Liberal Democracy in Britain — now is the hour

     I spent my life assuming that the Liberal Party (becoming in time the LibDems) was my natural political home. But I was thinking of Gladstone, Asquith, and Lloyd George; thinking of a liberalism that extended the franchise, gave home rule to Ireland, massively taxed the landed magnates, introduced pensions and a heath service, and weakened the privileges of the House of Lords. I was taken with the idea that Liberals commanded the moral high-ground, unique in British politics and perhaps in world politics in that they fought not for their own pockets, but for other people's welfare, people less privileged than themselves. Liberalism was much more than laissez-faire free markets. 

     I trusted that Liberal policies would be well considered, and costed; by philosophers and economists. As I have grown older I have begun to doubt that superior moral and intellectual underpinning, and realise now that I have to do some radical thinking myself. I cannot rely on the Party line, but must shoulder my share of responsibility in forming the Party line. We must not let the LibDem label signify an empty reluctance to hold an opinion.

     I was brought up to the typically British notion that we have little or nothing to learn from other countries. It was a shock to find that, back in the seventies and early eighties, Germany and Scandinavia had already legislated for worker participation (Mitbestimmung, q.v.). More recently I came across the concept of Ordoliberalismus (q.v.), which emphasises the role of the state in actively ensuring that the free market produces results close to its theoretical potential. Germany evolved this vision back in the fifties; we seem not to have fully grasped it yet. 

     We have become mesmerized by the USA. There is the facile and lazy assumption that whatever works in the USA will work here, so we build shopping malls and BurgerKings, and watch Hollywood films, and abandon the adverb. But the USA has as maniacal a fear of socialism and trade unions as it has a love of firearms. Have we not yet grasped that we are different? We (I speak for myself and surely for many millions) are nearer to Europe than to the USA, geographically, climatically, emotionally, historically. 

     I think Capitalism is too rampant, in the UK. Are the current LibDems going to do anything about super-tax, wealth tax, off-shore accounts, money laundering, green energy, worker participation on boards of large and medium companies, curbing director salaries, reviewing student fees, and local government funding? If we stay in Europe have the LibDems got any policies to ameliorate real defects of the Europe project or to improve the way Europe is?
     In the history of the LibDem party this is a crucial 15 days. If we want to vote against the chaos of Brexit, we may have to vote with Labour in certain marginal constituencies. It would be an absurd vanity to expect a labour candidate to stand aside for a LibDem candidate if they are polling far more strongly. (In some few constituencies it should be the labour that steps aside.) 
     There will never be any future for the LibDems, and no proportional representation, till that is grasped. But absurd vanity seems to exist. Oh dear!

--

Ian West, 9 Thenford road, Middleton Cheney, Banbury, 

Bank Capitalization

“If the banks relinquish risk to the state, they must also relinquish interest in the same proportion.” [1]

Following the banking crisis of 2007 – 9 I read avidly into the question of Debt, Credit and Money Supply. I am particularly indebted to Tony Weekes & Sue Holden [2], Michael Rowbotham [3], and Richard Werner [4] for their clear expositions of the manner in which a very large fraction of our ‘money’ is generated as credit, and its corresponding debt. Their clarity triggered a train of thought in which I re-designed the whole banking system on a more logical and less pernicious basis. Let me explain.

When the owner of a business accumulates more capital than he can usefully employ, he is willing to lend it to friends to enable them to build or acquire plant and the means of producing goods and wealth. The borrower is willing to offer, and (depending on his religion) the lender is willing to accept, a small and regular fee proportional to the outstanding value of the loan, i.e. 'interest'. In a free market where there are numerous independent lenders and borrowers, the level of interest should indicate the real value of the loaned capital. Banks arise as clearing houses to link depositors and borrowers.

Banks are keen to lend at interest, for that is the way they make much of their profit. It soon became clear to banks that (in times of peace and stability) they could lend more money than they strictly owned, for the chance of all the depositors demanding repayment simultaneously was very small. As long as their borrowers eventually paid back all the borrowed money (or forfeited equivalent collateral) they could lend out their capital 5 times over, or 10 or 100 times. Lord Turner suggests [5] that banks should be allowed to lend 5 times as much money as they own, the Swiss bankers suggest 14 times; the risk-takers of Wall Street and the City of London may have dared to go to 30 times, but that seems to have been too far. (I am talking of ratios of capital to total lending of 20%, 7% and 3.3% respectively.) It does seem crazy that there is as yet no agreed ratio of total bank assets to capital held, and no mechanism of insisting that it is adhered to. The old mechanism was to let the over-extended banks fail, and then lock up the board of directors for debt [6]. That worked well enough to inculcate a generation or two of prudent bankers; but it created hardship for thousands of innocent depositors, and governments now-a-days step in and supply the missing money, with the consequence that bankers have become progressively less prudent.

