End of Thatcher's tax incentives
There were three big numbers announced in the pre-Budget report.
The 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.
I'm 
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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
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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.
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"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......
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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.
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Sadly the TIME has come to relocate our
Distribution & Warehouse facility.
Best place is mainland europe not the UK.
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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 !
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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?
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One final point.
Throughout his speech I haerd the word "Contingency". Can someone please tell me how big the governments TOTAL Contingency Reserve is?
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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.
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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.
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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!
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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.
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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?
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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
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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!
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FISCAL INSANITY.
FISCAL IMPRUDENCE.
FISCALLY UN-STIMULATING.
FISCAL TAX BOMB with a timer MADE IN
CHINA.
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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%.
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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.
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#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
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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?
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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.
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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)
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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?
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.....
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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!
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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.
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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.
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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.
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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
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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.
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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!!
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What about the small businesses that operate under the VAT flat rate scheme.
This pbr does absolutely nothing for them.
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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!
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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
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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.
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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.
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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.
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re post 8 gvheard.
Contingency???????????????????????????????
Double bubble DEBT or QUITS.
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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.
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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.
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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.
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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.
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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.
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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.
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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?
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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!
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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.
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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?
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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.
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Any body get the feeling we've ALL been
Financially NUKED?
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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')
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Only one hours worth of
BLOGS
AWAITING MODERATION????
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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.)
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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.
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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.
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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
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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.
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it is now 1930 hours. The last validated post is 1816 hours. What takes all the time?
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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.
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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 !!
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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!
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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
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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.
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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?
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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 !!
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#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.
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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.
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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......
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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?
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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.
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Old Labour, Nu Labour, Scandinavian Labour, it's all hard LABOUR ... see you at the Labour exchange Mr G.B. & Ally D.
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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?
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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.
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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.
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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
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#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.
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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
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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!
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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.
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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!
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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!
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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.
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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.
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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!
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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.
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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????
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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.
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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.
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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.
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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 !!
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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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At 6:38pm on 24 Nov 2008, superbig7 wrote:
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.>
Excuse my ignorance, I am not a business owner but I thought VAT was a reclaimable 'tax'? Therefore you wouldn't be 'giving away half your profit' in the above scenario??
Anyway, I'm betting in 3 years time none of the projected doomsday scenarios will have come to pass, not because of the awesome calibre of political leadership anywhere in the world but because they never do..I've seen the end of mining, shipbuilding and heavy engineering in this country, lived through periods of 4 millions unemployed, 15 percent interest rates, being bailed out by the IMF, 'Black wednesday' etc etc and you know what? Economic growth and prosperity in general terms and for most people has still risen throughtout my adult life..It is in too many peoples interests for it not to..
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Re: post 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.>
Excuse my ignorance, I am not a business owner but I thought VAT was a reclaimable 'tax'? Therefore you wouldn't be 'giving away half your profit' in the above scenario??
Anyway, I'm betting in 3 years time none of the projected doomsday scenarios will have come to pass, not because of the awesome calibre of political leadership anywhere in the world but because they never do..I've seen the end of mining, shipbuilding and heavy engineering in this country, lived through periods of 4 millions unemployed, 15 percent interest rates, being bailed out by the IMF, 'Black wednesday' etc etc and you know what? Economic growth and prosperity in general terms and for most people has still risen throughtout my adult life..It is in too many peoples interests for it not to..
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Brilliiant scheduling on TV tonight. Right after the pre budget report, BBC2 and Channel 4 both show programmes showing the folly of the massive government borrowing.
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Having read earlier that Alistair would make it so clear that your mother could understand it I thought to test this claim.
Mixed results - the small business stuff was a bit of a mess but the VAT and tax stuff was clearly understood.
As she put it, very nice of Mr Darling to help EDF out like that.
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Well done Gorden and Alistair you have just dragged the UK into bankruptcy these two clowns are hell bent in destroying this nation, whether its intentional or incompetence they have very nearly succeeded in their plan, will the last person to leave the UK please turn the light out.
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"Tonight, the British economy has taken on a Scandinavian, left-wing tinge."
I doubt this. Today it was announced that a Norwegian company is looking at acquiring the second of a pair of exceedingly hi-tech companies in the oil and gas exploration sector.
The first was bought last year by another Norwegian company.
Both companies are university spin-outs based on R&D funded by the taxpayer. The taxpayer will get nothing for his/her investment.
I will begin to believe Robert's Scandinavian theory when we start buying up Scandinavian companies. That will of course never happen.
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Calling the government action "borrowing" is very misleading. Who cares if the government is borrowing money. What is 100 times more important is that the government is not saving the money it borrows, it is spending it.
The American phrase "budget defecit" is far more descriptive of what is going on.
Why don't we simply say that the country is overspending, or making a loss, terms used by business that we use all the time.
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Looks like Gordon and Alastair have forgotten all the lessons of the 1970s. Fiscal stimulus DOES NOT WORK.
It is good to remember again that quote from Jim Callaghan in 1976: "We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step."
Those words are still true today. This government, like all Labour governments before it, is taking Britain towards disaster and national humiliation.
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#14 - Great!! You should write for the BBC comedy shows!
I wonder if I'll be laughing as hard when the irony has worn off and the rest of the world calls in Great Britains markers???!
Still, it made me laugh! I have to say that I am very pleased that those 're-finance' adverts have reduced dramatically since the crisis!
Now, if only we can get rid of x-factor...........
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GB/AD will have to rethink when interest rates go to 1% or less and everybody cashes in their Premium Bonds.
22 billion to be paid out immediately.
Where will that money come from!!.
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#57 "Oh my God, the governments are OPTIMISTS!! There can be no greater crime in the BBC's eyes."
