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End of Thatcher's tax incentives

Robert Peston | 17:36 UK time, Monday, 24 November 2008

There were three big numbers announced in the pre-Budget report.

Alistair DarlingThe biggest and most startling is that more than £500bn is being added to the national debt between now and 2015.

And the amounts that the government will be borrowing over the next two to three years will be unprecedented for peacetime.

But here's the thing.

If it weren't for substantial rises in National Insurance from 2011 onwards, those debt figures would be even greater.

Increases in employees' and employers' national insurance raise about £5bn every year.

And, funnily enough, £5bn a year is also what the Treasury hopes to save every year from 2010 in so-called "value for money savings" in National Insurance.

There was also a small number that caught the eye, which was that the Treasury expects the recession to be less severe than many independent forecasters.

And the Treasury also expects a sharpish economic recovery from the end of 2009.

Again, there are economists who fear the Treasury is guilty of optimism.

But investors apparently liked what they heard: the rise in the FTSE100 today is the biggest ever (though some of that is due to the bailout of Citigroup, which has very little to do with G Brown and A Darling).

Here's the big simple point.

This pre-Budget report symbolises a massive structural change in the British economy.

Quite apart from the massive rise in public-sector debt, there is also a big change in the structure of tax incentives.

These are the first seriously redistributive tax changes since the 1970s.

Or to put it another way, from 2011/12 the top 2% of earners will pay more tax.

In a way, this Labour government has ditched the cornerstone of Thatcherism, which is that those on highest earnings will create wealth for the benefit of all of us if they're allowed to keep as much as possible of their respective incomes.

More than a decade after the 1997 landslide, some will say that Labour has gone back to its socialist roots.

Tonight, the British economy has taken on a Scandinavian, left-wing tinge.

Comments

Page 1 of 3

  • Comment number 1.

    Fiscal changes often have a good short-term effect on GDP - but are partly offset by rises in long-term interest rates if markets think the creditworthiness of the government will be reduced in the long term.

    Thus, Alistair Darling has promised to bring the budget back into balance by 2015 to reduce this effect. But is that promise believable? I evaluate it in the following article and give him a score out of 25 for credibility:
    http://www.knowingandmaking.com/2008/11/credibility-check.html

  • Comment number 2.

    Can't understand why there was no mention of residential houses being included in Self Invested Personal Pensions. It can give a boost to the residential property market without investing the taxpayers money.

  • Comment number 3.

    "Tonight, the British economy has taken on a Scandinavian, left-wing tinge."

    I think you are being extremely unkind to the Scandinavians..

    Th Swedes are running a budget surplus or were since 1998
    And of course Norway has saved much of its petroleum revenues for the future..

    So perhaps you might care to remove that comment as it is - typically - 100% at variance with the truth.

    Unless we have a budget surplus and have saved our N Sea oil revenues without telling Mr Darling......

  • Comment number 4.

    Forgive me if I am being stupid but will the decrease in VAT affect prices in the shops.

    eg at 17.5% an item sold for £84+vat =£100

    At 15% won't the shops just charge 86+vat =£100

    Profits up 2%, savings to consumer Nil.

  • Comment number 5.

    Sadly the TIME has come to relocate our


    Distribution & Warehouse facility.


    Best place is mainland europe not the UK.

  • Comment number 6.

    Surely when we nationalised half the banking system was when we took a sharp left-wing hook ?

    Does anyone seriously believe that £15 off a new £600.00 LCD screen will encourage people to dash out and spend ?

    Why didn't they take the chance to do something practical and remove the VAT on gas and electricity ?

    This is a testing budget - they are testing to see if the public are so gullible they can get away with calling a general election in March !

  • Comment number 7.

    Gordon always made out that Tony was being "New Labour" and he still had his faith in "Old Labour", so now we see it.

    A rise in Tax for those earning over £140.000, but for the rest of us ANOTHER increase in National Insurance. Another way of taking money off the workers.

    Also the 15% VAT scam. Most people would have seen VAT come off fuel and booze, BUT, guess what, the increases on duty for fuel and booze EXACTLY cancel out the decrease.

    So, a question. From my understanding the VAT discount would have cost the Government £12 Billion, how much will it really cost now that Fuel, Booze and Fags are exempt from the changes? Also as a secondary question, will those Duty increases on the "Tax the workers three" remain AFTER VAT returns to 17.5% and how much will that bring in for the Goverment?

  • Comment number 8.

    One final point.

    Throughout his speech I haerd the word "Contingency". Can someone please tell me how big the governments TOTAL Contingency Reserve is?

  • Comment number 9.

    Nothing like leaving a legacy for the country and next Government.

    Private Finance Initiative skeletons and now this....

    Tactical 'Sergeant' voting could ensure Mr B and Mr D reap what they have sown.

  • Comment number 10.

    I see nothing remarkable, just more "borrow now, worry about paying later," exactly the attitude of the store card brigade. They don't have a clue where they will raise the taxes to repay half a trillion pounds on top of the existing massive debt. Tonight the British economy is one massive unfunded liability.

  • Comment number 11.

    Let's not kid ourselves, the government is taking the economic opportunity to justify policies that will shore up the core labour vote at the next (June?) election.

    A pity, because if ever the time was right to tackle the public sector pension timebomb, surely now is the time!

    If the wealthy have to bear their share of the burden - surely the public sector can too?

    As a small business owner and employer, I would hope the media recognise that the combined 1% increas in national insurance is effectively a 1% inrease in tax for all employees earning above the minimum NIC threshold!

    As a VAT registered business, the reduction in VAT is pointless. Not only does the timing issue guarantee future difficulties, but it will make no difference whatsoever. It would have been more sensible (and politically savvy for labour) for the govt to target tax breaks to the less well off and pensioners!

    As for the timing and projected rate of recovery - looks like they plucked out of thin air whatever figure they needed to balance the equation!

  • Comment number 12.

    Your conclusion is right the budget was unremittingly socialist - and had this been the budget in 1997 I for one would have been quite happy.

    However it is not 1997, it is 2008. The economy is in trouble becuase we have over borrowed to spend on revenue spending.

    So what did the muppet do - borrow a bucket laod of cash - dole out a tiny amount in investment then shunted the rest into unfunded permanent revenue spending. It would be lovely to give more to pensioners and children and all those other worth causes IF we could afford it and had earned it but we haven't.