It could be argued that the money that banks lend over and above their own capital, the debt-based money (or credit-based money), is not in any sense the banks’ money, and the interest on it should therefore not be their interest. I am going to argue that it could instead be regarded as a state asset. This is especially reasonable when it is ultimately the state that underwrites the bad debts. Under the present system it can be argued that when a bank makes a loan it takes a risk, and that risk gives it a right to the profit which is the interest; the bigger the risk the higher the interest. But it is the state that ultimately takes the risk. If the banks relinquish the risk to the state, they must also relinquish the interest. On this principle, banks would only keep the interest they earn on the capital they hold; interest they earn on their lending of debt-money must be handed to the treasury. On this basis there would be much less incentive for the banks to over-extend. They would still earn fees on the contracts they draw up; their income would consist of fee income plus interest on their lent capital, but it would not include interest on money they do not own –– which is the current anomalous position.

This rationalization effectively takes from banks the power of generating money and passes it to the government. The banks would be the brokers by which the treasurer generates debt. Fee income suffices for doctors and lawyers, so why not bankers?

Pursuing the argument further we can consider bad debts of two types: [a] when the debt is totally written off, and [b] when there is collateral. For clarity let us suppose that the bank that issued the loan is operating a ratio of capital to total assets of 10%. In case [a] the bank would lose its 10% portion of the loan, while the state loses its 90% portion. The bank would also lose its brokerage fee, as a punitive incentive towards prudent lending. In the case where there is collateral (type [b]), the collateral would revert to bank and government in the ratio 10:90; but the bank would again lose their brokerage fee as a punishment for arranging a ‘bad’ debt. (Or the collateral could revert wholly to the government with the bank being paid its lost capital minus its forfeited brokerage fee).

Note that a ‘bad’ debt with collateral is hardly a bad debt, for the lending bank can end with a more valuable real asset than the virtual debt they created in the first place. They lend money of which they own as little as 10% or even 3%, in exchange for the title-deeds of a real property worth 100%; so of course they are perfectly content to foreclose! This situation can lead to what is called ‘predatory lending’ whereby banks deliberately lend to someone who cannot easily pay back the loan, and where the object is to acquire the collateral; for example, the selling of ‘sub-prime mortgages’. This destructive practice is possible under the present laissez faire system; and indeed it is encouraged by the system, in so far as banks are encouraged to make profit. The cynical onlooker can shrug and say “We cannot stop stupid people signing stupid contacts”. But it is repugnant to the average citizen to see clever people taking money off simpler people in this way; or in any other of the manifold ways currently permitted, practiced, and encouraged by our corrosive financial system. The argument developed above would largely eliminate the problem of predatory lending.

How might this reform of the financial sector be implemented? It would be as simple as the Inland Revenue taxing all lending institution on their interest-income at a rate of not 20% nor 40% nor 50% but in proportion to their capitalization ratio; so at 97% if they are capitalized at 3%, and at 99% if they operate at 1% capitalization. This might seem a very high tax rate, but as argued above, the portion of the interest that I propose to tax in no way belongs to the banks, and letting them keep it seems even more anomalous than claiming it for the Inland Revenue.

References:
[1]  This idea stems from my post of 2011/11/ Debt-and-banks; it was also deployed (2014/8/12) on my IanWest2 blog: "Debt-Money, and the Banking system".
[2]  The Friend, 27 May & 3 June, 2011.
[3] http://www.freewebs.com/whosemoney/gripofdeathchapter1.htm.
[4] http://www.youtube.com/watch?v=wDHSUgA29L
[5]  https://www.theguardian.com/business/blog/2011/oct/12/financial-policy-committee-bankofenglandgovernor
[6]  Overend, Gurney and Co. crashed in 1866, City of Glasgow in 1878.

