It is a shame that some condescending art critics and their near cousins, disdainful literary reviewers, tend to unnecessarily over-complicate their language when simple descriptions will generally suffice.
Far too many of these folks suffer from the condition, yet we tend to forgive them and instead accommodate their collective linguistic eccentricity.
Economists, by contrast, attract no such sympathy. Their language is usually considered to be deliberately obscure because it is so closely associated with mathematical theory.
Consider, for example, the Austrian economist, Friedrich August von Hayek, a contemporary and friend of Keynes, who maintained the price of goods in a free market acted as “an efficient mechanism to co-ordinate people’s actions.”
Much of von Hayek’s work on markets, which evolved, “as a result of economic exchanges between people,” underpins modern theory relating to consumer demand and the elasticity of that demand with regard to prices.
Without wishing to head into the realms of academia, von Hayek, Keynes, Friedman, Ricardo and a host of other economists would undoubtedly agree that if consumers suddenly have more money in their pocket, their propensity to spend it increases.
Talk of price mechanisms, free markets and demand elasticity only clouds matters. If people have cash and the price of goods they wish to buy are considered competitive, they will spend it buying the goods or services. Which brings me neatly onto the taxation of savings.
Prior to the last General Election, the Conservatives said they would abolish the 20 per cent tax on savings.
In case you had not noticed, this pledge has not yet been honoured. Now, as inflation shows signs of motoring again, caused primarily by an as-yet unproven policy of printing money, aka ‘quantitative easing’ (QE), much of which ends up on banks’ balance sheets, those who have saved throughout their working lives are being hardest hit.
As inflation hovers around three per cent, only two non-ISA bank accounts (out of more than 1,000 available to savers) offer returns in excess of this figure, and they’re both five year bonds. Today, the average savings account pays just 1.04 per cent.
Of course, opponents would argue that scrapping the tax on savings would cost the Government an estimated £1.76bn, money the country can ill-afford to simply give away.
They would also point out that those on low earnings only pay ten per cent on their savings, although they’re still taxed at 20 per cent and must claim the rest back — a bureaucratic form-filling exercise which an estimated 2.6 million people either do not know about or do not bother with.
Furthermore, non-taxpayers can earn interest gross, but they too must complete form R85 to ensure they receive this concession.
But while £1.76bn is a sizeable sum, in the scheme of things, it is pretty small beer considering annual government expenditure of £750bn.
Most importantly, scrapping the taxation of savings would make enormous sense because most of the money (unlike that pumped in via QE) left untouched in savers’ bank accounts would, as economists have argued for decades, ultimately find its way back into the economy through increased spending.
As interest rates are forecast to remain painfully low for at least another few years, much of this £1.76bn would act as an annual economic fillip and crucially, it is a comparatively easy measure to introduce.
Putting money in savers’ hands and honouring a pre-election pledge looks like a ‘no-brainer’ to most people. Let us hope George Osborne agrees as he plans his autumn statement.
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