    So now I have to pay a huge increase in NI in return for which I get nothing for the simple reason I work for a living.

    An absolute disgrace - this is so blatantly politically designed for an election which I am sure will happen net year - no point waiting untill 2010 when we start paying it.
    Sickening.

  • Comment number 13.

    Robert,

    'Left-wing'? This is a government that has so far committed billions to supporting shareholders of banks embroiled, at their own risk, in debt instruments and wholesale debt at a level that would make the UK public sector debt look mild by comparison. This is a government that has, moreover, decided not to place one single board director on the boards of those banks. If this 'an end to Thatcherism', the City must be mightily pleased. Oh, and the effect? Reflation - too little, too late agreed - for the businesses of the UK.

    Hardly a revolution. In the light of all this, measures to increase by 5p in the £ tax on the top incomes earned by the likes of BBC Executives seems slight, doesn't it?

  • Comment number 14.

    Dear Mr Brown

    Are your debts becoming harder to pay?
    Is your over inflated Housing Market in Crisis?
    Have your Banks been squandering money at a level that could bring your economy down, but the revenue was good, so you didn’t want to meddle?
    Are you up a creek without a paddle?

    If so, then:

    Consolidate you debts into one easy to pay loan from the IMF?

    With IMF loans your can delay the inevitable even further and maybe have enough spare for that holiday you promised yourself.
    Normally only available to 3rd World Countries, the IMF is now making available Billions to help world leaders secure re election. Just complete the attached application form and you can turn the ‘Spend Now, Pay Later’ philosophy of the past 10 years into a ‘Spend Now, Borrow Later, Borrow Again, Pay Much Later’ Manifesto for your upcoming campaigns.

    PS - Choose your free gift from below:
    1. All expenses paid ‘World Leader Pack’, simply attend a gathering of World Leaders, have your photo taken, read the sound bites and take back to your voters credibility as a Global Influencer. (Please note: No decision making commitments necessary, this activity is a mutually beneficial showpiece to help heads of state retain power)
    2. Parker Pen Writing Set

  • Comment number 15.

    I agree with Peston - Scandinavia here we come...

    ... as long as we get the great healthcare, great education, great sense of social responsibility etc. etc. and not just fatter and fatter government.

    At least there is a real choice in May 2009 - or whenever Brown goes for it - high spend high tax or back to the basics of spend what you can afford. Mr. Cameron, here we come!

  • Comment number 16.

    FISCAL INSANITY.

    FISCAL IMPRUDENCE.

    FISCALLY UN-STIMULATING.

    FISCAL TAX BOMB with a timer MADE IN

    CHINA.

  • Comment number 17.

    Staggering.
    After a few days nobody will know whether the VAT reduction has been passed on.

    OR is it intended to help retailer margins so that they increase profit and Darling can recoup 28%.

  • Comment number 18.

    NI up. Yep, that's just what's needed to help get the country back to work.

    You really, really, couldn't make it up.

  • Comment number 19.

    #1 i read the link and when i got to this part
    "I think they (and most politicians) are genuine public servants and care about improving the world they live in. Darling and Brown are both intelligent people, capable of learning from the effects of the previous policy"
    And realised your taking the piss


  • Comment number 20.

    Would that it could take on a Scandinavian left-wing tinge?

    This is nothing more than a trimming of the sails as the economic storm begins to bite.

    A cunning sop to the left of the party, a bit of flannel for the retailers, and the prospect of more taxes to come for everyone at some point in the future.

    What has this got to do with the coming recession? Do they really think it is going to be that easy?

    I would feel more comfortable if there was evidence of a major change in taxation. Sure, I have long felt that the wealthy should pay for their privileges, but where are the benefits to the millions of humble folk who each day struggle to work for their daily bread?

    Surely, these are the people who are Labour's core vote and what has Darling done for them today?

  • Comment number 21.

    2.5% off VAT. Oh lordy, what lucky people we are to be given such a bounty!
    No wonder the recession will only be a short one. I feel a deep urge to run out and start my spending spree today.

  • Comment number 22.

    At least there is now a gap between the policies of the two main political parties.

    "Vote for Napoleon and the three-day week" (Increased leisure)

    "Vote for Snowball and the full manger"

    can at least be changed to

    "Vote for Brown and the fiscal stimulus"

    "Vote for Cameron and financial prudence"

    Who you vote for depends on what you think will do best for you (not the country note)

  • Comment number 23.

    I have just had the horrible experience of hearing Vince Cable speak, and agreeing with him.

    Income tax cuts, putting the money directly in consumers' pockets, would stimulate spending far more effectively than this bugger's muddle of VAT cuts and duty increases that Darling must have come up with over a liquid lunch.

    Most retailers won't pass on the savings - they'll take it as a nice increase in margins and no benefit to the economy as a whole will accrue.

    Why do we have such a fool as Chancellor?

  • Comment number 24.

    Robert, we may be getting Scandanavian tax levels, but I doubt we'll get the sort of generous welfare systems that they receive to make up for it.

  • Comment number 25.

    The scary weakness in this strategy is that the government expects a recovery to begin in the middle of 2009, and to be quite brisk.

    This assumption - for which no evidence has been offered - is absurdly over-optimistic, and will not fool the markets.

    Markets will recalibrate the projected borrowing numbers based on far more cautious economic assumptions.

    When they have done this, they are likely to conclude that lending to HMG is too risky, even if eyewateringly-high interest rates are offered. Sterling is likely to come under further pressure.

    The assumption that recovery will begin in the middle of next year might be taken as evidence that the government's forecasters are no good at their jobs. I see it differently; I think that using artificially-optimistic growth assumptions was the only way of reducing the likely fiscal catastrophe to presentable proportions.

  • Comment number 26.

    I never believed the trickle-down theory from the top 2% is anything other than marginal, although maybe some economist has done the hard work and 'proved' it occurs.

    These top 2% people are smart, fiscally mobile and are often extremely greedy* people.

    For starters, they and their advisors decide how much, if anything, they are going to pay in taxes.

    As usual, re: todays PBR it will be the PAYE drones who get clobbered.

    When you think about this, you can see why the Government wants most working people to be employees.

    In effect, they are captive tax generators, to be cranked up (or more rarely down) at will.

    In my opinion, the price of being an 'employee' is exceedingly high and has just gone up again.

    No wonder the majority of working people are so unhappy, they barely control their lives, mostly it has been given over to the Government.