I don't think the BBC has a view on this - it's Pesto's own opinion. So far as I am aware, unlike with Labour MPs, it's not yet a requirement for BBC journos to be lobotomised and remotely controlled, electronically, from the whips office. .."I'd rather have a bottle in front of me"
On the other hand, seeing that they didn't foresee any of this before, why shouldn't any thinking person display a healthy skepticism?
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Don't miss the massive High Street sale - starts Monday. 2.5% off everything (except food, books, childrens clothes).
Just look at some of the bargains.
Plasma TV was £499, now just £488 - save £11
New suit - was £199, now £194.75, a massive £4.25 off.
MP3 players slashed from £99.99 to an eye watering £97.87
Get your bargains before stocks run out, they will be flying off the shelves - NOT.
The sheer cost to retailers of repricing stock, rewriting POS, changing EPOS systems etc for 13 months is ridiculous. 2.5% margin in their pocket, another own goal.
(I expect the £ signs will not work so this post will look rubbish!!!)
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65. Micallef1:
"Would it not speed everything along quicker by ensuring that all bills were paid within 21 days. "
The French are in the process of instituting a similar law maximum 45 days - but to comply with EU law only applies for French registered company to french registered company.
You can get around it by only buying imports but that would be an anathema. You would be tied to the Bastille day fireworks if you tried.
Besides supermarkets and the like who fund their working capital at the expense of their supplier on long terms would have a fit if we tried it here
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Actually what's happening here is very simple and completely ridiculous...
The government have decided to attempt to move a significant proportion of the truly huge personal and commercial debt in the country to the government.
Lets face it, that's what's happening. The government increases spending, reduces taxation so there is more money in the commercial economy and at the same time increases government borrowing massively to pay for it.
This is nothing more than NATIONALISATION of private and commercial debt... Moving the debt from private to public.
The taxpayer is going to pay for decades.
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"unprecedented for peacetime"
Sorry Robert, I can't help noticing that we are actually at war in Iraq and Afghanistan...
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I have an idea for a story, about a ruler of a small country, called Ebenezer Brown, a miserable skinflint who took every penny he could from his people, grudgingly letting some of them have a bit back sometimes. Near Christmas, he was visited by 3 ghosts-firstly the ghost of Elections Past, who showed a vision of himself as a fresh-faced young socialist wishing to do good for the poorer people and create utopia in the land. Secondly, the ghost of Elections Present, who showed him as a grasping tyrant, hated by his people,saying "Bah Humbug" when the people complained about retrospective tax on their horses and carts; and making more and more petty regulations on everything. Then the ghost of Elections Future(who looked remarkably like Peter Mandelson) showed him his political grave, out in the wilderness, uncared for. He woke frightened, and was transformed into a kind and generous old man who reduced VAT,....etc, etc.
Does this story sound familiar?
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Have these muppets got any clue. Borrowing is moronic why should keep paying. Thanks for the £45 increase in tax relief that will make all the difference to the standard tax payer. Think about the grey voters whose saving rates have been slashed and who presumably will not be taking so many cruises and holidays yet another nail in the coffin. P.S. Bye bye high tax payers....
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#108 "This government, like all Labour governments before it, is taking Britain towards disaster and national humiliation."
Nothing like Black Wednesday, the 3 day week, the Economic consequences of Mr Churchill, Suez, Stop-Go and son etc.
Stop looking at the world with blue-tinted spectacles!
The Attlee government actually ended on a high: it got 48.8% of the popular vote when it was defeated in 1951, as opposed to 44.3 for the victorious Conservative party.
Not that this lot aren't completely washed up though: Enoch Powell's observation that "All political careers end in failure" seems to be true again.
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92#
your supercilious comment on Mikemadf, perhaps you should 'ensure' that if you are issuing a warning that your post is free from error. Bluring is not in the dictionary!!!!!!!!!!!!!!!!!!!!
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Unfortunately the numbers don't add up. If you use respected forecasters views of the medium to long term and believe that the UK will rebound next year (unlikely! but never mind), then we can't reduce the debt within the cycle without further tax increases on middle income earners. about 3p in the pound.
on a wider political point, what was the point of the budget? seems like a long-winded way of doing nothing. it felt like a pre-election budget as well, with so much tinkering when all that was needed was a simple spending stimulus package. i think they didn't go far enough on too many things and would be better picking one or two things and going hell for leather!
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Brown and Darling have written their political death warrants. Unfortunately they are intending to take us all down with them. But, then since they are merely following their pals in America - where they go we will follow.
We are in this mess because of a philosophy which encouraged borrowing - whether that be government, banks, businesses or the public at large. Take that out of the equation and we had no growth - it was phantom.
The problem is that the strategy was always going to fail - debt was only a sticking plaster over a deep wound. However, because they (UK/USA) sought to manipulate and prevent the 2000/01 recession taking its natural course, they have given us the biggest slump since the Great Depression.
To be honest, we shouldn't really be surprised that Brown and Darling are taking this suicidal approach - if we were in their shoes with the footprints of their incompetence all over the place, what else would be open to us?!
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Leaving aside the pathetically optimistic and baseless Treasury view about the "recovery of the economy being strong after 2009" this whole approach is fatally flawed. The world needs to deleverage and the governments response is to increase leverage. Oh well, Socialism here we come again, its back to the early 70s. Once deflation sets in as the Japanese discovered it takes years for it to change. Contray to popular economic views about the eventaul inflation risk, we are now in the depressing territory of asset prices falling faster than the fall in the cost of money or inflation. This equals a depression where the more you increase the supply of money (as with every other good or service) the price will fall. We are already seeing this in the foreign exchange market as the £ heads towards parity with the $.
But why should we be surprised? Gordon Brown was always a tax and spend centralist, he just managed to cover it up for many years.