George Monbiot and Re-Wilding

Dear George Monbiot,

    I am a great admirer of your tweets and Guardian pieces. However, I agree with your suggestion that you still have some thinking to do on those novel and stimulating ideas about “Inter-generational Theft”, “Re-Wilding”, and “Commons”. I see now that you were addressing yourself to an undergraduate audience, and though the vice-principle sitting next to me said she welcomed the ‘mixed’ audience (meaning the greybeards like me), it may have been wrong of me to put my oar in. But that was my enthusiastic response to your provocative remarks. 

    Inter-generational theft: were you just pandering to a presumed younger audience? I find that concerned older people are quite as engaged as the concerned younger ones, and my bet is that the greediness of my generation will be well matched by the greediness of their descendants. Though I agree that we (current citizens of all generations) are polluting the planet that future citizens will inherit. 

    The idea of re-wilding Britain makes me think of Marie Antoinette playing Bo-Peep in the garden at Versailles. I am all for letting ecosystems evolve on their own without human interference. But where? There are too many humans; in England particularly. You asked, “Where are the Elephants that once roamed these English oak-woods?" Where indeed! They are endangered even in Africa where there are 42 humans per km^2; what chance in England where there are a hundred times as many humans per km^2? You mentioned wolves in Oxford. Well, there were of plenty wolves in England at the time of the Norman conquest (human population 2 million), but they were hunted vigorously, and as the population of humans grew English wolves were exterminated; circa 1500 (human population 3 million). There was no longer room for wolves and men. Since then the population of England has grown 20-fold to 55.3 millions. 

    In 1973, when I got married, the 'good causes' around Cambridge were Greenpeace and Population Countdown. Where-ever has the latter gone? No! One does not need to kill people; merely educate and reward them. The fertility rate in Britain fell from 3.5 babies/woman in the early-modern period to under 2.0 in 1930 and is now 1.79. That of Nigeria today is 5.4, but is falling slowly. (Nevertheless, I think in vitro fertilization need not be offered free on the National Health Service.)

    You advocate “commons". In that case we should understand the processes by which the commons of early-modern England were enclosed and privatised, in order to know and neutralize the forces that will oppose you. Public and communal land is still passing inexorably into private hands; even nominally ‘unalienable’ allotments. 

    Your first questioner seemed to be asking if the same forces that got us into this mess could not be used to get us out of it, which concept I applaud in the sense that we have to work with humans as they are — inherently greedy and increasingly desperate to survive. You wittily rebutted by quoting Einstein, that the thinking that produces a problem is not likely to get you out of it. But look at the Carbon Tax success in British Columbia where it has been shown greatly to reduce CO2 emissions, and even to boost GDP [https://en.wikipedia.org/wiki/British_Columbia_carbon_tax].

    I am all for limiting CO2 emissions. I travel by public transport, and heat myself with renewables, wherever possible. I am not so worried in the longer run, as I understand that the Earth has been round this cycle several times before. Atmospheric CO2 levels varied cyclically from 0.02 - 0.04% (v/v) over the last million years, falling during each interglacial. Plants consume CO2 and do so faster when the climate is warm, and the CO2 levels high. But before that, levels were 10 times higher in the Cambrian period, till the laying down of the chalk in the Cretaceous, 100 million years ago. Before that, during the Carboniferous period (350 million years ago), temperatures (and CO2 levels) oscillated up and down a number of times, laying down a sequence of coal measures. I presume things will revert to ‘normal' once we get the human population back down to 1% of its present level. The Lovelockian view.

Yours, Cawstein

==================

Yanis, and DiEM25

Dear Yanis, and DiEM25,

     A year and a half ago, the launching of DiEM filled me with hope, particularly in the context of the British referendum. Since then DiEM25 seems to have slipped off the main stage, which is a pity. I wish I could help it re-find its momentum.

    One way of seeing the problem is when we hear Yanis Varoufakis describe his confrontations with the central powers of the EU. They met, talked, listened. He left. They did nothing. My first analysis was that they did not understand. Indeed, I found it very hard to repeat the argument to myself;  about how it is all Germany's fault, so stubbornly bent on recycling money so that the Greeks can go on buying Mercedes cars. My second analysis is that Yanis does not understand. Oh yes, he understands the  economics; but the crux, the movable fulcrum, the point in the argument against which a popular movement might push and win — has he identified that? 

