Monday, November 24, 2008

A reduction in VAT is puerile politics and economic sabotage

The 'Golden Rule' has been ditched, and its remnants gilded with Keynesian spin. An imminent 45p rate of income tax for those earning more than £150,000 spells the end of New Labour and heralds a return of the spectre of the 70s. The party has reverted to type, as Cranmer always knew it would. Socialism brings nothing but communal misery.

Labour is supposed to be the ‘party of the poor’. It professes to be concerned with social justice and alleviating the plight of society's most vulnerable. But it is nothing of the sort. While unemployment reaches 2 million, and is projected to head inexorably towards 3 million by 2010; while house repossessions increase by 12 per cent, and are projected to make tens of thousands more homeless over the coming year; while the income of the nation’s poorest falls in real terms against rates of inflation higher than the increases in benefits or salaries; while thousands of families face a Christmas of worry about mortgage rates; while pensioners freeze, unable to heat their homes adequately due to spiralling fuel costs, it is reported that the Prime Minister and Chancellor of the Exchequer have decided to reduce VAT from 17.5 per cent to 15 per cent – the minimum permitted by EU directive – in order to ‘stimulate the economy’.

So, the chocolate bar in your Christmas stocking that would have cost you £1 will now only cost you 97.75p, which retailers will round up to 98p – that is, if they bother passing on the reduction at all. And if you buy quite few chocolate oranges, your savings could be as much as 10 or 15p. A litre of petrol might fall by a penny. Your bottle of wine might be 20p cheaper, or your average saving on a laptop might amount to £7.

This is paltry.

Cranmer is all for cutting taxes, but only when it is prudent to do so.

Reducing VAT at the present time is not only insulting to the intelligence; it fails to bring relief to the poorest in society in the same way as a cut in income tax (or a raising of the tax thresholds) would. And such a reduction in the burden of taxation would then leave people with more money to do with as they thought best. It would be tax relief to encourage individual financial responsibility. But the Chancellor’s ‘stimulus’ does not assist with personal debt repayment, and neither is it an encouragement to reduce that debt or to budget carefully for the future. In fact, it is designed to entice us to spend more, because the only people to benefit will be those who spend more. This ‘stimulus’ amounts to nothing more than more debt-fuelled growth, which is simply stoking those same high levels of debt which were the cause of the ‘credit crunch’ in the first place.

Cranmer is not remotely persuaded that retailers will go through a costly and time-consuming re-pricing exercise - especially so close to Christmas - or that businesses will be concerned to pass on such minuscule reductions for minimal gain to their customers. In fact, such a reduction in the turnover tax is likely to be pocketed by businesses, thus simply increasing their own profits.

As the nation’s debt reaches £100 billion, this impoverished Labour Government is bringing forward the Budget with a raft of announcements which will make next Christmas even more miserable, and the one after positively Dickensian (and not in the romantic sense).

What people need is security for the future, while these temporary measures simply white-wash over the nation’s crumbling finances and conceal the decay at the heart of Labour’s economic policy.

And the real worry is that a Conservative government, having won the coming general election on a narrative of ‘change’ and ‘hope’, will be faced with the harsh reality of balancing the books.

While Labour’s VAT reduction to 15 per cent will have little impact on people’s spending plans and will scarcely be noticed by the people, a Conservative VAT increase to 22.5 per cent in 2011 - to offset a budget deficit which is likely to be around £120 billion - will have considerable negative impact and will most certainly be noticed by the people. And neither will it be quickly forgotten – rather like VAT on fuel, or ‘Black Wednesday’.

And the thought of the next Conservative government constantly blaming the past Labour administration - while it may be justified and true - will simply become a tiresome mantra to the electorate.

This temporary tax cut is more about entrenching a client state of the permanently impoverished, permanently dependent and permanently eternally grateful to Labour for whatever crumbs are thrown at them. It is a tax-payer-funded subversion of democracy.

Is Gordon Brown simply stoking the nation’s debt and wrecking the economy simply to sabotage the prospects for success of the incoming Conservative administration?


Blogger Botogol said...

Sigh, if only we had the transparent US custom where all items are priced excluding sales tax, which is then added at the till.
It that environment - which is much more honest - the reduction in tax would be
1) noticable
2) much more likely to be passed on to consumer

24 November 2008 at 09:42  
Blogger ultramontane grumpy old catholic said...

Your Grace

Gordon Brown, on top of his skills as a inverse Midas (every time he touches gold it turns into paper) is now going to have a massive borrowing binge. By the time the next election comes around, the country will be in a deep deep mess.

I echo Your Grace's thoughts - will the next election be a good one to win? Whichever party wins will be held accountable for the economic whirlwind that will surely ensue.

It is of course possible that if the Conservatives win the next election by a substantial majority, Labour will revert to type, militant tendency, ban the bomb, etc etc just like they did in 1979. By Labour making themselves unelectable in the 80's, Mrs Thatcher could prescribe the difficult medicine that the country had to take to turn the ecomony round - but it took more than one parliament to do it.

24 November 2008 at 10:28  
Anonymous Anonymous said...

Your Grace.
The answer to your last question about sabotage is obviously yes, I remember that some monetary policies were not destined for implication until after the next election. If it wasn't for the prospect of another five years of misery under this inept bunch of cowboys I might wish that they would inherit their own booby traps in wily coyote fashion.