David Potter
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99#
Good post but this will be the only compliment you will get because you are not toeing the party line of the majority whose only pastime is to continue to put the boot in at every opportunity and it does not matter whether it has any connection or relevance to Robert's blog.
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I might have to break my 10 voting record for Labour. This mess urgently needs some ruthless right wing policy applied to it.
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#100 Ethicalblog is completely right and helps explain why there is no way out of this mess.
In real terms, salaries have fallen year on year whilst the cost of living has risen year on year - didn't anyone ask how it was possible for people to get 2.5% annual pay increases and yet face utility bills, council tax, mortgages etc. rising by 10%+?!
That's why you remove the borrowing and the gaping chasm is there for all to see. Sorry, but not even Paul Daniel's can get us out of this one.
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From these bankers, who messed as up we have to get the money back, government should do some thing about this.
I think there should be a win fall tax on certain individuals in the banking industry as well as energy companies.
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Labour and the BoE between them having destroyed much of the banking sector and consequently destroyed much of the value in our pension funds and property, the psbr/national debt would go through the roof anyway due to the reduced tax revenues from the banks and its employees.
The US despite being in a bigger hole than us a year ago, apart from Lehman, has handled things far better our leaders.
Incredible that Labour is still talking about full nationalisation of the banks-haven't they damaged investor and consumer confidence enough? A crazy not thought out threat that if carried out would result in 100000s of job losses and a ruined financial sector which would never recover.
Far more sensible to inject preference shares (not carrying a 12% coupon) if necessary, and guarantee inter bank lending and the borrowings of big employers such as housebuilders. Credit availability and borrowing costs would improve at a stroke.
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What I liked most about the PBR was AListair Darling virtually on his hands and knees begging the retailers to pass on his VAT cut.
My reply, on behalf of small retailers
You increased the amount of National Insurance we have to pay - the tax on jobs
You removed the small business £10,000 tax-free exemption on corporation tax
You have increased the rate of corporation tax we pay.
You forced us to put up wage costs to maintain differentials over and above the minimum wage.
You inundate us with petty rules and regulations adding even more to our costs.
Well ---- ITS PAYBACK TIME
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I have always felt betrayed by New Labour, in my opinion they sucked up to the rich and mortgaged our future with PFI, throwing money at organisations which just couldn't use that money wisely - the result was huge waste.
They have caved in to pressure from lobbyist and have allowed things which were crazy, all so they didn't lose their business friendly label.
Many people, including myself, have been very worried about the levels of government and personal debt run up during the good times. However, had Gordon taken steps to reign in the borrowing or to regulate some of the more toxic products the very people now screaming about his mis-management would have been lambasting him for interfering in the "markets".
Yes we are in the sh*t and yes Gordon has to take a great deal of the responsibility but in many respects I think he was just doing what he was told, didn't Alistair Cambell say that it was effectively Rupert Murdoch who ran the country.
I heard some ocrrespondent on ITN tonight saying how Alistair C had "broken the big tent of the labour party" by introducing the 45% rate. What tosh, for a start it wouldn't kick in until after the election - which labour will lose. I would imaging that most of the £150K+ earners have ways around the majority of tax anyway and therefore this is just window dressing intended to pacify those of us who will be paying out more.
In any case surely those who have had a big hand in producing this mess ought to be prepared to give a little back considering that the millions of people who haven't made a killing from government management consultancy or financial engineering will be shelling out a far higher percentage of thier earnings to bale out the reckless bankers.
The VAT reduction is a joke, most shops are saying that they won't be re-pricing everything so in effect we have an increase in fuel, booze, fags and NI.
As to those calling for an election, I'm sure Gordon would love it - both parties would be trying to lose because I don't think any of them have the first clue about what to do.
My own feeling are close to those of timetoponder who puts the case very well, unless we start to get some sense of community and social responsiblitiy back into our society and stop exporting all our wealth we are doomed.
I believe that we will never change our society quickly enough and sometime in the next 30 years things will fall apart. Our society is so interconnected and marginally stable that it will not take a large external shock to collapse it. For some years I have been convinced that it would be a pandemic of H5N1 influenza. As soon as it hit no one would go to work and very soon our shops would be empty of food. Once that happened the veneer of civilisation would wear off very quickly.
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Robert,
I think you have it wrong. GB and AD have I think gone as far as any sane person would go to try and stop this recession being unbelievably dreadful. There looks to me to be a bit of a balancing act- tax cuts to boost spending and perhaps restore consumer confidence- at the same time a warning that it has to be paid for to keep any run on sterling at bay. A very confusing timetable as to when things will happen.And reduced growth is public expenditure just like DC said his Tories would make. Then the masterstroke of a 45% rate in 2010 when he has put DC on the ropes.
Conclusion is that GB and AD have probably been about as brave as they can be and have stuffed the Tories so not a bad effort. But we still need to stuff GB at the election for all the tosh he has spoken in the past and the stupid things he asked AD to do re CGT for example. So give credit to GB/AD for now as it might just work but lets get them at the next general election.
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#57 wrote: "Oh my God, the governments are OPTIMISTS!!"
There can be no greater proof that they do not understand the problem.
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Hi Robert
I would like to question some of your post.
"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)."
You nearly fell upon the real answer but still missed it. If you look at the performance of the Dow Jones index late on Friday and today it explains the rally. If readers do not believe me then take a look at how the CAC 40 ( France) and the DAX ( Germany) performed today.
So the rally had nothing to do with the announcement and would have taken place anyway.
When will the BBC find people who understand what is going on? I at least give you credit for being better than Hugh Pym who really looks and acts like a man who is clueless.
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Maybe we should also follow Scandinavia in having a Government that is based on proportional representation and move away from the short term views present in politicians who only are really concerned about the next election. If the economic cycle runs outside of the voting cycle then how can we ever synchronise politics with the cycle?