    Martin West thinks the single currency is a mistake. No single interest rate can suit both Germany and Greece. Put another way: how does it work in the USA, and how can Ecuador and the USA both use the same currency?  I believe there is an understanding in the USA that federal money must be returned to poor states if they are going to be kept in the union. I do not know how. There may, in that complex and subtle constitution, be a degree of political integration that is still missing in Europe. Or is it just the common language? But perhaps we do agree that something needs to be done about the Euro Currency Union.  

     Yanis Varoufakis suggests there is a democratic deficit? Before the Brexit Referendum, that sounded like a promising slogan, but we now see what a mess is made if complex issues are decided by simple people. It is not obvious to me that it is democracy that we lack. I believe it is education.  

     Can Europe be 'cured' by allowing more power to the EU parliament?  I doubt it. Or by curbing the EU civil service? Possibly. But we have to recognize that the origin of the EU depended on the dreams of a very few people; integrated Europe is not the product of a popular dream. Only by imbedding the guiding force in a hidden and inaccessible committee was it possible to get the project of a united and inter-dependent Europe off the ground.  It is true that we pay lip service to democracy, but I doubt we really believe in it, except to rally forces against flagrant corruption. I do not think we are quite there yet; I mean the corruption is not flagrant enough; people are not convinced that revolution would improve their situation. 

     I think the Pro-Europe lobby finds its greatest traction at present by showing that the EU is protecting workers rights, clean beaches, fish-stocks and, by instituting uniform production standards, is allowing economies of scale. These are the tangible and practical benefits of integration. For me, and for a considerable fraction of Europeans, there is some appeal in the thought that United Europe could be (would be) a great power. Britain being part of Europe would allow Britain to effect some control in world affairs.

     Arguably the most depressing sign at present is the resurgence of nationalism. The British seem to think they are special (which may be true), but special in a ‘good’ way; this, to any travelled person is clearly a delusion. 

     Yanis Varoufakis believes that right-minded people will spontaneously support socialism. In Britain, they do not; or they are too few. He suggested that all businesses subvert a fraction of their profits towards the public purse, to illustrate the principle that wealth is generated by a combination of capital and labour**. That suggestion sounds drastic and risky, and unlikely to garner mass public support. (Though admittedly, it is little different from our widely accepted but as widely resented corporation tax.) 

    But thank you DiEM25; please keep the ideas coming.

    Yours sincerely, Ian West

(**capital and labour — See http://occidentis.blogspot.co.uk/2012/09/pre-distribution.html)

The National Health Service

Dear LabourList,

There seems to be widespread concern about the collapse of the National Health Service around here (Banbury). It is important that the country should know the Labour party line on the NHS? I trust the Labour Party has done its research and got the answers? 

So, should there be more Government money spent, to match the fraction of GDP spent (per head) by Germany and France?

What should we say if the Government retorts that they are spending more now than ever before? That it is still not enough? That the population has risen? That our spend is a lower fraction of GDP than in comparable first-world countries? Can we defend our figures? 

What do we say if the Tories say that Tony Blair started the sell-off and Private-Public-Partnership concept? That we now regard that as a mistake?

Do we subscribe to the idea that we must squeeze out inefficiency and waste? Or do we point to the global efficiency of our NHS compared with USA or Germany?  Is our NHS more efficient or less efficient than USA or Germany/France? On what metric. Can we defend these figures in Parliament. 

Do we think there is Mission Creep in the NHS, with an ever- increasing list of treatments, procedures and medicines?

Would Labour advocate 1p/£ increase in income tax specifically to fund the increased demands on geriatric care, rather than see closures and sell-offs? Say, 20% 'basic rate' rising to 21%; as advocated here some 4 years ago. 

(Trying to help! ) Best wishes, Cawstein

Why tax? Why not just print money?

Why tax? Why not just print money?

     It seems [1] that the business of balancing Government spending and tax revenues is not quite so crucial as many of us have supposed. A fully sovereign government can simply make up the shortfall by printing fresh money. Could it perhaps abolish taxes altogether? I mean, just print the money it needs to do what governments do. 

