Reduction in VAT - it won't work..

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Keith T - 2008-11-30 10:41 PM

 

Just a mathematically point - the 'reduction from 17.5 to 15%' in VAT isnt actually what is seems and does not work out at £25 per £1000 spent.......so even the supposed 'generosity' of the chancellor is yet another con.

To find the 'real' value, you need to divide £1000 by 117.5 (as the initial figuire includes VAT),then multiply by 115 ( to include the new rate), and the resultant figure just under 979...ie a 'saving' of only slightly over £21 per £1000!

This does not seem to have been picked up by many of the commentators, and certainly not Alistair Darling - although even he must have worked this one out!!!!(tohis benefit, of course!)

 

It's called 'political spin' Keith - something this government has turned from a campaigning tool into an art form all of it's own!

[Brian Kirby]

Oh dear, Bruce!

More own goals than useful scores here.  Tongue in cheek, I accept, but it is far too one dimensional, and that is the problem I was hoping to expose.  So with my thanks for the coathook, and your bravery, here goes with the coat.

Cut NI contributions by 50%.  Assuming the take is similarly affected, that would cost the treasury some £45bn.  Yes, billion, the present yield from NI is £90 billion!

Ban public sector travel.  To my knowledge, much of what you advocate is already common practise.  Public sector employees are already strongly discouraged from making non-essential journeys, and when they do travel, they travel by the cheapest means available.  Some senior people get first class, but they are the minority, and generally have to justify the additional cost.  Accommodation is in "price marked" hotels, meal allowances are pre set at modest levels, generally below restaurant prices for much of the country, and booze is forbidden.  Many meetings are video conferenced to eliminate travel.  However, the disruption to normal activity from a blanket ban would be immense, and the effect on government spending, overall, negligible.  It will also be irrelevant, for a reason I shall come to.

Ban non-EU immigration.  Not a great effect on spending, as most immigration comes from within the EC.  Cost, in terms of damage to external relations, liable to exceed benefits.

Temporary ban on recruitment to the public sector.  Not original, but effective in the short term as a token gesture.  I assume this would also ban recruitment for replacement purposes, so there would be some actual shrinkage.  How much this would affect government spending would depend on what provision has already been written into the figures.  However, this is no more than a ban on new employment, and on replacing leavers (probably few under present circumstances) and retirees.  Minimal effect on spending, because slow acting, with some negative impacts on efficiency, but generally OK - provided it is kept short, and not allowed to just run on a la Thatcher.

Seal existing entitlements, and transfer public servants to money purchase pensions.  No actual savings here, as employer's and employee's contributions would have to be increased, to yield acceptable levels of future benefit.  Both, of course, come from the same pot.  It is already the case that new entrants join on much less generous schemes than the mythic schemes you seem to be thinking of.  However, just pause for a moment's thought.  This would be hugely unpopular, and would be presented in the worst possible, most frightening, way by the unions, who the employees tend to believe (for generally good reasons) in preference to their employer.  The whole of the public sector would simply down tools and walk out, and you, as government, would be impotent.  No taxes in, no dole payments out.  No supplies to hospitals, no weapons, fuel, or ammunition for the forces, no pay for the police, no streets swept, no bins emptied.  All that, and more.  Some government!  Huge cost, no benefit!  Typical!  Oh, and of course, this is the reason the travel ban would be irrelevant.  Striking workers don't travel.

Abolish stamp duty on homes below £500K.  Present yield to treasury around £6.5bn.  Allowing for the nature of the tax, and the national spread of house prices, possible cost?  Say around £4bn.

Suspend all overseas aid.  Huge own goal.  Huge damage to trust, image and reputation abroad with consequent repercussions for international trade.  Those countries we currently assist will have far greater need of that assistance under present circumstances than shall we.  Mean spirited, as it picks on the least well off to benefit the hugely better off, and counter productive.

