Why Should We Subsidise London From Our Taxes?

The news today has been covering the latest rise in rail fares.  Given all of the other news coverage, in recent weeks, over the devolution of finance, which will lead to the break-up of Britain, there has been little coverage of the fact that taxpayers continue to make a huge subsidy to rail fares, of around 50%.  Yet, the main beneficiary of these lower rail fares is capital based in London.  Hard pressed workers in the North, are paying taxes to benefit capital in the South that is raking it in hand over fist. This is the same capital that objects to the imposition of the mansion tax, because it would mean the rich, in London, paying a few bob more, and who, given half a chance, would declare financial UDI, to keep all of the money made in London.

Because London acts like a huge vacuum cleaner that sucks up most of the available capital and resources, in Britain, it has continued to grow, whilst the rest of Britain has languished under the effects of the Liberal-Tories' insane austerian economic policies.  That is, of course, a Liberal-Tory government that exists, in large part, because of the electoral support it obtains from the relatively affluent sections of society living in and around London, and which is now at extreme odds with the political situation, not just in Scotland, but in the North of Britain, and much of the Midlands.  The consequence has been the ludicrous run up of property prices in London, which has far exceeded the rise in wages, even in London, fuelled by a massive credit bubble, originally initiated by Thatcher back in the 1980's, and which every successive government has been forced to reflate, each time it threatened to burst, because otherwise it would mean the destruction of Britain's banks, again mostly based in London, whose balance sheets are a fiction based upon this astronomical debt, and outrageously inflated property valuations.

Private debt in Britain is now higher as a percentage of GDP than it was in 2007, and is set to increase further as wages continue to fail to keep pace with prices.  One consequence is that potential homebuyers can no longer obtain mortgages, because, even in their forties, their wages are insufficient to cover monthly repayments, even with interest rates at record low levels, and mortgage rates at about a third of their normal level.  That is why house selling prices - as opposed to the ludicrously fictitious asking prices presented in the house price indices - have been falling in much of Britain.

But, in London, it has also meant that many potential buyers have continually moved further and further away from the centre where they work, in order to find houses they can afford to buy.  There are even those WILLIE's who work in London, and live in Edinburgh, flying down or travelling down by train to their jobs in London's financial centre.  But, this is largely made possible because of the subsidy of their rail fares by taxpayers.  If the taxpayer in the rest of Britain did not subsidise these rail fares, and commuters had to pay the full cost, one of two things would occur.

Either, many of these workers would decide the cost was too great and would decide to seek alternative employment outside London, where such expensive travel costs were not incurred, or else firms based in London, would themselves have to locate outside London, where plentiful labour supplies were available.  If the former occurred, capital based in London would find itself short of workers, just as its only possible to obtain low-skilled workers, in London, because the wages of those workers are subsidised by various in-work benefits, and huge levels of Housing Benefit.  In that case, London based capital would have to either raise wages substantially, and thereby reduce its profits, or else it would be forced to move its operations outside London, to where there are plentiful supplies of labour, that does not face the high cost of travel and living that exists in London.

Either way, workers outside London are acting like turkeys waiting for Christmas by continuing to subsidise the private rail companies' fares from their taxes, and thereby also subsidising the profits of London based capital, that is not covering the full cost of the labour it employs, because of that labour being subsidised by taxpayers from elsewhere in the country.  Workers elsewhere in the country by providing that tax subsidy to the private rail companies profits, and to the profits of London based capital, are thereby encouraging the further concentration of capital and labour in London, and a restriction of their own employment and economic prospects.