Mr Osborne, like Mr Clegg has on so many occasions in the past few months, attempted to justify this seemingly regressive, unhelpful, policy by pointing to its 'progressive' qualities, saying it would be a fairer alternative to other measures. In doing so he was partly supported by research from the Institute for Fiscal Studies (IFS), which highlighted the fact that those with the most limited means tend to spend less on the majority of items subject to VAT.
The problem with a rise in VAT, however, is that it reduces the purchasing power of those on lower incomes. Research clearly demonstrates that the poorest bracket of the population in terms of household income will lose disproportionately more from this policy. When it comes to decisions as to whether or not to buy certain consumer goods, those struggling to make ends meet will increasingly decline to take the plunge. This is bad for the poor, whose quality of living decreases further.
Moreover, it is bad for the economy as a whole. Every time people spend money on things like televisions and computers, the shop they buy them from makes money. The more money the shop makes, the more employees they can afford to hire. The more employees they hire, the more those employees spend in other shops. And so on. Discouraging people from purchasing is not good economics. It's especially damaging given the weak growth projections for the UK economy following Osborne's cuts package.
If it has any sense, the coalition will execute one of its now famous U-turns before the rise starts to pour further misery on British retailers. Given the unfortunate timing of this tax rise, coinciding with the start of the Oldham by-election campaign, Mr Clegg may well have a word in Mr Cameron's ear.
Something has to be done about the massive National Debt. Once again labour and its supporters say you cant do this the world will end. Not so. Yes its painful but its necessary the government has to raise money to pay its debts and in case you hadnt noticed spending money that people havent got is what has got us into this mess in the first place. The strongest stores will in any case discount items to a level where they sell. In the long run it will be worth it if if the deficit reduces and the government can reduce the £120 million a day it currently spends on debt interest.
ReplyDeleteBrother, remind me how creating another huge wave of unemployment helps cut the deficit.
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