Withdraw forces from Iraq.  The US would be incandescent.  And, who do we rely upon, for the most part, for our arms, missiles, aircraft, computers etc etc?  Who are we now relying upon to stimulate the world's economy?  Do we really want to bite the hand that feeds?  Do we really believe we have such friends in the US that they would just pass this one by?  There is considerable animosity against the UK lingering below the surface in the US.  There are still perceived to be old scores to settle.  Many influential Americans resent the "hitting above its weight" influence of the UK, and would like to see it neatly corralled into a more restrictive EU.  This would be to commit international political suicide.  The US would get its own back for this bit of treachery, and we should all, like it or not, be the losers - big time.  The saving in revenues would be as nothing to the losses.

For me, therefore, this package spells political and economic disaster.  Do not vote for this man! :-)

[BGD]

Hi Brian -

 

A good and well-thought-through critique on my suggestions.

I would argue against most of your suggested negative consequences though; and in any event there is going to be no gain without an awful lot of pain...that's the nature of the animal that we are faced with.

 

But I would have preferred I think for other posters to have come up with their own "manifesto" list of actions.

 

I tried in my post not to criticise those ideas (or posters) who'd gone before me on this topic, but rather to throw some new ideas into the pot.

I know you know that I'm a pig-headed bugger, mostly immune to flak in here, but may I encourage others to put forward their own list of ideas that would be effective in getting UK plc out of the mess.

 

(Oops - on re-reading my earlier post, I realise I forgot to mention that I'd take the UK into the Euro forthwith too. No messing. No plebicite. In from next 1st Jan if possible to set it up in time; or at least with a commitment to do so, which would help Eurozone confidence that lower-cost tading with the UK is imminent)

 

 

[Brian Kirby]

BGD - 2008-12-01 4:02 PM Hi Brian - A good and well-thought-through critique on my suggestions. I would argue against most of your suggested negative consequences though; and in any event there is going to be no gain without an awful lot of pain...that's the nature of the animal that we are faced with. But I would have preferred I think for other posters to have come up with their own "manifesto" list of actions. I tried in my post not to criticise those ideas (or posters) who'd gone before me on this topic, but rather to throw some new ideas into the pot. I know you know that I'm a pig-headed bugger, mostly immune to flak in here, but may I encourage others to put forward their own list of ideas that would be effective in getting UK plc out of the mess. (Oops - on re-reading my earlier post, I realise I forgot to mention that I'd take the UK into the Euro forthwith too. No messing. No plebicite. In from next 1st Jan if possible to set it up in time; or at least with a commitment to do so, which would help Eurozone confidence that lower-cost tading with the UK is imminent)

My critique was only intended in the same slightly tongue in cheek vein as your noble post.  However, I would be sad if that were to put off others, because that is not the intention.  The main problem seems to me to be that because Gordon didn't pour water on the irrational overexuberance when he was chancellor, our collective ammo for the present fire fight is not up to the job.  We should have had modest reserves, and not large debts accompanied by overoptimistic forecasts.  However, we are where we are. 

Ah yes, the Euro.  How I agree, although I doubt the rest of Europe will let us in at the present rate!  Also, I'd be a bit disappointed to see the relativities in buying power set quite so strongly in favour of Europe, and against us.  Somewhere around 1.25 "feels" about right to me. 

Sterling is just becoming the plaything of the major currency speculators, who can't shift the Dollar or the Euro by such large margins short term.  It surely can't really survive on its own for much longer. 

The idea of a vote before the event is, in my view, totally mad.  All hell would break loose in the currency markets, and the move would be defeated.  First go in at an agreed rate, and then hold a vote, if one has to, on whether to stay in or get out.  Problem is, the opposition, ever mindful of their own political advantage over the national interest, would portray the move as proof positive of government failure, and would probably scare the majority in voting against.  We'd than face several years in real schtuck on the money markets as speculators play football with sterling, until we are eventually forced to join at a distress rate with a truly broken economy.  Best policy, just join and, as is traditional, when challenged about the plebiscite say "well, that was then, this is now"!

The cost to industry of the incessant swings in rates is enormous, and none of our industries can really invest into Europe or elsewhere as the exchange rate risk makes any attempt at forecasting returns a total lottery.  In my opinion, a bit more exchange rate stability would be a great help to recovery.