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Greek lessons for Britain

It is ironic that Osborne keeps proclaiming that his policies have prevented the UK being sucked down the path being taken by Greece. This may seem a curious point to make when it has just been announced that Greek debt is now expected to reach 189% of GDP next year, a level more than twice as high as the UK.

But the significance of this big rise in Greek indebtedness is that it is almost wholly caused by the shrinkage of the economy leading to further declining tax receipts, and that has largely been caused by the choice to prioritise deficit cuts over policies to revive the economy.

To be fair, a Greek recovery has been constantly spiked by every fresh demand of the deficit enforcers, notably Germany, which successively hobbles any incipient signs of growth that each stage of debt restructuring throws up. Osborne has no such excuse. The fact that UK indebtedness has now grown by £180bn since 2010 is due to his unfettered choice that continuing deficit reduction should always override growth stimulus.

There is a second lesson which the UK should learn from Greece, and that is the failure to crack down hard and seriously on tax avoidance/evasion was a major cause of the collapse in the first place as well as a millstone blocking recovery once the crash had happened. According to a recent US study, revenues of about €30bn elude the Greek tax net each year, equivalent to about 15% of Greek GDP. A former IMF official has recently commented, “If they’d collected the taxes, there would never have been a crisis in the first place”.

Despite Osborne & co preening themselves that Britain is not Greece, the UK position is not that different. The tax avoidance/evasion/non-collection figures for Britain hover each year between £38-42bn, about 3% of UK GDP, but no less than a third of the current UK budget deficit.

The real point here however is that in Greece the worm is turning on tax avoidance, but not in the UK. The acquittal of Costas Vaxevanis, the journalist who published the list of 2,000 Greeks with Swiss bank accounts and was then taken to court for impugning their privacy, foreshadows a change in Greek culture about responsibilities to the State. Hitherto Greek governments avoided crackdowns on tax evasion, relying instead on tax amnesties and high VAT on petrol and cigarettes.

Now negotiations are under way to reveal the names of thousands more bank accounts held by Greeks in private banks. No such perestroika is being undertaken in the UK.The links between the banks and the Tory/New Labour State remain too strong: half of Tory party funding comes from the City of London, and in return City interests are safeguarded at any political price. Till that link is smashed, the names of thousands of the British super-rich hoarding their wealth in Swiss bank accounts, Jersey, the Cayman Islands and all the other tax havens will be safe from tax justicde. But their time is coming.

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