It is truly amazing how Labour, who put up taxes enormously during their thirteen years in government, and left the country with the now acknowledged vast debt and structural deficit issue (which makes the debt worse year on year), now has the temerity to have a go at the Coalition Government over its modest VAT rise on the top rate.
First, it shouldn't have been necessary, but that is Labour's fault, no-one else's. Now the damage has to be repaired, something that Labour were, frankly, never going to bother to tackle seriously. The revelations regarding Messrs Brown and Darling on this in general, and on Mr Darling's own wish to raise VAT (though staged), give the game away.
Labour says that VAT is "a regressive tax". Perhaps it is, but we're stuck with it as a part of our membership of the EU. One day we might be able to leave the EU safely, or perhaps it will collapse and cease to exist even sooner, and we can scrap it. The tax itself might be considered regressive (which explains why it originated from a Left-wing organisation) but a modest change doesn't affect that one way or the other.
A modest increase in just the top rate isn't going to make a noticeable impact. It doesn't affect food, children's clothes, or utility bills, and near enough everything else is optional to a greater or lesser degree.
For example, something rated at 17.5% before, previously costing (say) £4.70, now costs £4.80. Wow! A whole ten pence difference on a multi-pound purchase.
Somehow I can't see that breaking the bank, unlike many (perhaps most) of Gordon Brown's more than a hundred tax rises, which by the way included a number of stealth taxes, and were far more punitive on all of us. The VAT rise by contrast is honest, open and up-front, not sneaked in and hidden away from the general public gaze, which was Brown's method in dozens of cases.
So, we're stuck with the necessity for this, and it means that several other possible tax rises have been able to be avoided, according to expert commentary in several places. All we need to do is ensure we never forget who it was who put us and our country in this position in the first place!
Agreed.
ReplyDeleteLabour are quick to say "this will have a devastating impact on those people already struggling to pay their heating bills and feed their families"
When Labour recently temporarily reduced the rate to 15%, did anyone notice the difference?
Food and children's clothes are zero rated and heating is at a reduced rate of 5% and this is not being changed.
This is hardly devastating.
I do enjoy pointing out inconsitency.
ReplyDeleteWhy is it before the election John VAT was, and in your own words
"It might not seem all that great a change each time, but it will significantly impact the country's recovery from recession, especially with everything affected (such as price lists with VAT itemised) having to be re-done"
http://wwwjohn-m-ward.blogspot.com/2008/11/vat-con.html
In addition, Cllr Jarrett (Finance Overlord) has shown himself to be entirely inconsisent on the issue when he opined that
"In 2010 you will be lucky to keep your job as such scarcely noticed rises such as a 2.5 per cent increase in VAT take their toll." December 2009
It seems that a change of political colour in government and the Tories are selling out.
Why is a 2.5% increase now fine but only 8 months ago a terrible curse that should be challenged?
Labour locally are campaigning against the VAT increase because we had a consistent policy, which we told the electorate, to raise NI and repay the deficit over a longer period. Interestingly a position which the cabinet is taking against Clegg / Cameron with the 'blunderbus' cuts.
More importantly however, it is a matter of trust. Both David Cameron and Nick Clegg told the British people that it was not going to happen, when it so clearly was being planned. Better then expected economic figures puts pains to the line that things were worse when they came into office.
Just admit that the Tories were planning this increase way before the election and people will respect.
Thank you Irene, you have it sussed.
ReplyDeleteTristan is trying to manufacture an issue that isn't there. I can say, from inside info, that the VAT rise was not "being planned" before the election.
I gather that it is only because the situation was found to be so much worse than anyone could have realised (e.g. already having spent from several future years' budgets) that necessitated a re-think.
I still would prefer no tax increases at all; but if something is now unavoidable, I wouldn't want it to be a tax on jobs, such as National Insurance rises.
I am actually being consistent, while adapting to changed circumstances, in the same way as the Captain of the Titanic would have been consistent if he had dealt with avoiding the iceberg and then re-plotted a course toward the ship's original destination.
One is still heading toward that destination, even if an emergency requires a change of tack.
As always with such matters, in respect of the national economy, we should never have been placed in this situation in the first instance; but that's the preceding Labour government's doing, no-one else's.
Any negative impact will be their fault; but at least this way it is less serious than the alternatives, and won't hit jobs to any significant extent, unlike an NI rise.
As far as Alan Jarrett is concerned, note that he mentioned the possibility of a VAT rise as just one of several tax rises that would have been implemented (as Darling and other sources have admitted)under Labour, in their usual "stealth taxation" style.
We're doing it with just the one, very open tax (i.e. no stealth) and at last the damage to Britain is being repaired. Yes, there will be pain (as we all knew really) but spread broadly across the population and much thinner than alternatives would have done.
Bottom line, though, is that familiar saying: we wouldn't (by choice) have started from here...
The problem as I see it now is not the VAT rise per se, but the general taxation burden and the complexity of the methods by which it is currently levied.
ReplyDeleteTax isn't just high, it can be expensive to pay and collect. So many people in small businesses probably pay more than they owe due to the complexity of the allowances system.
We also have so many different taxes which are imposed upon business that the cost of work is increased dramatically. HMRC is bloated and expensive, and largely inneficient because the tax system is so complex. Each pound of revenue collected should cost less than it does.
Also, the complexity leads to fraud and mistake (which is often prosecuted as fraud). Moe unnecessary expense. Avoidance also rises with complexity.
The upshot is that, in the current hard economic climate, the tax and regulation of business in this country is a direct disincentive to business startups and the self employed, and collects less for more cost than it should.
You cannot hope to undertake even the smallest of ventures without a very good accountant.
Tackle that as a priority and the recovery will follow from it. The VAT rise viewed in isolation is a red herring.
Yes, Tony_E; and the overall burden will be with us for some years to come, I suspect.
ReplyDeleteWhat can be done in the meantime is simplification of the taxation set-up in this country, and that is apparently being worked upon right now. Hopefully we shall have fully detailed proposals in the autumn Spending Review.