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I think this blog is hugely biased - something totally unacceptable from the (formerly) venerable BBC.
Coming to the point however, I think Robert, your figures are a bit deceiving (much probably like the government you accuse so much).
You do like to over-hype things a tad bit too much: For example:
"£500bn is being added to the national debt between now and 2015" - that sounds like a big figure, but is in effect actually less than 100billion a year. Put in comparison, Barclays alone made a profit of 7 billion pounds in 2007.
It would be useful if you actually did some more such analysis and comparison - which can give a balanced view of things.
A place to start is probably on the tax bogey you have been harping about. I know you are probably upset about the tax changes if you have to pay more - but it might be useful to say how many people like you would. Or what is the highest level of taxation in Sweden, Norway etc. And if the UK tax payer actually has fewer benefits.
I think you should take as much blame for the gloom as you give to GB&AD for the doom, purely because of your biased reporting. Please pull up your Gucci socks!
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I have yet to see anyone giving the government credit for at least trying to fix the problem. Whatever your immediate reaction to the budget report, some kindness should have coloured your thinking instead of the bitter comments I have so far seen.
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Really some posters on here must be so glad the internet was invented.
It saves them standing out in the cold being laughed at as a nut job with their the end is now sandwich boards.
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Comment 121 : XCAnderson
To be honest, we shouldn't really be surprised that Brown and Darling are taking this suicidal approach - if we were in their shoes with the footprints of their incompetence all over the place, what else would be open to us?!
Forget Darling for the time being. He wasn't in the job when the wrong decisions were being taken, and he's only a mouthpiece for his boss now.
But I think if Brown was a properly functioning human being, then he would adopt one of two approaches :-
1. Acknowledge that there were some pretty poor decisions made, but, if true, explain why he had no option at the time other than to make them the way that he did. Like Iraq. If Blair's decision was driven by a fear of the shutting off the feed through the umbilical cord between the US and the British economy, then why not say so? Why pretend that our involvement was for some more noble motive than protection of self-interest?
2. Accept responsibility for the errors of judgement, and candidly assess whether or not he is the most appropriate person to deal with the ensuing chaos. If yes, explain why. If not, resign.
What can't be right, surely, is to maintain that none of the poor-quality outcomes of policy decisions could reasonably have been foreseen, and that therefore each policy, at the time it was put in place, was the option most likely to be successful. Brown's thought processes seem to work on the basis of no presupposition being more or less valid than any other, so that the only criticism that can be levied against a policy is if its process of implementation is defective. And, according to them, the government is not answerable for implementation because this has been sub-contracted outside its area of direct responsibility.
So, according to the Prime Minister's rules of engagement it's impossible to find fault with anything the government does. It's assumptions are no less likely to be correct than any other assumptions, and it's not directly in control of any of the implementation
Cozy, innit.
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we asked for it-may, we DEMANDED it, and I watched and listened very carefully like a good citizen-it wasn't there!
Vote of no confidence
Conspicuous by it's absence!
Also missing:
No apology
No acceptance of responsibilty
No fraud investigations
No balance sheets
No declaration of off book debt
The bail out for the banks was the equivalent to £16,000 per tax payer I remember reading.
Now I have heard that when these short term, pathetic changes are the equivalent of £3,000 per tax payer
That's a gut wrenching, mind blowing £19,000 for each tax payer darling Ally and greedy Gordon have just taken.
Personally, I would have preferred to have a government Christmas present of £19,000 through my letter box!
You know the phrase '****' or bust?
GB and AD were in the '****' and now they're bust!
How predictable was all this!
Civil unrest is bound to increase dramatically!
Also, Robert, dear heart, I'm sure the world's markets have better things to think about other than our internal workings-especially as the FTSE was CLOSED by the time AD finished his speech! How on earth can a closed Market respond at all to anything!
Think our 'esteemed' leaders are going to get angry phone calls from the IMF!
See what happens to sterling over the next few days, shall we?!
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#52, "good riddance" eh? Weird... that was my feelings about the UK when I left. All of this was utterly, utterly predictable. Enjoy your "fiscal stimulus", I'll enjoy the sun and marginal rate of 10% tax.
Hope the smoke and mirrors approach to "reducing waiting lists" is worth all the pain you are about to suffer. Look forward to another far more painful crunch in 6-18 months.
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It wasn't failing to close down the zombie banks that did for Japan. It was allowing the poor loans to business' and individuals to retain their value and continue. It sucked the growth out of their economy. We are doing the same.
The difference is we aren't making the world's cars and electronics products. We don't have anything like that sort of depth in our economy.
As I've said before. Barclays deal with the Gulf funds is telling us what Barclays really think is going to happen to UK inflation, sterling and shares over the next 5 years.
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'Tonight, the British economy has taken on a Scandinavian, left-wing tinge.'
Just as was done this fall in the US.
The US government, including both parties(!), in effect threw in the towel this fall with the passage of the TARP act, and its active intervention with AIG, Fannie/Freddie, Citi, next the auto firms, etc.
But the untold story still is how the Senators and House Members were implored by their constituents NOT to do this!
They did it anyway...under intense pressure from the bankers, White House, and Treasury painting doomsday scenarios.
Once 'The Deal' passed--originating in the Senate, in contravention of the Constitution--it felt like the mood of the country just deflated into resignation and resentment.
And the geniuses in charge wonder why no one wishes to spend money, take on a car loan, etc.
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The fraud of the golden rule is now exposed for all to see , the governments seven year increasing rake off from the credit bubble economy now unsustainable and to be measured against the real economy with the hope that it can be explained away as a global phenomenon .
