Letter: Why we need European single taxes

Share
Sir: Sarah Helm's report (16 January) that France and Germany favour a common income tax and social security system co-extensive with membership of the proposed single currency, should be welcomed in Britain as the best European news in a long time.

The present Maastricht fiscal convergence criteria and monetary relationships have by themselves a deflationary bias. The economies within the single currency least able to contain the upward creep of costs would suffer the worst employment/inflation trade-offs. These weakest regions would therefore bear the brunt of the costs of adaptation, in terms of unemployment and industrial stagnation.

The most enterprising of the unemployed will migrate from such regions, taking their savings with them. Local capital will similarly migrate, leaving a depressed, impoverished region in its wake.

A similar process occurred in southern Italy after the Risorgimento, and South Wales in the 1930s had a "balance of payments" deficit within the UK, owing to a local concentration of inefficient coal mines. Equilibrium in payment flows was restored by the downward crushing of average household incomes through a regional concentration of enforced redundancies.

An analogous threat was posed for Britain by the Maastricht arrangements as they stood. The plans revealed by Sarah Helm in principle provide a way out. Under a federal fiscal system, a member state suffering a structural balance-of-payments deficit, owing to uncompetitive firms, will experience an inflow of funds for unemployment benefit as workers are made redundant.

If the fiscal federalist plans include a European element in industrial investment incentives, national measures to stimulate revival will no longer be limited by the "national rate-capping" effect of the Maastricht 3 per cent budgetary deficit ceiling. On the contrary, such measures would attract matching supplementary funding from Brussels.

A fiscal federal system in Europe would provide automatic compensating flows of funds to regions or member states suffering deficit or de-industrialisation (the British case), and the European Union economy could thereby achieve real convergence in productivity between its regions.

The danger is that our wretched party political leaderships will not realise the opportunity presented to them by the Franco-German proposals until too late.

CYRIL POHL

Hockley, Essex

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Java Developer - 1 year contract

£350 - £400 Per Day: Clearwater People Solutions Ltd: Our client based in Cent...

Junior Analyst - Graduate - 6 Month fixed term contract

£17000 - £20000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

Day In a Page

Read Next
Tory whips were anxiously ringing round the “usual suspects” following Douglas Carswell's defection to Ukip  

Douglas Carswell’s defection reminds us that it's the Tories who have the most to fear from Ukip

Andrew Grice
Daniel Barenboim conducts Prom 46  

Despite Gaza’s war, the show must go on

David Lister
Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone