Monday, November 24, 2008

Darling - VAT cut from 17.5 percent to 15 percent

Just checked the BBC website; fiscal irresponsibility is the order of the day. Darling is up on this feet delivering this pre-budget statement.

So far, Darling has:

  • Reduced VAT from 17.5 percent to 15 percent:
  • Raised the government deficit to £78 billion this year and £118 billion next year.

    Working on the assumption that this year's GDP is about £1.4 trillion, and assuming that it does not increase next year, this means that these deficits are about 5.5 percent and 8.5 percent of GDP respectively.

    Do New Labour really think that they are going to get away with deficits of that magnitude?

    Dream on....

    1. The whole bally country has gone to pieces.

    2. "Do New Labour really think that they are going to get away with deficits of that magnitude?"

      They wish, the deficits are going to be far, far higher.

    3. All the forecasts, for future growth, and for 'efficiency savings' are very much at the optimistic end of the spectrum. All chancellors go into recessions thinking that revenue will hold up better than it does, and spending will be kept under control (it never is). They also underestimate the length of the recession. Darling/Brown are falling into all these traps (knowingly some might say), and the reality is that 2009/10 and 2010/11 will be worse than predicted today. Which in itself is very scarey.

      Other than the NI increase, and the 45% rate, there are no other tax rises proposed to bring the deficit down. VAT will go back to 17.5% in Jan 2010. They are relying on the economy returning to growth, and efficiency savings to turn the situation round. It won't work. I reckon by then the deficit will be so large VAT will have to rise to over 20% to get extra revenue in. Other taxes on the masses will have to rise too, income tax and more NI.

      Of course there is an alternative. Deep cuts in public spending - the waste added in the Brown years could be slashed, and some of the savings passed back to the tax payer. But I can't see any party suggesting that, sadly.

    4. and assuming we're in even deeper doodoo in a year's time when the ridiculous VAT reduction is supposed to be rescinded, does anyone really think they'll actually raise it back up and make things even worse - especially if the election hasn't happened? And what would that do to the pound I wonder?

    5. For the day to day shopper/home owner/student this temporary cut by 2.5% isn't going to make life any different. The cut doesn't mean that the market value will be cut, especially with competition taking time to build, and it only being cut for a year?! Small business may profit £2.50 for every 1. Larger corporations will of course stream their profits into itself. Why isn't something drastic being done, when with the economy - the whole country the way it is, something drastic needs doing. I saw a survey asking who would be encouraged to shop more with the tax cut, 7% so far had said they would. For what reason? ....