    * But not always, e.g. Americans Gates and Buffet who are giving away substantial sums.

  • Comment number 27.

    Just heard Peston say the Stock market likes the Darling package.Stock markets are rising worldwide and especially in the USA so this is no indicator today.Say something meaningful.

  • Comment number 28.

    Please can somebody help me.

    Our balance of payments was not mentioned.
    Surely before we can talk about real growth we have to improve our overall balance. Sure, exporters are helped by the exchange rate as it stands but is not our base overwhelmed by imports. Apart from buying up our companies what will our suppliers buy from us? I read a note that Sony were about to increase prices by 33% to cover currency costs and surely this scenario can only get worse given our overwhelming level of imports.
    I would like to know how the growth figures are arrived at. If it was a business asking for money in a similar scenario I suspect the bank would be asking to see the scenario on a no growth basis.

  • Comment number 29.

    How anyone can put a positive slant on this bungling budget is beyond me!

    We are in deep trouble and i'm going to be a lot worse off for this.

  • Comment number 30.

    Not often I see Robert nearly lost for words

    The size of the mess we're in is astounding.

    To even try to blame the global economy for our problems is to treat us all as morons.

    It has only exacerbated this governments mishandling of the country's finances which would have come to a head right now anyway.

    A few handouts to people this government has made poorer as a consequence of their incompetence is an insult.

    Who will sort it out and how no one knows. Certainly not Gordon Brown.

    The only thing I do know is that the country
    must put its own house in order and fast before it can have any input into any global recovery.

  • Comment number 31.

    I just cannot believe the rubbish you speak. The first seriously redistributive tax changes since the 1970s? Brown has taken more in NI increases and stealth taxes over the last 10 years than he's just done with this tax increase - and this one doesn't even take effect until after he's likely to be out of office. He has done nothing apart from up borrowing. The definition of stupidity is to do the same thing today as you did yesterday, but to expect different results. Excessive borrowing got us into this situation - Brown and co demonstrate their stupidity by doing more of the same.
    As for you, Mr Peston, the sooner the BBC realise you have not got a clue what you are talking about, the better for all of us.

  • Comment number 32.

    4 reforse

    "
    Forgive me if I am being stupid but will the decrease in VAT affect prices in the shops.
    eg at 17.5% an item sold for ?84+vat =?100
    At 15% won't the shops just charge 86+vat =?100
    Profits up 2%, savings to consumer Nil.
    "

    ah, no it's much worse than that. The fact that they have to change their computer systems, price lists, catalogues etc so close to christmas mean that they could actually end up having final post-vat prices higher than they are right now to cover their additional cost of changing the vat rate on their products/systems, so not only does it not get passed onto the consumer, but it also actually costs the retailers money too, as well as the tax payer; everybody loses; it's clearly insane.

  • Comment number 33.

    you are being disingenuous by saying the stock market rally has anything at all to do with GB/AD.....the rally started in the US on friday and similar rises in Paris and Frankfurt mean it was nothing at all to do with this disastrous statement.....

  • Comment number 34.

    A lot of people associate Thatcherism with pain, without acknowledging that it was a necessary evil that got Britain out of the mess that the previous Labour administration had got it into, by using similar policies to those being used now by this Labour government.

    If it were not the case, why has over eleven years of Labour government failed to overturn a lot of what Thatcher brought in? indeed why did Gordon Brown pay homage to her in his early days as PM?

    Labour doesn't work and this Labour government is setting out to prove that once and for all. Nobody knows what anything stands for anymore. They will let your pensions and investments deteriorate significantly in you were fool enough to invest them in the Stock market, but will protect you from any losses if you invest your money in a dodgy foreign bank!

  • Comment number 35.

    With the news that govt loans will be available for businesses why not go the whole hog and bypass the high street banks in more instances and let comercial pressure come to bear as they see custom ebbing towards the govt - they need a slap after accepting the bail outs but not following up on their side of the bargain.

    The VAT reduction - if passed on to consumers - won't stimulate a spending spree as you need to have money spare to spend. It will at best allow household budgets to be eked out longer before the cash dries up.

  • Comment number 36.

    Labour has returned to its 1970s socialist class envy.

    You are grossly unkind to the competent management of some of the wealthiest economies in the world - Scandinavia.

    They don't engage in partisan political budgets at a time of national crisis.

    No amount of spin can change that.

    As for taxing jobs another 1%, brilliant idea at a time of recession. Make it more expensive to hire.

    You couldn't make it up.

    As for the VAT cut... 2.5% on anything except...

    Food
    Petrol/Diesel
    Domestic energy
    Alcohol
    Tobacco.

    Don't know about other people but I'm saving now for the tax increases.


  • Comment number 37.

    I wonder if HMG factored in to even the slightest extent, just how much trouble this VAT change is going to cause business.

    I run a flat rate scheme on one business,and no, it is not going down by 2.5% but only 1%.

    Is it worth continuing with the scheme?

    By next Monday, tills, cash registers etc will have to have been re-programmed with the new rate or be trading illegally.

    I don't think I have ever sworn on these blogs but I'm mighty close to it now.

  • Comment number 38.

    I see the moderators haven't managed to increase their productivity!

    Today's announcements are a big gamble but I don't see what else they could have done. The real benefit will come after Christmas and when the US and France and Germany have to do the same thing.

    It's now time for us to stop talking about downturn, recession etc. we, and the whole world are at the start of a SLUMP. This is going to take a decade to work itself out

  • Comment number 39.

    An observation about VAT
    The vast majority of businesses pass on there VAT charges to the end user (the punter). The effect of this reduction is 50p off a product of 20 pounds, big deal.
    A far more effective generator of trade would have been to raise the starting Vat threashold to 100k.
    This would have given people the oppertunity to start up so called mom and pop businesses and have the chance to earn a sizeable wage from it before the VAT man came to take his share. eg.. turnover 100k, pre tax profit 50k, net profit 40k, cool... thats a good wage.
    The present system.. pay the vat man his cut, and you have given away half your profit, between income tax and vat.
    How many people at the moment earning reddies would swap 50k in black money for 40k in tax paid money,,,,, all of them.
    You have just increased the tax take for the government, as well as encouraging everybody to have a go and help themselves.
    Mabey im wrong, just a thought.

  • Comment number 40.

    So it will take untill 2015 even to pay the intrest off this huge debt which mr prudence brown has left for future generations to pay off.
    And all to satisfy one mans hubris and ego.
    Thats quite an achievment at the end of the 'nice decade'. I wonder what the figure well be if the next decade is not as pleasant!!

