Wednesday, 5 January 2011

VAT at 20%: A very deliberate choice

The Guardian editorial

...The chancellor claims that this week's rise is relatively fair. Fairness is a slippery term; but if a fiscal measure hits the vulnerable more than the well-off, it is clear that such a change is regressive. The IFS has calculated that the rise will cost the poorest 10th of society over 2% of their income, while taking less than 1% from the richest 10th. If that sounds unprogressive to you then you are in good company: both Mr Cameron and Nick Clegg described VAT as regressive before the election. Mr Osborne wants to portray his regressive tax measures and spending cuts as a matter of necessity. The reality is that his deficit-reduction package will end up hitting Britain's poorest hardest. It doesn't need to be this way.

Simon Jenkins:

The banks are a clearly oligopolistic market, badly in need of a 1986-style shake-up. The big four are soon to reveal that some 200 staff in each of them earned an average of £1m last year. Bankers were reported to have rewarded themselves with personal bonuses of £7bn over Christmas, two fingers to the public and three times the VAT rise on all their high street neighbours. Needless to say, there is no VAT or other transaction tax on banks. Money that properly belonged to shareholders and, in many cases, taxpayers, simply walked off the premises. What would ministers say if subsidised car workers decided to take half a dozen vehicles home each Christmas?

The banks need not care because they are not in politics. Ministers should care because this spring they are asking the public to pay a heavy price supposedly to rescue a sorely wounded economy. This is money they could raise in five minutes by calling the bluff of the richest section of the business community. As long as the government continues to tolerate this gross imbalance of pain, people will howl, and they will be right.

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