Rather than pretending to be santa claus
[and then decieitfuly swapping the two and a half percent vat reduction on fuel for a two and a half per cent increase in fuel duty that will be hiked again in the future VAT rise so as not to appear as a new tax ],
Gordarren brown should roll up his sleeves to see if hes missed out any aces ,before he carries on playing happy families ,missfits ,snap and poker rolled into one
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Finally, a honest take on the PBR:
http://www.thedailymash.co.uk/politics/politics-headlines/brown-to-gamble-on-you-being-retarded-200811241415/
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Gordy & Ally D,
Game over call in the Administrators,enough is enough.
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To quote the bard: Much Ado About Nothing.
So we have a 2.5% reduction in VAT and 1% higher NI. A budget for jobs obviously - provided you work in China.
Where was the bold new investment plan to get manufacturing up and going, to foster the next generation of business, to will help drag the country out of recession, to get people into work, producing things we can export and paying back the money we will have to borrow?
That must have been on the other channel. All I heard on BBC was the news giving Darlings plans the credit for a record rise in the FTSE. Robert, if you have to report such nonsense, at least put it in the commedy hour or people might actually believe it.
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I've commented on the Daily Politics blog that it feels like the Captain of the ship opening the scuttle valves at the stern of the ship because its down at the bows.
In the interests of fairness, I've got to acknowledge Labour taking some big, brave decisions. I just happen to think that they were completely the wrong decisions....
The UK is now in a much weaker position than it was 24 hours ago.
Osborne's view is right, and it was a good performance over the despatch box. He's a very credible Chancellor and from the expression on Darling's face when under attack, he knew it...
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The gaping hole that will surely sink the Labour battleship - and so with it, the UK economy generally - is Darling's risible forecast for the brevity and shallowness of the forthcoming recession. His whole plan hinges on this single, flawed and fantastic assumption.
Brown knows full well that the assumptions underlying his plan are unbelievable, but we're looking at a desparate man, in desparate times now taking desparate measures to ride out his period in office until the electorate gives him some feedback. That should be interesting.
The great sadness is that the reckoning for Labour's cosmic levels of economic incompetence (nothing new there then) will hurt people more than at any other time in living memory (nice one Gordon).
As I've said before, we ain't seen nothing yet - particularly when you factor in the as yet unrecognised impact of our forthcoming energy crisis. That's the one to watch, but few are doing so right now; everyone's so gripped with the current credit crisis. The looming energy crisis will change the world beyond all recognition.
But for now, let's focus on getting that tenner knocked off the £400 flat-screen TV we (don't) need to, er, get the economy moving again. Oh boy.
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Dear Robert
There is now no doubt that Socialismn has bailed out Capitalismn, AND in the process BANKRUPTED BRITAIN, no doubt at all.
Lessons from History have not been learnt, there is going to be major major issues to deal with 18 months down the road.
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I do not recognise how these things can improve the plight of the majority. I am led by the information given by our journalists who seek (hopefully) to clarify the complex arguements we see before us. I have no political affiliation but this seems to be a move too far for an unelected Prime Minister (although not sure anyone else would want the job - at least Gordon Brown deserves to be there to explain his fiscal policy for the last x years). If anyone should shoulder the responsibility, it is fair that he should. Harsh but extremely fair!
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Why does everyone assume that this recession will end? What is the magic that everyone assumes will happen to pull the economy out of recession? Oh yes of course....More borrowing!
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Recently moved to the US. They have their own problems too but they are less acute for a number of reasons. I would absolutely love to come home.....but how can we with such "leaders". It make me sad. Would like my children to grow up with British accents and a country to be proud of - I still live in hope.
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So, VAT reductions take effect on Monday. Two problems - (i) retailers do not generally display VAT as an element of the price, so it will not be easy to tell whether they are, in fact, passing on the reduction, and (ii) more significantly, this weekend is a crucial part of the pre-Christmas trading season for retailers. By saturday evening I expect retailers to be complaining that footfall is low because shoppers have decided to wait until the VAT reduction takes effect before going shopping. Given that retailers have signed up in droves to Philip Green's campaign for monthly rents rather than rents payable quarterly in advance (citing cashflow concerns), the government has set itself up to take the blame for retail failures over the next few weeks.
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The reduction of VAT reminds of 1971 and decimalisation. Then the government expected any benefits to be passed on to the public but retailers took it as an opportunity to raise prices.
Next week I suspect it will be difficult, if not impossible, to tell which products have been reduced in price amid the offers that abound. I suspect that trading levels will be unchanged, prices will be unchanged but retailers will pocket the extra 2.5% as profit. And they need it, don't they.
If the VAT reduction does fail to act as a stimulus to the economy what will Brown/Darling do? More and more Brown looks like Captain Mainwaring in Dad's Army!
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With an attempted flourish, Mr Darling announced that the lenders had promised to give borrowers a three month 'grace period' before repossession. Why was this announced as a 'concession'? s 103 Law of Property Act 1925 says that a mortgagee's power of sale is not exercisable unless there are at least three months' arrears.
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143- Highly amusing, except, of course, that it was, in fact, the toffs in top hats who got us into all this mess, and mugs like the Daily Mail readership who are paying to clear up the mess, and be sure of this, the top city types will make sure enough money is left over from the bailout to ensure that they can still pay Jeeves to iron their newspapers. Certainly the Daily Mail is beyond irony, and its readers take the gold prize for gullibility.
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Robert -- I am absolutely amazed that no-one seems to have reacted to the fact that this VAT reduction will:
:: drop retail prices by 2.1 percent not 2.5
:: Result in a significant cost to business. Computer systems will require reporgramming, along with expensive product price labelling. This is not just changing the key on a calcultor.
I have 1 client that will require 3-4 days programming to modify their accounting system.
Should we be applying for a government loan.
