The present Greek debt is NOT the problem - it is just the symptom.

I believe that if ALL the Greek debt was instantly wiped out the problem would NOT be solved; the debt would IMMEDIATELY start building up again.

Greece's government, even with all its austerity measures, is still spending more than it has coming in (i.e. even excluding debt repayments).

A bloated civil service and over-generous state pensions are probably the main culprits.

Most western countries are in EXACTLY the same position with our governments apparently incapable of making the books balance and continuously putting off the inevitable because the truth is just too awful to state and have any chance of being elected.

We CANNOT afford our present 'generous' (UK's state pension one of the least generous in western Europe) guaranteed state pensions in their present format where the contributions made by individuals are used to pay those already in receipt of pensions.

Say we pay 10% of our income towards a state pension; it would have to rise to something like 30% to 40% for it to be self-financing!

Does anybody honestly believe that today's youth will be prepared to pay for their own state pension plus that of two or three or even four generations that have already retired and are in receipt of pensions? I don't believe they will be prepared to make such a sacrifice and would probably rather revolt and bring about anarchy.

So, what's the solution (if any)?

Personally I'd abolish income tax (far too many loopholes), reduce state pensions to 75% of the basic unemployment rate, increase National Insurance Contributions to 20% of total earned income and increase VAT to something like 30% (harder than income tax to avoid).

I'd allocate expenditure as a percentage of revenue.

Example: Unemployment benefits to be a maximum of £'x' per week and a maximum of 'x' % of revenue; then if unemployment went up the rate of unemployment benefits would go down as the country could not afford to be so generous. All members of society suffer and gain as the economy either prospers or falters.

With increasing unemployment and reducing benefits more unemployed will genuinely seek work to make ends meet and then as unemployment goes down and unemployment benefits increase those unable to find work will be less badly off.

A self regulating system!

I'd also make it a criminal offense for any Prime Minister, Chancellor and Cabinet to increase the level of debt over a period in power; any temporary increase in debt would have to repaid before the next election was held or those individuals responsible held to account and, for example, they would lose any pension rights gained in office.

Some people keep bleating that a country's debt is different from an individual's debt and they are right; at present an individual bears some responsibility for their own debt but if a government increases debt no one person takes any responsibility (losing an election is nothing compared to being personally responsible for a trillion or two of debt, is it?)

It's time to face the truth and live within our means; the alternative is revolution and social unrest and a collapse of the democracies almost 40 million people died for in Europe (and something like 56 million people worldwide) died for worldwide in WW2.

Well said Robert!

Robert,

Great post!

How about abolishing CGT for all individual UK registered taxpayers who also have a National Insurance number?

It would free up a log-jam billions of pounds that are currently locked up and doing nothing thus providing great liquidity into the financial system.

Most of all it would encourage a tremendous amount of financial activity.

This idea could be engineered towards the newly acquired money having to be re-invested into UK registered businesses, start-ups or whatever the country needs in order to give a boost to getting the wheels of commerce really turning again.

Sharper minds than mine could structure this so that it would be of real benefit to the country, particularly in the area of the creation of new jobs and the consequent reduction in unemployment benefit.

stormdog

Thanks - though I am certain almost everything I post can be shot down in flames.

How can you be a registered taxpayer if income tax is abolished?

Re. capital gains tax - I'm not sure on the morality of this tax as I have to admit that I'd prefer to live off unearned income rather than earned income which is probably counter-productive from an economic point of view so I'm all in favour of capital gains tax being abolished though doubt it would be good for those who'd curse me for my good fortune.

Hmmmm... maybe abolish CGT for investments in 'British' firms - but that might rule out global companies with just a UK base.

Corporation tax is another tax I'm not too sure about; it should definitely only apply to 'large' companies with good profits but again that is taxing success and rewarding failure, isn't it?

I'm an optimist and my ideal world would be one where we are all rich and totally unenvious of the Jones who have a Bentley Mulsanne Turbo (but in psychadelic green so they should be pitied!).

Rich people redistribute wealth when they spend it and when they spend it they make other people rich so they should be encouraged to make shitloads more money so they can spend more and eventually we'll all be rich and have to employ aliens or robots to do all the boring work rich people don't have to do like wipe their own bums.

Yes - I want everybody to be 'rich' and happy and live in the best of all possible worlds and we can all live in our own personal kingdoms surrounded by high voltage fences with large signs on all entrances stating: 'Private Property - Keep Out or Die'

I have another quite brilliant idea on how to stimulate the economy and shall start another thread to give it an airing.

Hi Robert,
A very thought - provoking article which I think merits serious consideration. However, I do disagree with your assertion of a "Top down" economy, where the rich stimulate more economic activity.

In my opinion, it is those at the bottom of society who have the real clout. If you give a rich man 10k, he will most likely top up his savings/investments for him and his family, and the remainder will go towards a foreign holiday.

If you give the same amount to poor people, they will either replace the car, or spend it on the house, upgrade the computer/t.v. etc, etc, etc.

Then, the people who have provided those services will go out and have a conservatory built, or extend the house, the wife will go out and get that dress she always wanted.

In this way, the money percolates UP through the economy to get to the people who provide the most services to the greatest number of people. If you can take £ 60 out of 200,000 households, you might be doing quite well. Look at Richard Halpin.

When the poor people stop spending, the High St. catches a cold.

Regards, Pete.