Tuesday, 22 June 2010

VAT hike takes gloss of the budget

Having taken a bit of time to digest the budget I can't get past the VAT hike and the message it sends out. Not only is VAT a hugely regressive form of taxation which is likely to hit the poorest hardest, but there is also the message it sends about our Government - both halves of it - that what they said before the election and what they are doing now don't match up.

Nick Clegg in his email to members yesterday talked about how hard some of the decisions were. But for all that the books are in a far worse state than anybody thought, and for all that the Government can rightly blame Labour for their shocking display in office, going back on your word on VAT is a crying shame. Some pedant will point out that all parties left enough wriggle room on the VAT issue to cover their post-election actions. That is true. But the Lib Dems campaigned on the basis of the Conservatives' 'VAT Bombshell' and I can't help thinking that today's decision is hugely regrettable.

Looking at the other measures announced today, you have to think that the Lib Dem thinking was behind a lot of them. The aim of raising the income tax threshold to £10,000 is still being adhered to and we saw a welcome step along that road with a £1000 rise. There is some movement on Capital Gains Tax - although not nearly as much as I would have hoped. In addition, the link between pensions and income is being restored and the whole tenor of the measures on tax allowances and tax credits is that those at the higher end of the income scale will receive less than in the past.

I don't think anyone will be better off as a result of this budget and the fault for that lies squarely at Labour's door. For all her whingeing, Harriet Harman failed entirely to grasp the fact that they got us into this mess and they have done nothing to show what Labour would possibly have done to repair the damage.

I'm glad to see the broadband tax on fixed line phones has been abolished. It would have particularly hit those in rural areas without decent mobile connections and older people who rely more on their landline.

I'm also glad to see the National Insurance break for new businesses outside London and the South East. How much this will actually help, I don't know, but it is a clear message of support for the economy outside the capital.

On many issues the details are still unclear. One of these is the potential freeze in council tax. George Osborne said that if councils could limit cost rises then he would be able to offer some help. I would welcome a freeze in Cornwall next year and campaigned for a lower increase here this year. All the while local Conservatives seemed content to boost bills by as much as would be allowed. How they will react to the Government's offer will be key.

The decision to abolish the cider hike is welcome and many pubs would have been under threat from a significant beer duty increase. Likewise, the costs of petrol are crippling rural communities already and so I am glad not to see another hike in fuel duty. However, it seems perverse not to raise tobacco duty at a time when almost everything else is going up. Surely we should be taxing the bad things much more heavily than the good.

I'll end on a piece of good news. The public sector pay freeze and the ambition of ensuring that the bosses don't earn more than 20 times the lowest earners is very welcome given that those public sector workers on the lowest wages of under £21k a year will actually get a pay rise of £250 a year. These are more examples of Lib Dem thinking becoming reality.

But still, the VAT hike. Oh dear.

2 comments:

futiledemocracy said...

I am ashamed that I voted Lib Dem. You people posted yourselves as the progressive party of English politics. Yet, you've let the political discourse become neoliberal in essence. And then, you contributed to it, with the budget. Your party is shameful. Tory-lite.
We now need real progressives, offering real change, and not more Thatcherite bullshit. To increase VAT, yet decrease corporation tax, is shocking. The good thing to come out of this, is that both the Tories and the Tory-lite Lib Dems will be unelectable for another generation.

DNP said...

As a first (and last) time Lib Dem voter, I can echo futiledemocracy's comments. I know there are many like me and I predict that the Lib Dems will never recover from getting into bed with the Tories. The final nail in the coffin for me was the nauseating sight yesterday of Clegg and Alexander acting like two smug nodding bookends as Osbourne delivered his speech. As a North Cornwall constituent I'm afraid that Dan Rogerson is going to face an uphill task at the next election. Fingers crossed for a half way decent Green candidate as an alternative.