And as for Yvette Cooper claiming it will save consumers GBP270 this Christmas -- we have already bought the majority of Xmas gifts and guess what we paid the current VAT rate.
It would have been easier if GB & AD had instructed retailers to have pre Christmas sale.
All a big smoke screen to buy back Labour votes.
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So, with the withdrawal of personal allowances, we now have a top effective rate of tax of 60% for those earning between £100,000 and £106,000 and for those earning £140,000 and £146,000 - whereas others earning between £40,000 and £150,000 will pay 40% and those over £150,000 will pay 45%.
What a shambolic mess.
And add in National Insurance and you have an effective rate of 66%.
Add in the massive increase in the National Debt and it is all too apparent that Socialism is alive and well with Gordon and Alastair in charge.
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what about all the other bombs:
- credit card and loans debt bomb
- increased unemployment bomb
- lower high street spending bomb
- failed insolvent businesses bomb
- property repossessions bomb
- reduced mortgage lending bomb
- bad investment by banks bomb
- crash in global stock market bomb
it's da bomb - let's hope they miss their targets
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What a con!
How slow are the "economic experts" to pick up on the fact that this spin is just another "10% tax" hotlicks by this government.
This "budget" will result in prices rising!!
Look at the figures.
By reducing the VAT on Petrol/Diesel BUT increasing the duty to negate it, the actual cost of Diesel to the hauliers will increase. I calculate circa £10 for £500 or every "fill up". This will get passed on to the end user. Every business (VAT Registered) will now pay more for fuel.
So much smoke and mirrors again from this absolute shower of a government. I've been thinking about getting out of this country for a while, am determined to now, fed up of paying for this shower to bankrupt us.
Wake up you so called "experts" and read between the lines, that's what you have to do all the time with lot.
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#155, yeah because everyone in a bank went to Eton...
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I run a small company that operates in the Transport and Waste Disposal Industry. We employ 15 staff & have turnover circa 1.5mill.
When you combine all the taxes we collect on behalf of HM Labour this amounts to 500,000 (VAT, PAYE, NI, Employers NI, Corporation Tax, Vehicle Excise, Fuel Duty, Landfill Tax and the other things that are probably hidden from us.
As this budget statement was apparantly aimed at helping consumers and Small Business (which are the real life blood of our economy - NOT the Banks. Banks only exist because of small enterprise and personal consumers, not the other way around.) I was initially impressed at the decision to cut VAT as I believed this would allow us to sell our services cheaper and therefore increase demand, which is currently at its lowest since 1998, and allow us to avoid redundancies.
However the statement regarding the increase of fuel duty to compensate for the VAT reduction is concerning. As a VAT registered Co. we reclaim our VAT purchases against our sales and redeem what is left to HM Labour. So we are now expected to reduce the price of our services by 2.5% VAT inclusive. However one of our biggest costs is fuel, so as i understand it the price of our fuel will remain the same but we will now only be able to reclaim 15% of the cost rather than 17.5%. So if we spend 8k a month on fuel we would now reclaim £1043, instead of £1191, so the Govt are pocketing £143 a month that was previously reclaimable.
So all this means that if we reduce are prices we will actually lose money, so where is the incentive to make the price cuts and maybe get people spending? There is a large fuel cost in the sale of most goods/services, so this will affect most areas of the retail and service sector to varying degrees, so i cannot see how nett prices will not be increased.
Of course the Govt may not be applying the increase of Duty to Diesel, which was not mentioned yesterday. If this is the case then from next week the difference between the cost of petrol and diesel, currently about 12ppl should reduce substantially.
I wonder if it will?
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I run a small company that operates in the Transport and Waste Disposal Industry. We employ 15 staff and have turnover circa 1.5mill.
When you combine all the taxes we collect on behalf of HM Labour this amounts to 500,000+ (VAT, PAYE, NI, Employers NI, Corporation Tax, Vehicle Excise, Fuel Duty, Landfill Tax and the other things that are probably hidden from us.
As this budget statement was apparantly aimed at helping consumers and Small Business (which are the real life blood of our economy - NOT the Banks. Banks only exist because of small enterprise and personal consumers, not the other way around.) I was initially impressed at the decision to cut VAT as I believed this would allow us to sell our services cheaper and therefore increase demand, which is currently at its lowest since 1998, and allow us to avoid redundancies.
However the statement regarding the increase of fuel duty to compensate for the VAT reduction is concerning. As a VAT registered Co. we reclaim our VAT purchases against our sales and redeem what is left to HM Labour. So we are now expected to reduce the price of our services by 2.5% VAT inclusive. However one of our biggest costs is fuel, so as i understand it the price of our fuel will remain the same but we will now only be able to reclaim 15% of the cost rather than 17.5%. So if we spend 8k a month on fuel we would now reclaim £1043, instead of £1191, so the Govt are pocketing £143 a month that was previously reclaimable.
So all this means that if we reduce are prices we will actually lose money, so where is the incentive to make the price cuts and maybe get people spending? There is a large fuel cost in the sale of most goods/services, so this will affect most areas of the retail and service sector to varying degrees, so i cannot see how nett prices will not be increased.
Of course the Govt may not be applying the increase of Duty to Diesel, which was not mentioned yesterday. If this is the case then from next week the difference between the cost of petrol and diesel, currently about 12ppl should reduce substantially.
I wonder if it will?
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About this VAT 'decrease'.
For simplicity:
Previously a petrol station, tobacconist or pub buys a product at say £117.50.
actual cost £100 because they can reclaim the £17.50 VAT.
Now they buy at the same price but can reclaim only £15 back in VAT
actual cost £102.50 because the extra duty cannot be reclaimed.
Result - higher cost, therefor loss of profit!