  • Comment number 41.

    What about the small businesses that operate under the VAT flat rate scheme.

    This pbr does absolutely nothing for them.

  • Comment number 42.

    All this is based on very optimistic growth forecasts and the economy starting to bounce back in just 300 days from now!

    If it doesn't the level of national debt will need to brreakthrough the 60% level thus heralding in an IMF style loan.

    If I were Cameron I'de lose the next election because it really is the one to lose!

  • Comment number 43.

    Labour have been accusing tories of being the "Do nothimg party"
    Well exactly what has the news today done to stimulate our economy.
    %2.5 of goods which are being discounted at %20 plus in sales anyway.
    At least AD will have a job to go to after Labour are bootedm out. In stand up

  • Comment number 44.

    We are determined to grow and maintain an enormous State controlled sector of the UK economy, no matter what arguments there are for reducing it, and no matter what effect this has on our financial standing in the rest of the world

    This is the message of today's PBR.

    Did anyone expect anything different from a party that is paralysed by it's inability to believe that rationality has any part to play in human decision-making.

  • Comment number 45.

    If practically every government is borrowing, then who is lending? At the moment it is the Chinese and perhaps the Arabs who are buying Treasury bonds. But at some stage they may lose faith in our ability to repay. When that happens there will be no more money available and the government will be forced to print money.

    Borrowing is not going to solve this problem. It is time to let the banks and other financial institutions fail.

  • Comment number 46.

    But investors apparently liked what they heard: the rise in the FTSE100 today is the biggest ever (though some of that is due to the bailout of Citigroup, which has very little to do with G Brown and A Darling).

    The CAC and DAX were up over 10%. Which suggests that overall, combining the positive effects of the Citigroup bailout and the negative effect of printing an extra 500,000,000,000 pounds the city had a slight downer on all that printed cash. Compared with the Germans and French who have no such unfunded squanderfest to lose sleep over. For the moment at least.

  • Comment number 47.

    re post 8 gvheard.

    Contingency???????????????????????????????



    Double bubble DEBT or QUITS.

  • Comment number 48.

    it has taken 11 years for this government to show their true colours and well the sheep voted them in and must realy like been shawn.

    sadly the sheep will be happy with the few extra euros in their collective pockets and will no doubt keep them in power.

    i only wish i had the money to leave this debt riddled poorly run country behind.
    but i cannt so i have to suffer a government i dont want a prime minister that acts more like a dictator than robert mugabe.

    violence and anti social behavour is on the rise and will only get worse with lowering of vat on every thing ah well tripple lock the doors and expect the worst.

  • Comment number 49.

    Furthermore, having just done a VAT quarter today, I note that HMRC have withdrawn the pre-paid envelopes.

    I can see their logic, apart for the tiny saving in postage, you have to find the appropriate stamp now and if it does not get delivered, well, here come the fines.

    Especially if you had enclosed a cheque.

    Just another nail ... small business is almost revered in some countries like Canada and the USA.

    Here in the UK, it is mostly shat on by HMG.

  • Comment number 50.


    It is to be hoped that this works! The Government's forecast for debt going forward is very much an upside forecast, in that it allows for the positive impact of this stimulus and assumes a return to trend-rate economic growth very rapidly. If either of these two things do not come to pass, the debt projections will be on the low side.

    Even if the Government's forecasts are correct, the UK is taking on a great chunk of additional debt, which will take years to work its way through the system, rather like a snake swallowing an egg.

    The stimulus package now announced will see Government borrowing total £78 billion in 2008 and peak at £118 billion in 2009 before then falling until a balanced budget is forecast in 2015. The impact of swallowing this great chunk of additional borrowing will mean that the national debt, currently valued at around 41% of annual GDP, will swell up to a peak of 57% in 2011 before beginning to fall again. This obviously is way above the previous 40% supposed ceiling, and returns it to levels last seen when Denis Healey was Chancellor.

    However drastic times require drastic measures, and it needs to be emphasized that the UK does start from a position of strength in that many other major economies, notably Germany and Italy, already carry a far greater national debt burden than the UK (as a % of GDP). If this is the worse recession since World War Two, then a stimulus and associated expansion of national debt to counter it probably needs to be of historically big proportions. It is also an occasion to note that UK national debt at the end of World War Two was close to 300%, yet this had diminished to around 40% by 1970. National debt has a tendency to diminish in significance in the long term through the impact of growth and inflation aside from repayments, - so alarm needs to be tempered.

    Nonetheless the forecast is very shocking, especially as it does have to be seen as something approaching the best-case scenario. The stimulus package which adds borrowing upon borrowing had better work for everyone's sake. If it does not there will be no alternative to massive cuts in public expenditure as part of a contraction of a type not experienced since the thirties.

    What will help will be international action along similar lines, and on this front the Government was helped, with almost perfect timing, by Barack Obama's press conference in Washington today in which he outlined how a very similar set of measures will be implemented by the incoming US administration.

  • Comment number 51.

    Did anyone think to check if the Chancellor was wearing his underwear over or under his tights? Over, I rather think, because this is "with one bound he was free" economics, and I thank him for proving the accuracy of my posting this morning.
    Some would say that (Labour's gone back to their socialist roots) - wouldn't they?
    They'd be wrong, and few will believe them now anyway. This is survival politics of the worst order, who knows how long this recession will take to recover? Perhaps it's a depression.

  • Comment number 52.

    If anyone is going to relocate or emigrate from the UK as the result of higher income tax for those earning >140K...

    Good riddance. You will be replaced here by someone more deserving.

    Darling should have gone much further, and announced an immediate pay cut for any public sector worker earning >100K (including himself).

    We can either have higher taxes or inflation, and it makes far more sense that those who can easily afford to do so pay a higher percentage.

    Thatcher's policies are all washed up, now that the banks are dependent on the state.

  • Comment number 53.

    Doesn't the combination of VAT and fuel duty changes just push up the costs to business ?

    They could claim back the VAT, but they can't claim back the duty - so have to pass it on.

  • Comment number 54.

    There is now an incentive to keep my income under £100k. Given the recession, I don't suppose this will be a problem, but after that I would rather give money to charity than to Darling. Wouldn't everyone?

  • Comment number 55.

    AH

    VAT Divide current prices by

    1.02173913

    Fat lot of good that's going to do us!

