Alice in GordonLand

I can immediately think of a lot of things a pretty, bespectacled girl called Alice might be good for. I like the name. It has nice associations. One of the things includes writing articles in girls’ magazines. But when Alice writes in a respected national newspaper about improvements in the bureaucracy of tax returns, whilst admitting she can’t handle complicated things like that, well my patience runs thin.

My patience is runny these days.

Well Alice admits she isn’t good at tax, or even at sums, because when she wanted to pay a nanny she worked out Nanny took home to the nursery 3p for every pound Alice had to earn to pay for her.

Now she knows she’s not good at sums because that can’t be right, can it? And of course it isn’t. But it got me thinking. How much does Mean Gordon take from us? The simplest measure is the Tax Take as a percentage of National Income. This is usually quoted at about 37% currently, rising to over 40% shortly now that we’ve re-elected the little ray of sunshine to No 11. But this doesn’t really tell the important story. The story of motivation.

Little Alice, remember, isn’t only pretty, she also writes quite prettily (despite having no idea what she’s talking about, or perhaps because of it, I can’t say), and nowadays these attributes mean she makes a very good income thank you.

So I got thinking about an illustration. Something that Alice might be able to understand. Imagine then, mighty Alice, that you do proper work; dig coal out of the ground, say, then sell it to people to cook with. Something your mother set up before she handed the company on to you. Being equally muscular and industrious and experienced and worldly and dusty (gotcha - you’d never catch Alice dusty, but this is fantasy, remember) Alice makes a decent living at this. Suppose then that she takes a moment to decide whether or not to do a little late digging one night, to dig out another £100 worth of coal, retail value. How much is the government’s tax take on that? How much of that money would be Alice’s to spend?

Alice would get £33.87. That’s how much. Out of the £100 the old age pensioner pays her for that coal Gordon Brown would take home £66.13 through VAT, Income Tax, National Insurance, excise duty, community charge and all the other excuses he has for stealing from her. Tax might average 40% across the whole economy but because Alice is making a marginal decision at the top of the tax scale (and that’s not far off the ground) on this lump of coal it works out that Gordon gets £66.13 if all taxes are taken into account.

And what does Alice get for all the £66.13s Gordon takes? Very little indeed if she is typical of a moderately high earner. The roads she uses, her rubbish collection and a notional police presence. That and a simplified tax return of course.

So after the flush of community spirit has worn off and her back and lungs ache from years of bone crunching effort, she decides to pack in early.

That’s what’s called the enterprise economy.