Russia must back down over Ukraine to avoid a catastrophe
VLADIMIR Ilyich Lenin was a monster. He was a central theorist of communism, a key player in the Bolshevik revolution, a commissar, a leading instigator of the Red Terror and other massacres, and the first leader of the Soviet Union.
For decades, busts of Lenin adorned the communist empire; they were finally torn down in 1989 together with the Iron Curtain, as millions celebrated all over Eastern Europe. Yet there was one exception to this symbolic decommunistification, and that was Ukraine, where many statues of Lenin remained, the defiant symbol of a country that retained an ambivalent attitude to its totalitarian history.
It is only in the past couple of days that Lenin’s Ukrainian statues finally suffered the fate of all the others, thanks to the handiwork of the young revolutionaries who have just deposed Viktor Yanukovitch, the country’s Russian-backed kleptocrat in chief.
Yet the final outcome of this saga is far from certain. The Orange Revolution of 2004 petered out. We still don’t know what Vladimir Putin will do; he needs Ukraine to rebuild Russia’s sphere of influence. The revolutionaries in Kiev are pro-European; but parts of the country are pro-Russian. Many Russians see Crimea as rightfully theirs. Ukraine country depends on Russian energy; its finances are in crisis and will only survive with a huge bailout. Who will offer more – Russia, or the West?
This is a financial war – but any Russian military intervention would be disastrous for the world; it would be the sort of black swan event that could trigger catastrophic economic, financial and geopolitical strife.
Most violent revolutions fail disastrously, or at least end up spawning a regime that is very different from the liberal utopia the revolutionaries had claimed was their aim. The Arab Spring has been a terrible disappointment.
We must hope that Ukraine doesn’t suffer the same fate.
SIMPLIFY TAXES NOW
IT would be great if Ben Gummer, the Tory MP for Ipswich, gets his way. He wants national insurance contributions (NICS) to be renamed the earnings tax. This would be a far more accurate way of describing a little-understood levy.
NICs were originally promoted as a contributory, state insurance scheme: in return, people were entitled to benefits, including the state pension. But the cash handed over is not like a contribution to a funded retirement scheme, or even a normal insurance policy: it is simply another tax, the receipts of which are spent immediately by the government on general expenditure. NICs have therefore become downright deceptive, making it harder for households to understand how badly they are being clobbered by HMRC.
To make matters worse, NICs are dishonestly divided into an “employees” bit (at 12 per cent and two per cent) and an “employers'” share (13.8 per cent on almost all pay). In reality, as most economists would agree, there is no difference: employees pay all of it. The forces of supply and demand determine workers’ total cost; the fact that some of this is made up of wages and some non-wage costs makes no difference. If employers’ NICs were abolished, wages would eventually rise commensurately. So-called employers’ NICs are a stealth tax on workers.
The total tax bill on wages, salaries and bonuses, including income tax and all NICs, is shockingly steep. Earnings above £7,717 face 12.1 per cent; this increases to 22.7 per cent from £7,769; then to an astonishing 40.2 per cent from just £9,440. The tax rate then spikes punitively to 57.8 per cent from £41,450; fortunately, that is merely a weird aberration and tax dips back to 49 per cent from £41,558, where it settles; eventually, it explodes to 66.6 per cent from £100,000 before falling back to 49 per cent from £118,880. Earnings above £150,000 face a cumulative tax rate of 53.4 per cent.
It’s time some clarity were injected into our hopelessly complex tax system.
allister.heath@cityam.com
Follow me on Twitter: @allisterheath