    Mind you the tax increase is no bad thing as long all loophole closing continues.

    REDUCTION in Government spending I'll believe that when Pig Bomber Command get flying.

    Anyone who thinks this Labour Government have any idea about what they are doing need their head examining, we are seeing financial political SPIN machine on overdrive!

    Cut the number of civil servants and increases the number of teachers, we need to spend as much as possible on education and invest in the future.

    This country is full of uneducated lazy good for nothings dragging us down and costing us billions.

    We need a revolution in the entire social system which would mean those on benefits would need to educate themselves in order to get benefit we need a tax system which pegs borrowing to the amount you pay in taxes to create a level sustainable playing field for borrowers and prevent boom and bust.

    The Capitalist system witout compulsory EDUCATION is NOT the answer we need a new system, which focuses on knowledge and education at its heart.

    A Revolution to drive us towards a balanced world.

    What we are seeing is already the effect of Globalisation the Internet Computerisation Robotic manufacturing all these things are making production manufacturing and finance react faster to change and produce more than we need and are able to consume so a glut of cars a glut of computers and components.
    Over supply and the system encourages this over supply.
    But due to the inefficinecies in EDUCATION potential buyers consumers are not there to buy and consume the over supply.

    Before you ask.
    I AM NOT A TEACHER ! I’m a CAPATALIST / REALIST!

  • Comment number 56.

    If you have less income you must spend less or not at all. That's the real projection that should be applied to the budget.

  • Comment number 57.

    Oh my God, the governments are OPTIMISTS!! There can be no greater crime in the BBC's eyes.

    Is that why they put a Market Data box on the News front page when the shares are bombing, but not on days like today, when they are flying?

  • Comment number 58.

    A bankrupt government with no idea what to do. We have to start manufacturing as soon as possible and improve the infrastucture, all our roads are disintigrating at an alarming rate we should be spending money on these things not T.V's and the like.

  • Comment number 59.



    Any body get the feeling we've ALL been


    Financially NUKED?

  • Comment number 60.

    A big gambol. Let's hope it works!

    Dear Prudence has become Sexy Sadie.

    "Dear Prudence, won't you come on out to play?Dear Prudence, greet the brand new day.
    The sun is up, the sky is blue,
    Its beautiful and so are you.
    Dear Prudence, won't you come on out to play?"

    "Sexy sadie, you broke the rules,
    You laid it down for all to see."
    ...
    "Sexy Sadie, O-oh! What have you done?"

    (You Tube, 'beatles white album')

  • Comment number 61.

    Only one hours worth of


    BLOGS


    AWAITING MODERATION????

  • Comment number 62.

    If I understand correctly, the effect of the petrol tax change will be that VAT-registered consumers will be paying more for their petrol - i.e., generally, businesses and particularly the road hauliers who transport much of our food etc. So what the change means in practice is a (roughly) 2% increase in their fuel costs - which presumably will have to be passed on to the end-consumer.

    So tinkering with the tax system may have unintended consequences. (Or, more likely, the consequences were foreseen but the Chancellor thought he could get away with some smoke and mirrors.)

  • Comment number 63.

    For those arguing we're not like Scandinavian because they've got a surplus. We're in the middle of changing our system, they've had it that way for yonks.

  • Comment number 64.

    ah it seems the reduction of vat on alcohol and tobacco is to be offset by a rise in duty on them but for years there has been vat on the duty thus a double whammy and now basic vat is lowered duty will rise and be vat ed again so sadly those people who drink and smoke will loose yet again.

    the problem is the more they add to toxic elements except petrol and diesel the more hardship older smokers and drinkers will suffer.

    this buget is primarily designed to please the population and blindside us into thinking they are doing the right thing.

    well who knows with all the moaning its hard to decide upon whats right.

    we can only blame ourselves if this government bankrupts the country.

  • Comment number 65.

    Would it not speed everything along quicker by ensuring that all bills were paid within 21 days. I know that large companies would not endorse it but many smaller business could reduce their borrowings at a stroke. The amount of cash released would generate an additional fillip to the economy

  • Comment number 66.

    Once again - A Missed Opportunity. It would appear that no-one in the government realises the extent of this recession. Nothing mentioned today will have much effect at all. What is required is
    Housing - return mortgage tax relief, this will stabilise House prices, give everyone with a mortgage some money back, and cut repossessions drasticaly. todays effect - nothing, houses will still be re-possessed, building companies still go bankrupt.
    Petrol Tax - cut by 40p/l this will cut the price of almost everything, and give everyone more money to spend.
    Car tax - increases should be cancelled. Presently many car manufacturers are close to bankruptcy.
    Banks require a massive influx of savers to save to give them more money to lend for housing mortgages (lack of this is what started the bank crisis)
    Insurance companies - are begining to suffer as well, especially if they have to pay out mortgage insurance to millions of unemployed.
    The prospects after today are almost unchanged from yesterday. Many more companies closing - causing unemployment, giving people less money to spend causing more companies closing etc. Soon there will be many more people on benefit than working, and of those, more will be employed by the state than private companies - an alarming prospect.

  • Comment number 67.

    it is now 1930 hours. The last validated post is 1816 hours. What takes all the time?

  • Comment number 68.

    This report from Darling is a disaster. It is the last throw of the dice for Brown too. To saddle every tax payer with ANOTHER £3000.00 of debt is ludicrous.

    The G20 meeting in Washington agreed that ONLY countries with substantial surplus funds should try such a fiscal stimulus. Brown has lied again to the electorate and nobody believes him. The G20 would never agree to this extortion and waste of funds.

    Brown and Darling are in denial, living in hope and have insulted the electorate. They have ruined our pensions, ruined our savings and ruined our country.

  • Comment number 69.

    A government that has long been morally bankrupt has now decided to financially bankrupt the country. A reduction in VAT on already slashed prices will have no impact (other than to allow retailers to add 2.5 per cent back on to prices). To blame events in the US for our own financial ineptitude (on the part of regulators) but to also claim the glory for the good times (obviously no credit to the US for the boom it was experiencing) shows that we have a government that still believes it is the king of spin. Bring Blair back at least he had the guts to back his own judgement and keep Brown out of no 10 for as long as he did. As for me time to leave the country I think and take my tax elsewhere where at least I make the choice over how my money gets spend and teachers, police and other figures in authority do not have to fear being persecuted for standing up to the bullies.

