In other words, one is about spending your own money and the other is about spending other people's money. If there is one lesson to be learned from the universally bankrupt religion of socialism, it is that nothing is easier than spending other people's money.

There is no legal obligation on any MP to claim the maximum possible sum for their additional housing requirements. Sadly examples are legion, from both political parties, of MPs doing exactly that. The Home Secretary's position is particularly bizarre and, on the face of it, dishonourable. She lives with her sister when in London but has a house in her constituency. Her husband and children live in the constituency home and by any normal definition that house is her first home. Assume you ran into her on holiday and don't know who she is. You get chatting over a glass of lentil juice and she tells you of her happy marriage, her two delightful children and her busy life as a civil servant which requires her to stay with her sister in London during the week. You ask where her home is, what would you expect her to say? Her sister's place or the house she and her husband own and where he and their children live permanently? There's no contest. She lodges with her sister and lives in her constituency. Yet she nominates her sister's house as her first home for the purpose of raking in taxpayers' cash and says her own house is her second home. That way she can claim up to £24,000 a year for her own house (an allowance she has, apparently, claimed in full some years).

Both hapless Jacqui and the careful taxpayer are using the relevant law and regulations to their benefit. The crucial difference is that the taxpayer is not asking anyone else to pay him anything and he has no control over how the law and regulations apply, he just arranges his affairs so that he loses as little money as possible. Hapless Jacqui, on the other hand, has to pay for her house anyway because her family live there and she needs a base in her constituency. She could, if she had concern for the public purse and were not just out to get as much as she can for herself, charge just the cost to her of living with her sister. Somehow I doubt she pays her sister anything like £24,000 for her room and use of the facilities; whatever she does pay is the true additional cost to her of the second home she needs in London in order to carry out her work as an MP. She has the choice of charging her employer, the taxpayer, the true additional cost (just as real expenses are charged in the real world) or pretending her own house is a second home in order to get us all to pay her mortgage and other costs for her real home.

You can forget any moral duty to pay more tax than the law requires, that is just fantasy. But when MPs have to choose between homes for the purpose of claiming an allowance there is a clear moral duty to impose the lowest possible burden on the taxpayer, to do otherwise results in the taxpayer paying for housing costs the rest of us have to bear out of our income.

There is, it seems to me, a simple mechanism to prevent this sort of dishonourable conduct. When an MP is elected for the first time he or she should have three months (or six, or nine, it matters little) in which to find themselves a base in London if they need one. In their first year they can claim for the reasonable cost of equipping that property up to the current financial limit of the allowance. At the end of their second year in Parliament, and at the end of every year thereafter no matter how long they are an MP, they must declare the costs each year of both their constituency property and their London property. The allowance will be paid equivalent to the costs of the cheaper of the two, subject to an upper limit. Not only will this help the more simple-minded like hapless Jacqui to behave themselves, it will also be a constant reminder that expense accounts are for the purpose of reimbursement of work-related expenses not personal profit.

It is very kind of hapless Jacqui to bring the current disgraceful state of affairs to public notice, at last she's done something useful.


The Great Simpleton said...

One thing that bothered me over this case has been confirmed by the Devil's Kitchen - jaqui, as Home Secretary, is entitled to a grace and favour residence. However she appears to have refused that as it would have become her primary residence. Furthermore, we have to stump up for security at he sisters home.

TheFatBigot said...

But if the grace-and-favour bungalow with avocado sanitary suite were her first home, Redditch would be her second (as she now says it is) and she'd be making the same claim as now.

Her current additional security might cost £200,000, but it's probably less than the cost of scraping dried pizza off the walls of a state owned grace-and-favour dwelling once she's booted out.