24 November 2008 at 10:35  
Anonymous anonymous-2 said...

Suppose Gordo is not, himself, planning to fight the next election but has instead set his sights on a big international job, eg at the World Bank, IMF, EU or UN. The slash, burn and screw the incoming Tory administration starts to look like a logical career development strategy/gamble.

24 November 2008 at 11:24  
Blogger Wrinkled Weasel said...

"Is Gordon Brown simply stoking the nation’s debt and wrecking the economy simply to sabotage the prospects for success of the incoming Conservative administration?"

For the Government that took us to war on the back of lies, for the Government that said 9/11 was "a good day to bury bad news", for a Government that starves Tory councils of funding and fattens Labour ones, and for a Government whose entire agenda for the last year seems to have been to wrong-foot the Tories - I wouldn't be at all surprised.

Any tax cut of this sort, at this stage, is irrelevant. Public borrowing must be curbed and spending must be cut. It's what I do when I am skint, except that I don't borrow at any time and I only spend what I have.

We have sleepwalked into this position where the masses expect to be nannied from cradle to grave and yet, despite public spending at record levels, I can no longer get free dental treatment.

His Grace is surprisingly in touch with modern politics, but had he the benefit of a a corporeal presence, he might be getting a little frustrated at how much of his money was being wasted, by so many, for so few.

24 November 2008 at 13:02  
Blogger dizzyfatplonka said...

The tax handout he gave the Banks should of gone into our personal accounts, now that would of helped with debts and triggered spending.

24 November 2008 at 14:36  
Anonymous Anonymous said...

And what's this got to do with religion?

24 November 2008 at 17:15  
Blogger The Half-Blood Welshman said...

It's even better than that - fuel is exempt from the VAT cut! The one place that might have made a difference, and it's not included!! Pure lunacy.

24 November 2008 at 17:46  
Anonymous len said...

We the taxpayers have bailed out the banks only to see our money disappear into their vaults.
We as a nation are in debt up to our eyebrows, Browns solution, borrow more.
My knowledge of finances and the economy is rudimentary to say the least but to my mind this labour governments financial strategy is madness!.

24 November 2008 at 18:11  
Anonymous Anonymous said...

And what's this got to do with religion Cranmer? Stick to your brief.

24 November 2008 at 18:24  
Anonymous Anonymous said...

Try top of page ,right, religio-politics or politico-religiosity.
just trying to be helpful!.

24 November 2008 at 18:32  
Anonymous Anonymous said...

But this isn't even religio-political, its not religion its economics and politics so its politico-economical, not religion.

24 November 2008 at 18:44  
Blogger Cranmer said...


Will you two please acquire names or go away.

His Grace blogs upon whatever pleases him (or displeaes him). And if you think money has nothing to do with religion, you might reflect upon the fact that Jesus spoke more about it than he did about the Kingdom of Heaven.

24 November 2008 at 19:04  
Anonymous len said...

Apologies your Grace the first anon was me,operator error!.

24 November 2008 at 19:39  
Anonymous len said...

Cranmer,18.32 was me,
Sorry, I will go now its been a long day, apologies,

24 November 2008 at 19:52  
Blogger Cranmer said...

Mr Len,

That is quite alright. You are forgiven. Confession is good for the soul.

24 November 2008 at 21:06  
Anonymous len said...

Couldn't care less, it's a crap blog really

24 November 2008 at 22:23  
Anonymous len said...

Couldn't care less, it's a crap blog really

24 November 2008 at 22:23  
Anonymous no nonny said...

Well who said our religion had nothing to do with economics? What's all that about REDEMPTION - if it's not about the price of our breaking God's Golden Rules? He bought us back, didn't he?

In other words, for anons who don't know anything about Judaeo-Christianity: our religion assumes that we naturally think about things in terms of buying and selling.... (nota bene: I don't imagine I know what God thinks...)

25 November 2008 at 00:23  
Anonymous Sam said...

I think the point is exactly that the vat reduction will simply be pocketed by businesses.
They're not doing "socialism" they're doing trickle down economics.

25 November 2008 at 01:03  
Blogger Wrinkled Weasel said...

Len, His Grace is too polite to reply to you, but for me, if you think this is a "crap blog", the second word is "off"

25 November 2008 at 13:08  
Blogger dizzyfatplonka said...

"for anons who don't know anything about Judaeo-Christianity: our religion assumes that we naturally think about things in terms of buying and selling"....

What is the essence of Judaism? Materialism.

Christs message is corrupted by Judeo Christianity

25 November 2008 at 14:13  
Blogger Hannah said...

This comment has been removed by the author.

25 November 2008 at 17:06  
Blogger Hannah said...

Hi Cramer,

Hey individuals from the poorest section wont be benefited by the reduction in VAT.You should post this interesting article in to send a strong and fervent message to the labour party.

25 November 2008 at 17:13  
Anonymous len said...

Cranmer, someone is posting in my name.Please check.22:23 Is not me!.

25 November 2008 at 19:34  
Blogger Cranmer said...

Mr Len (2),

There is no means of checking which Len is Len or if Len is Len or not.

The only mechanism for preventing others from using your name is to register it by obtaining a google account.

25 November 2008 at 20:27  
Blogger len.allan said...

Thank you your grace.

26 November 2008 at 07:54  

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