    I have had enough of Mr Brown and his lapdog Darling darlings !!

  • Comment number 70.

    If ever we needed proof that Alistair Darling and Gordon Brown live in Cloud Cuckoo Land, completely out of touch with the electorate and completely in touch with their own egos.....well that was it!

    Arrogance in massive doses!

    Unbelievable hogswash!

    Think we'll move to Europe too - Portugal sounds good - lovely beaches and a good market for our product.

    Never thought I'd want to be an expat!

  • Comment number 71.

    Robert,

    1. Where will we borrow the money from?
    I know that Government borrows by the sale of Premium Bonds and Gilts and takes loans from the IMF.

    2. The IMF has made loans to Pakistan and Iceland recently and has 100s of applicants. IMF loans have strings attached that Pakistan and Iceland were unhappy about. I thought that other countries facing food shortages would be ahead of the UK in the queue for IMF loans.

    3. Will we get loans from the IMF and what are the strings attached.

    4. Perhaps cynically, I thought that when GB was trying to persuade oil rich countries to contribute to IMF funding it was most likely because without additional funding there would be no loans available for the GB administration.

    5. We have also been in the IMF bad books fow at least one year for our public spending excesses.

    6. Another clarification. Is the 0.5% increase in NIC similar to the 1% increase some 9 years ago. At that time everyone thought it is only 1% but it was really an increase from 10% to 11% which is of course a 10% increase.

    David Lilley

  • Comment number 72.

    Fiscal stimulus GBP 20 billion. Increase in National Debt GBP 500 billion. Why bother? And there does not appear to be any measure which addresses the crying need to keep people in work. If unemployment goes to 3 million, what price the numbers then, with the massive increase in benefit payments?

    Another take on the prescription - in situations like this, governments tend to drip feed with a little bit of help here and a little bit there, rather than going for just one or two measures with a real wow factor – a BIG increase in the state retirement pension and/or a significant hike in the personal allowance. The VAT reduction looks like producing a substantial reduction in the total tax take without producing anything in the way of enthusiasm from Joe Public.

  • Comment number 73.

    Thank the lord it's on line here! Huge day for our future and I've been home an hour and a half watching 24 hr news, but still not heard the real thing. Seen the weather forecast 3 times and still only seen wingers and tories after the briefest whiff of Darling in Parliament. Still don't know what was fully proposed, never mind what it means for me. I want to hear it and make up my own mind please, don't want to be told why it won't work and why someone is grumbling and how awful it's going to be in 2010, what about tomorrow?

  • Comment number 74.

    This was the most important financial statement since WWII and yet Robert Peston ( THE BBC Business Editor) skirts around the real story with this wishy washy report.

    As for GB and AD - It's always somebody else's fault - it used be "we inherited the problem from the previous Government" - Then it was "the Americans" - Now its "the World who have caused the problem". Why did everyone else see this coming and yet Gordon Brown just kept on spending every last penny as if there was never going to be a recession again. I was half expecting him to do a King Canute and tell us he was going to stop the tide coming in, after he had leaked the story in advance, of course


    This statement was a typical give and take budget as far as taxation is concerned. But did anyone else get the impression AD & GB really have not got a plan to repay this debt. They seem to be saying lets spend the money and hope that Baldrick comes along with a cunning plan.

    500 Billion of extra debt over the next 6 years with only a guaranteed repayment per year of 5 billion from NI increase plus a possible 5 billion from efficiency savings, that even you Robert commented on BBC News, "usually won't happen".

    This sounds more like a credit card statement where you only pay the minimum payment wishing you get a windfall to clear the debt. If that minimum payment is less than the interest charge the debt is actually getting even bigger and never gets paid off !!


    NuLabour - no more than a wolf in sheep clothing. Another increase in NI - but, heh over the years, they did 'promise' they would not increase basic income tax - they just screwed us on our personal allowances.

    Altogether now - "Things can only get better" - it's still ringing in our ears from 1997 !!

  • Comment number 75.

    #28

    Balance of payments is a VERY big worry.

    In the last 10 years it has averaged £50 billion a year and, despite the fall in the value of the pound in September was nearly £4 billion.

    If you remember, back in the 70s and 80s these figures were published on a monthly basis and 'economists' discussed them.

    Now they don't mention them - especially on the BBC - too scared probably.

  • Comment number 76.

    The PBR in one word: weak (mostly tweaking). Where is the vision? Where are the bold strategies?

    Disappointing - motorway funding?? what about the railways - too much of a basket case, perhaps? How about a world-class broadband infrastructure - too useful?

    Missing: initiatives to improve the skills and education of the general population - example, part-funding undergraduate university degrees

    Missing: initiatives to resolve UK's overdependence upon financial services - example, grants program to stimulate cleantech R&D - or at least a Select Committee for a Sustainable British Nation

    Missing: initiatives to create sustainable international systems - example, convening meetings to accelerate Koyto and Doha negotiations

    I'm just a little guy so I don't know what exactly the best initiatives would be, particularly with reference to international systems, but if I had the resources of the government I'm certain I could come up with a set of bullet points for moving things forward.

    I acknowledge this was a PBR and maybe the initiatives I'm seeking are off-topic for PBRs.

    But until these initiatives are undertaken, long-term sustainability will remain doubtful.

  • Comment number 77.

    As an oldfashioned shopkeeper, the change in VAT is going to mean a visit from the accountant to change the accounting programme. Also wondering whether this is really going to get people to spend more? Is the 1 p difference on your chocolate bar really going to make you want to spend more.

    What beats me is that as a nation we continue to borrow to spend. It has been apparent to me over the years that the 20 plus generation lacks training in bookkeeping and financial planning skills. Maybe that would be a good investment in our schools today.
    Also, does an increase in NI contributions not increase costs to the NHS and therefore the government? This will increase the costs of businesses in the long run.

    And all the people losing their jobs, will receive help form the government to which they are entitled to, making the deficit and debt greater still so the government certainly have to support businesses otherwise how do they fund everything, banks, benefits, services. Good luck to them......

  • Comment number 78.

    How long do we have to put up with these incompetent buffoons, does anybody have the b**ls to call for a vote of no confidence in them, or is the alternative a worse proposition?

  • Comment number 79.

    Firstly,our economy has prospered on the basis of consumers' ability to borrow cheaply because the value of their houses were rising.Now they are falling that confidence has evaporated and equally lenders won't lend because houses are no longer a good risk.For any recovery to occur house prices have got to start rising again.So where was the stimulus to that today?

