Paying for the Olympics

The Tory party has come up with another crackpot idea to limit the amount that Londoners are liable to pay for the Olympics. This does not of course mean that they will pay nothing, but limits what they would pay if there are cost overruns. The trouble is that the only other way of underwritting these costs is for the UK government to underwrite them - so the rest of the UK gets to pay for these extra costs. We can already surmise that Londoners will benefit far more from the Games than people outside the capital; so why should the rest of the UK underwrite it?

This comes on top of the latest tory party "push" for a flat tax, which has also gained support from the Adam Smith Institute. I have long believed, ever since coming across the flat tax as an undergraduate many years ago, that such a tax would be great - if only it were feasible. The ASI report shows how every category of taxpayer would be made better off, while briefly shrugging off the fact that there would be a £50bn shortfall in revenues; some of this could be made up by reforms elsewhere (if these other reforms are so good, we could do them anyway - they are not a benefit of the flat tax system). The fact remains that a revenue-neutral flat tax would benefit only those who currently pay higher rate income tax. Now surely that's not a coincidence?