According to Wren-Lewis [2] “there is a growing consensus that monetary policy and not fiscal policy should deal with macroeconomic stabilisation (Kirsanova et al, 2009)”.  It is certainly true that there has been much tweeking of ’Bank Rate’ in the last 50 years, and it is also true that the novel procedure of ‘quantitative easing’ has been used vigorously in the USA, UK and the Eurozone since the credit fiasco of 2007/8, in an attempt to stabilize or revive the macroeconomy. But, in the last year, that trend seems to be waning, perhaps because you cannot lower interest rates effectively when they are already at zero, and quantitative easing seems to be about as ineffective as pushing on a piece of string. (The Bank of England gives some money to the banks, and all they do is place it on deposit back with the Bank of England [3], even though interest is near zero percent.)  Finally this autumn there is talk, first from Labour [4] but then last week also from the Tories [5], of abandoning ‘small-government austerity’ and using Government spending as a way of boosting the economy. Does this mean that the ‘growing consensus’ of Wren-Lewis is dispersing?

    A sovereign government with a floating ‘fiat’ currency can print as much money as it needs. There is talk (by Wren-Lewis) of ‘Modern Monetary Theory’ having its inception in 1971 when the USA came off the gold standard.  As analysis of the theory behind a floating ‘fiat’ currency seems to date from 1905, the term ‘modern’ must mean something like ‘incompletely understood’. However, it is becoming increasingly clear that countries with sovereign currencies (as UK and USA) do not need to maintain fiscal balance; they can spend more than they raise in taxes, can run a deficit, year after year after year. Indeed (according to the ‘modern theory’, though this is far less widely understood, and may have missed George Osborne completely), they must run a deficit if the economy is to grow. Wikipedia puts it rather starkly: government deficit puts money into private pockets, government surplus takes it out. (This deserves a post on its own — later.)

I examined, in a previous post, the beneficial effect on GDP of raising  taxes [6].  Here I toy with the possibility of completely abolishing taxes, lowering tax rates to zero, running the entire cost of government by printing money. 

Suppose (and these are realistic figures for 2015) UK gross domestic product (GDP) to be 1,864 B£ [7]; total government receipts from tax and national insurance contributions to be 515 B£ [8]; and the total (broadly defined, i.e. M4) money supply to be 2,115 B£ [9]. The proposal therefore is to introduce new money each year to the tune of 515 B£. This would increase M4 from 2,115 B£ to 2,630 B£ in the current year. In simple monetarist terms this rise of 24% would be expected to cause inflation of the same amount. 

Inflation, of course, takes money off everyone who has it, and in proportion. It is a tax on cash savings. If I owned a house ‘worth’ a million in 2015, in this scenario I could probably sell it for £1,243,500 in 2016, but its worth would not have changed. However, if I had a bank balance of 1 million, it would still be £1,000,000 the next year, but worth only 80.4%, or £804,000 in ‘old money’. People would soon learn to spend their cash as promptly as possible. The ‘idle rich’ (Keynes’ Rentier class) would not like this regime; but the rest of the population might. Central banks aim at an inflation rate of 2%, so 24% does seem steep, but there must be some other reason for taxation, apart from the fact that governments have always exacted tribute off the weak. 

References

[1]  https://mainlymacro.blogspot.co.uk/2016/09/why-was-austerity-once-so-popular.html

[2]  https://www.bsg.ox.ac.uk/sites/www.bsg.ox.ac.uk/files/documents/BSG-WP-2016-014.pdf

[3]  http://occidentis.blogspot.co.uk/2015/01/candidate-mps-if-i-am-going-to-support.html

[4]  http://blogs.spectator.co.uk/2016/09/full-speech-john-mcdonnell-labour-conference/

[5]  https://www.theguardian.com/politics/blog/live/2016/oct/05/theresa-may-speech-tory-conservative-conference-theresa-mays-speech-politics-live?page=with:block-57f3eb44e4b0afec6ad16cb6#block-57f3eb44e4b0afec6ad16cb6

[6]  http://occidentis.blogspot.co.uk/2016/07/tax-and-spend.html

[7]  UK GDP (nominal) 2015 = 1,864 B£ (1.864 T£). https://www.measuringworth.com/datasets/ukgdp/result.php

[8]  Total UK tax and NIC income (2014-5) = 515 B£; =29% of GDP. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/539194/Jun16_Receipts_NS_Bulletin_Final.pdf

[9]  UK M4 (total money supply) mid 2015 = 2,115 B£  (2.115 Tr£). https://www.statista.com/statistics/320127/uk-banking-total-money-supply/

Estate Tax and Limits to Wealth

Estate Tax and Limits to Wealth

Francis Coppola discusses  the “fairness” or otherwise of the tax paid by an estate when a person dies (previously call Death Duty, currently called  Inheritance Tax). It seems a rather easy ‘Aunt Sally’.  I think 'Estate tax' about the most essential, and least harmful, tax in existence. Great accumulations of wealth are bad for nearly everyone in society. But by ’great accumulations' I mean something like the top 1%. Gordon Brown was being snidely clever but at the same time very foolish in leaving unchanged the threshold for Estate tax, for with inflating house prices he got increased revenue, but seriously distorted the effect and purpose of the tax. Within months the Tories had realised that a great segment of the electorate would turn their way if they declared abolition of Estate Tax a manifesto issue. 