    Secondly,our over dependance on retail spending,mostly on imported goods, and financial services has left our economy unbalanced.We have priced ourselves out of manufacturing because our competitors do not have the restrictive employment legislation to contend with that we do.We need a more diverse economy with manufacturing at the heart of it but need first to sweep away unnecessary red tape and compete on a level playing field.

  • Comment number 80.

    Old Labour, Nu Labour, Scandinavian Labour, it's all hard LABOUR ... see you at the Labour exchange Mr G.B. & Ally D.

  • Comment number 81.

    Hmm: there seems to be a huge moderation backlog tonight - are the bloggers being that rude?

    What strikes me is that this is a Micawberish budget of the worst sort - it assumes that "something will turn up" and solve the basic economic problems. I doubt it.

    Perhaps we can't impose import duties in this "free trade" globalised world. But in that case we should have differential tax regimes, including on dividends, for different types of company.

    Companies which manufacture at home, either for export or to replace imports should have a much more favourable regime than mere retailers, and an even more favourable regime than importers of cheap rubbish we don't need. Similarly, there should be tax incentives for home production of food, energy, etc. this is a matter of national security. Perhaps instead of building on playing fields we should be ploughing them up to grow food? Etc etc etc - I'm sure you get my drift. I'm not against free trade, but as we can't support ourselves anyway, there's a difference between free trade and encouragement to spend more than the country earns. I'm not against entry to the euro if that would help either, but it doesn't really affect the main issue. I don't want the UK to be either fleecing the rest of the world (as the financial services industry aimed to do), or even worse, holding out the begging bowl.

    PS: I wonder whether the pound shops will become 98p shops?

  • Comment number 82.

    I really am at a loss here, what is this going to achieve?

    I think it would have been better to let the banks 'go to the wall' and handed out this wonga to joe public, then the good old Brits will once again be world leaders, in spending money we haven't got, but we'd certainly do it with style.

  • Comment number 83.

    Another set of missed opportunities.

    I can't see that VAT reductions will help at all. Prices are already being slashed due the laws of the market, and through this they will find a realistic level. Funny how the historical political belief in the market only works one way ...

    Whilst I believe in higher taxation to pay for decent public services, I cannot agree with NI money being used to rectify the mistakes made by the profiteering and reckless lending of our financial insitutions.

    And why this obsession with children and pensioners? Save money by targeting pensions to those in need - not retired financial fat cats - by meantesting for proposed one -off payments, and stop funding savings bonds for children.

    How about the novel idea of rewarding young employed people with assistance to buy property currently under construction? Housing grants would get property markets moving and create /sustain work in the construction industry.


  • Comment number 84.

    1. The cut in prices will be less than 2.5 pence in the pound, (new price 85p + VAT = 97.865p less old price 85p + VAT = 100p) In reality new price will be rounded up and a price of £100 is more likely to become new price £97.90 or even £97.99
    2. Retail prices have to be displayed as inclusive, so the price on display is what the retailer believes is the best price he can get, not Marginal Cost plus a fixed profit percentage - that sort of calculation is just for economists with no business experience (Treasury experts perhaps??) VAT with compulsory final pricing in practice operates as a tax on the retailer, and therefore just one of his costs.
    3. Most high street prices are price pointed in a highly competitive market, so if the retailer believes a good will sell at £99.99 that isn't because it is currently priced at £85.10 plus VAT. The reduction in VAT will therefore have no effect on the price point.

    Someone should have asked a retailer for advice, not an MBA

  • Comment number 85.

    #65 Well said: in particular, those big SOBs who squeeze their suppliers by making them wait 150 days should be forced to pay interest, and be broken up by the monopolies commission.

  • Comment number 86.

    Who fancies going down to the shops and having a good old spend up?

    What, no takers? Go on, you know it makes sense - go and blow your budgets like your leaders, its fine, ITS THE RIGHT THING TO DO

  • Comment number 87.

    Dear Gordy & Darling.

    As you are so desperate to cling to POWER.

    Please could you cover me for the 23.5

    million that ive lost as a DIRECT result of

    YOUR economic POLICIES.

    If you do I might VOTE for you.

    HA HA ,thats if you dare go to the POLLS.

    Whatever Gordy see ya!

  • Comment number 88.

    There is much I could say about what should have been in the statement. In order to use the space to with good economic principals however I will keep it short.Never has so much money ever been spent for so little good effect. I salute this monument to fiscal stupidity.

  • Comment number 89.

    why does everybody seem to think its only greedy directors of banks that are to be blamed? if you leave the fridge door open and the dog eats all the sausages and then does a big mess on the floor the dog deserves a smack but the fault lies with the master and the master has to clean up the mess!!!!. i would like to see G Brown, every regulator, insurance & rating firms take there spanking first!

  • Comment number 90.

    Pre-election spending spree. There are some out there who will think the Govt cares - It does but only about the glimmer of re-election. This pre-budget is total madness. If the govt is correct and there are lots of unfilled vacancies, why not make some public sector workers redundant and they can fill them!

    People are in trouble who have borrowed big and unwisely. Darling and Broon are like alcoholics in a brewery. No-one is daft enough to spend like viv nicolson when only a few quid knocked off VAT. Cut back the ludicrous state, cancel the (London only) olympics, cancel ID cards, knock 30% off headcount at health, education and social services, eliminate 60% quangos. Start manufacturing something useful like trains and buses. Create new recyclable materials and build plant to recycle material that is put in green bins but currently stored as no market.

    Brown out ASAP!

  • Comment number 91.

    The VAT reduction is merely a smoke screen to create a discussion about something that helps no one. Why not reduce the fuel levy? abolish stamp duty on houses below £250,000, reintroduce MIRAS to help the housing market? If people are able to move home they will spend. The banks are now pretty well secured, lets encourage broad market activity rather than tinkering.

  • Comment number 92.

    At 5:53pm on 24 Nov 2008, mikemadf wrote:
    "Tonight, the British economy has taken on a Scandinavian, left-wing tinge."

    I think you are being extremely unkind to the Scandinavians..

    .......So perhaps you might care to remove that comment as it is - typically - 100% at variance with the truth.....