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Even with the Governments optimistic economic forecast tax revenue from banks will be down, unemployment costs will be up, losses from Northern Rock and Bradford and Bingley will be up. At the same time the government will be going on a spending spree. A very conservative estimate is that the UK government will be running a 50 billion deficit before the vat reduction. Some how raising 20 billion in extra tax in the future does not seem nearly enough.
What is worse is that the measures taken will have almost the opposite effect than intended. That vat reduction will be used by retailers and the consumer will not see any of it. Price deflation will most probably hide this though and Gordon will claim a victory. Let?s not beat about the bush though the vat reduction is about bailing out retailers not helping the rest of the economy. Even if it did help reduce prices it is firmly targeted at the imprudent.
Now lets look at the increased taxes for the rich. Since they are in control of wages all they have to do is increase their wages so their take home pay is the same. The average worker then pays for the bosses wage rise by seeing wages stagnate.
Then we see national insurance rise, which indeed it probably should considering the pension deficit. This just increases the burden on the average worker.
Cynical, over optimistic and likely to damage the UK?s reputation when people begin to work out the real numbers. The markets like it though and I guess they ought to because its not aimed at the consumer.
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163- I see maths wasn't your strongest subject at school. For even greater simplicity:
Trader currently buys goods for 100 pounds, pays 17.50 VAT. Total cost 117.50. Next week buys same goods, cost 100, VAT 15, total 115, a reduction of 2.50. Result, lower cost, profit will depend on how much he sells for.
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#165, of course #163 is making the more realistic assumption that the cut in VAT won't be passed on. As someone pointed out this is a rather large administrative overhead which will easily wipe out in the near future the lower cost.
Also possibly it was a coincidence that he/she mentioned pubs/petrol/tobacco because the increases in duties in alcohol/petrol/tobacco far outweigh the VAT decrease.
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Is is just me or have Humpty Brown and Numpty Darling ignored a huge part of the electorate and income generating population?
Where's the mention about getting those woman who want to work, back to work? And what about all those extra votes? That is actually a moot point as I don't believe they deserve to be re-elected.
Why not simply reduce the rate of income tax and save businesses millions of pounds in having to adjust their administration - orders, invoices, standing orders, direct debits, computer software to name just a few items the VAT change will impact upon. Plus it will need to be changed again in 13 months.
What a pair of eggs!
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Robert -- not quite right.
FTSE is DOWN 1.8 percent this morning. What does that tell you ? Business is being screwed by these idiots and this so called PBR is nothing more that a bunch of spin to cover other round of tax increases.
Oh I wish the Queen could step in a charge Blair, Brown & Darling with treason for what they have down to this country over the past 11 years.
The people of UK should be planning a revolution -- the french would if they were experiencing such incompetence and arrogance.
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Fiddling with pennies, a socialist hangover for the next governement - as usual!
If you want to change VAT positively, increase teh scope of the 5% and Zero rated items, 2.5% is not going to make a difference.
Make it a flat tax rate and increase personal allowances to incentivise people to improve their earnings. BTW this also reduces the avoidance measrures and realease vast amounts into the econcomy from high earners who will spend it.
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So Robert what happened to your 22% VAT prediction ? Like every other economist I have had dealings with you put out these predictions and when nothing happens you ignore them and move on to the one or two things you got right.
In 30 years trading in the financial markets it was always the same, the economists would come up with their scenarios and disappear until something they said came right choosing to ignore all other predictions, ask them to take a real trading position based on their views and they would run a mile.
How easy it is to stand on the sidelines and make throwaway comments like 22% VAT without having to take any consequences.
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It seems the plan is
(a) seize money, assets and property
(b) set up control mechanisms
(c) pretend it was spent or 'disappeared'
(no decision for costs to be determined today)
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As a Director of an SME, my biggest concern is protecting the jobs of my employees.
The initiatives within the PBR for individuals, are minimal.
However with the capacity to extend the payment of VAT, Corporation Tax and NI, and the opportunity to borrow from the EIB and the Governments proposed £1 billion fund, I feel more confident in riding out the next 12 months without cutting jobs, and pushing forward with our expansion plans.
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165- 163 has made a simple error of arithmetic, no assumptions were mentioned in the post. I quite agree that the VAT reduction will allow many businesses to increase their margins rather than pass the cut on, but that is a totally separate matter. And, of course, the cut of 2.1% in retail prices (even if retailers pass the full 2.5% VAT cut on) will make no difference whatsoever to consumer behaviour in the current environment. So the whole thing is a complete waste of time and money. The obvious and simple answer was to increase the personal tax allowance to 10,000, taking millions out of tax altogether, and also out of the benefits system. The low paid really would spend the money, and the Civil Service could be cut by at least 20,000 in view of the numbers no longer paying tax or claiming benefits. Far too simple, of course. Let's make life even more complicated than it already is.
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Whilst coverage of banking crisis has been admirablyinternational in scope, both blog and almost all of your coverage on BBC yesterday did not give much attention to fact that UK fiscal stimulus is only one of many taking place or about to take place. It would have been good to link to Obama statement. Much of the coverage of Darling's statement was the old iimplicit closed economy discussion we normally get, and these are not normal times. It would at least have been helpful to hear what impact coordinated stimuli might have for growth forecast which is so critical to Darling's report.
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personally, hes an idiot
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# 168
I think you'll find FTSE was down because Miners were down, Rio Tinto by 35%. Rio was down because BHP Billiton announced it was withdrawing its takeover bid. Other Miners (ex BHP which rose strongly) were down because the market sees less likelihood of consilodaition in the sector now that the BHP-Rio deal is off.
So, basically, the answer to your question is that the fall in FTSE this morning tells us nothing about the PBR, as it has nothing to do with the PBR.