I had a letter in the Times back in 2007 on Tory plans to abolish 'Inheritance tax', which I think still relevant today. 

Date: Fri, 17 Aug 2007 

Dear Sir,

We are told that John Redwood has proposed abolishing inheritance tax. I have not heard anything so daft in a long time.

For one thing, Britain does not have inheritance tax; it has 'death duties' or 'estate tax' paid on the estate of someone who dies, though this has mistakenly been called inheritance tax since 1986. In many countries in Europe there is a true inheritance tax, paid by beneficiaries of an inheritance.

For another thing, death duties are among the most clearly beneficial of taxes. Death duties are not new. They were levied in Roman times and in Medieval England, and have been continuously applied in Britain since 1894. It has been argued that death duties are superior both to taxing income and taxing spending, for both those depress trade and productivity.

But the most significant benefit of death duties, which I hope everyone will bear in mind, is in combating the agglomeration of wealth into the hands of the few. This is of vital importance for there are so many ways in which the few powerful interests can exploit the many weak ones. Far from abolishing the tax on estates, it is crucially important for the maintenance of a wide distribution of wealth and stakeholder interest in this country that we improve the tax; target it better and collect it more fairly.  Yours sincerely,

I strongly recommend all political parties, and anyone interested in taxation, to read the “Mirrlees Review: Reforming the Tax System for the 21st Century”, which is magisterial in its scope, thoroughness, and disinterested high-mindedness. Besides, it is available online. Though published  in 2011, it is still relevant, because no attention has yet been paid to its recommendations.

Higher Tax Bands

Gift Aid for higher tax bands

The current (April 2012) position with respect to Gift Aid is (I believe) as follows. For those who only pay 20% tax, the Inland Revenue makes a contribution to the charity that is equivalent to the donor making the donation before their tax liability is calculated. If I donate £100 the charity is given £25 extra. This is because when I earnt my money in the first place, the Inland Revenue took some in tax. I earnt £125, gave £25 to IR and £100 to the charity, whereupon IR gives the £25 to the charity.

For those who pay 40% tax, Inland Revenue DOES NOT make a proportionately larger contribution to the charity. If £100 is given out of taxed income, the donor would have had to have earnt £167 (and paid £67 in tax). To play level the Inland Revenue would give the charity the £67. Instead it gives the charity £25 and returns a portion of the remaining £42 to the donor. In the words of  HM Revenue and Customs:

"If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 per cent and the basic rate of tax 20 per cent on the total 'gross' value of your donation to the charity. For example, if you donate £100, the total value of your donation to the charity is £125 - so you can claim back:  £25 (i.e. £125 × 20%)".

Mysterious!  There must be a White Paper somewhere that justifies this arcane system. To guess at the justification we suppose the tax efficient donor will see this as a way of clawing back some of the money he lost in tax; his eye is not on the charity, and giving is not his aim; his eye is on his own money. If he gave nothing his tax rate is 40% and he loses £67 of his £167 to the tax man. If he gives £100 to a charity the tax man rebates £25 to him and give the charity an equal amount. He writes a cheque for £100, but it costs him only £75 and benefits the charity £125. This incetives the donor. Furthermore, it is so complex that a considerable number of 40% (and 50%) tax payers neglect to claim their rebate, so the Revenue benefits by the complexity. 

On the other hand there is certainly a research paper from 2009 that reccommends a change (http://www.cgap.org.uk/uploads/seminar_15thDec Gift Aid.pdf). This was commissioned by HM Revenue and Customs on behalf of HM Treasury and examines the effect on donations of possible changes to Gift Aid. It argues that it is more efficient to focus on the charity rather than the donor, and suggestes that the 40% (or 50%) tax payer gets no rebate while the charity gets either all or a larger portion of the tax.  Getting all the tax would be simplest, and the easiest to justify.