    Just a bit of advice for Mikemadf.
    Your comment assumes Scandinavians would be offended at the suggestion they have a 'left wing' tinge. Some of them may find this a compliment. Reading Robert Preston's last paragraph again it does not suggest that a 'left wing tinge' is a bad thing anyway. I would suggest Mikemadf that you read this again and ensure its not your beliefs that are bluring what you read, before you comment again.


  • Comment number 93.

    Robert,

    Could you ask Auntie if they could implement a recommend button a la Guardian and others? I want to recommend post no 14 by thinkb4.

    Those of you skimmers go back and enjoy! Having just had the most depressing news in years it had me crying with laughter.

    Thanks thinkb4 - made my day!

  • Comment number 94.

    50 : chrisbastille

    "If [the stimulus package does not work] ... there will be no alternative to massive cuts in public expenditure as part of a contraction of a type not experienced since the thirties."

    You make it sound as though every pound of public expenditure confers on us some heavenly benefit that we'll be not far short of suicidal if we're forced to do without.

    It's not like that. There are uncountably large sums spent by the public sector that nobody other than those in direct receipt of them would notice whether they are spent or not. Huge, vast, mind-boggling sums of money spent paying people to do things that don't matter, or are duplications of what someone else is already doing elsewhere, or are no more than paying through the nose for something that could be sourced much cheaper from somewhere else.

    Yes, of course, the recipients of all this largesse would be mightily disappointed if their gravy-train is curtailed, but they MUST, surely, have made some provision for what to do if "the government" stops paying them for digging holes with imaginary shovels.

  • Comment number 95.

    Its only snobbery that makes people pretend not to like socialist policies because unless you are a top wages earner with mega buck bonus' only the social ideals of a Country like Sweden is the way forward for ordinary hard working committed people.
    In Sweden the pay differentials between top earners and bottom earners is substantially less than in this Country because it is accepted and appreciated that in order for society to function we need everyone from the top down.
    No one is frowned upon because they are 'only a waitress or only a taxi driver' because society knows they would be the poorer without them.
    If we are moving more towards an egalitarian society who also has far greater green credentials than we have then great!!
    If that is the case then its been a good day for us all but sadly I think Robert was only playing with words yet again.
    David Cameron spoke highly of the schools and the banking system in Sweden but I don't recall he mentioned anything about equality????

  • Comment number 96.

    If this were a more wholehearted redistributive package then I'd be happy. A key source of the problem we now face is the growth of the gap between rich and poor in recent years, resulting in the (very) rich lending excessive amounts (via the banks) to the poor(and not-quite-so-poor). If we want to reduce the debt in the UK, then we should fix the tax system to take money from the rich(creditors) and give it to the poor (debtors). Makes perfect sense.

    But this is so half hearted. 45% on those over £150k? Should have been more like 50% on those over £100k. And NOW not in 2 years time. 2.5% off VAT - as previous posted have pointed out the purchaser won't see much of this - though I suppose if you look at it as a subsidy to industry/retail then it might prevent a fair few redundancies. Posting £500 of gift vouchers to each household might have been more effective though.

    As for increasing NI in these circumstances.... I just don't know what to say.

  • Comment number 97.

    I agree that the economy needs stimulating but I'm not certain about reducing VAT (as has been) said it won't necessarily help the poorest.

    It is reckoned that the country needs around 200,000 new dwellings a year. (I don't know how many homes part of the £3bn stimulus will finance - not many I suspect.) My idea would be for the Government to fund the construction of at least say 50,000 a year and gradually sell them off as the economy - and houseprices improve in the same way as it hope sto sell of bank shares.

    I say gradually as of course it will have no way of knowing when house prices have fully recovered. Hopefully it could stimulate the construction sector, make a profit in the long term and ease the housing shortage all at the same time.

  • Comment number 98.

    Robert

    I'm hope it's not deliberate, but everything you write reveals how much of an apologist you are for Gordon Brown.

    (i) Describing the tax rises as the 'end of Thatcherism' (and by implication worthy ?) rather than the end of New Labour's explicit promise to the country that a Labour government was for everyone, not just Old Labour redistribution under a new label.

    (ii) Your reference to Scandinavian governments (because taxes are going to be very high ?) while neglecting the reality that in the UK this is going to be to refund out-of-control borrowing, not to invest in social infrastructure, as is universal in Scandinavian countries (which incidentally generally run budget surpluses)

    (iii) saying that the effect on the FTSE was positive, when the reaction in the markets is predominantly world-wide and therefore unrelated to Brown's Grand Plan. This recovery started on Friday evening, or was in expectation of the Pre-Budget Speech ??

    Either you should be properly sceptical of this Government's attempts to misrepresent both the scale of the problem, and their intentions to deal with it, or you should join Brown's PR Department, and create space for a more balanced view to be given.

  • Comment number 99.

    In the midst of a financial depression, it's funny for an old Dane to see that quite many readers think that Mr. Pestons parallel with the Scandinavian countries are unfounded.

    Although a financial generalisation across the Scandinavian countries is somewhat impossible due to Norways incredible wealth, I'd say Robert is pretty much spot on.

    For those of you genuinly interested, the Danish personal income tax is around 58%, VAT is mere 25% and in case you'd have any disposable income left, car import taxes are a staggering 180% (+ the 25% VAT of course). Nothing of any significance is VAT exempt, and would you happen to come across anything of any value by coincidence, rest assured you will be found and taxed.

    I'd say for a working family that receives no social benefits you probably pay about 92 Danish Kroner back to the government for every 100 you earn.

    Yep, Denmark in my opinion despite the governement being formed by the the right-wing parties, in reality run very much a plan-economic regime where the ultimate owner of all wealth is the government, and the bits that the goverment can spare goes back to the workers.

    For those of you that think the grass is greener by your neighbours to the east, you really should go and see for yourself. I bet you will be back here within a week.

    To you British, this may sound absurd, but to a Dane like me, Britain is (still) the land of opportunity. The British government (both sides) knows and appreciates that it's the people that create the wealth of the state, and therefore do the best to help the people accomplish this. Many other European countries would have a very different approach to that !!

  • Comment number 100.

    robert,
    it is not just the banking crisis that has led the british economy to a period of recession.

    for some years now low and modest incomes have not kept up with that of the top ten percent or even r.p.i..
    that has led to a huge gap between families that can afford a "luxury" lifestyle and those that "now" cant even pay the bills!
    how can the top 10% keep the entire economy going.
    until income distribution receives the urgent attention it clearly needs the economy will not recover sustainably.

 

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