Incidentally, at the time of writing, FTSE has recovered a bit, to be down 0.5%
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The pre-budget deals in a percent here and a few percent there. A step in the right direction? we're way past that!
Time to think a bit big I say. Why? The Chancellor of course multiplies all gains and losses by, what, millions to come up with his predicted P&L but it's a very different story down at business level. A 2.5% reduction - not even on sale price - but only on the VAT it's such a small amount, well, it won't make a blind bit of difference. In the present (and forthcoming) environment it's mighty hard to know if ANYTHING is going to sell at any price and the only way to find out is to make a really big reduction. It's a bit like the race engine cylinder head development I do routinely. Sometimes to determine a difference it's quicker to remove a whole chunk of metal and see what happens on the flow bench, rather than fiddling around with incremental removal.
Sooner or later the Chancellor might hear the penny drop. And when it does he'll realise he has to axe VAT or NIC to make any impact at all. You sometimes gotta 'think big'.
Now, the immediate reply to such a move would tend, historically, to be 'yes but how are you going to fund it?' Well, sooner or later someone with his head screwed on the right way round, and with nerve, will respond, 'you don't need to fund it, it will fund itself in improved fiscal revenue from the improved sales that companies will generate'. And quite right too.
Too many fiddly little tax add-ons, or things masquerading as taxes, get RID of them. Rely on income tax revenues alone, build the economy around that, watch this space. Imagine no vat! Immediately NO VAT FRAUD!
Sack all the bossy bureaucrats administering all that unwanted guff, vat returns, NIC paperwork, all tha tred tape and calculations, vat inspections, quarterly EU sales returns blah blah blah, send them out to get proper jobs instead of wasting everyone's time and patience.
We should definitely have a THINK BIG week.
GC
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If the rise of around 10% in the Stock Market yesterday was supposed to reflect approval of the Government's action....
.. what does a Stock Market trailing at around 10% below what it was when they first come to power say about this Government's performance over the past 11 years????
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Oh dear, oh dear, oh dear !!!
Well obviously the safest place to be upto 2010/2011 is in a Job Centre as a Civil Servant advising others how to get back to work. He announced lots of extra money for that.
After that when the major tax increases hit ?
Perhaps emigrate..........
He could just have taken VAT off gas, electricity and heating oil. Then raised personal limits or cut the basic rate as suggested by the Libs. This would help many of those struggling to pay bills.
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Looks like the 'New' has finally been ditched by Labour. They also seem to be adopting a 'Scorched Earth' policy for the next Conservative government. It will take 10 years at least to clear up the mess left by Labour's reckless borrowing. Again, a Labour government will leave us bankrupt.
As usual, Socialists have shown they are economically illiterate. Their enduring appeal is to offer something for nothing to people who seem to believe there are millions of evil, undeserving, rich parasites out there, scheming in order to keep them poor. It seems to me that most rich people are rich because they have had the gumption to get off their backsides and work hard. It's the rich that create wealth. Why is a wealthy banker hated, yet a Premiership footballer worshipped? This Government is full of rich Socialists. Most have bought second homes in London at the taxpayers expense. They have huge index linked final salary pensions. There aught to be a definition of 'rich'; I think you'd find most Government ministers would be classed as rich.
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It's really interesting seeing the BBC slant on how Labour have kept their pledge to not raise income tax, as the increases will be deferred until after the next election.
This suggests that at the next election, we will have a choice not to vote labour and not have the tax rises. However in reality, because the money will have been spent by the time of the next election, the income tax rises will *have* to happen.
Labour may have stuck to the letter of their manifesto, but have not stuck to the spirit of it.
A bit like watching their linguistic gymnastics to prove that the "dodgy dossier" was a fair assessment of WMD in Iraq.
Mike
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I'm not sure why everyone is getting so worked up because the government has decide to increase its borrowings in an effort to try and maintain the UK citizens living standards and to keep as many people as possible in useful employment. Although I do share most peoples concern about how the hell are we going to afford it. However the problem of excessive borrowing goes back a long way and involves both Tory and Labour governments.
For as long as anyone can remember this country (and most other western economies) has relied on borrowing to fight wars and maintain our standard of living. Pushing forward a mountain of debt has been a feature of every government in this country for a century or more and is now ingrained in our culture. Borrowing is not a really problem providing the dues can be paid on time.
At the end of World War 2this country was effectively bankrupt and needed to borrow money in order to survive. In the decades since then paying off what we borrowed has become steadily more difficult for a number of very good reasons. In the post war years our empire and influence began to diminish and with it went our access to cheap mneral wealth and a captive market for our goods.
In the 70's and 80's when we started to lose our competitive edge in manufacturing the (then Tory) government decided to run down those industries and sell off many of the states leading assets or as Harold McMillan famously said of Margaret Thatcher, she's selling off the family silverware. Those decisions ensured that the UK would become overly dependent on the city and banking sectors ability to create the additional wealth needed to sustain the economy so that we could maintain our living standards. As an aside those decisions were made at a time when we were beginning to see the benefits of the North sea oil bonanza.
As recent events have shown (and it is something many people long suspected) becoming overly dependent on the city and banking sectors which were largely unregulated has been a huge disaster (particularly for the UK and the USA economies) and that most probably is the root cause of the global credit crunch. So now a fundamental rethink (on a global scale) is needed to decide how global finacial markets should act and behave. How that outcome will affect the economies of the UK and USA remains to be seen. From where I'm standing things don't look too good for us at the moment.
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Another Broon con trick, the VAT cut is a nonsense 24p off a £10 item is not going to have anybody 'rushing out' to spend money, and that's assuming the retailers pass it on which I would bet my last £ they won't. The rise in fuel duty is again typical of the underhandedness with which Broon operates. The man is the biggest con-man this country has ever known. I leave the hapless Darling out of it because it's clear that he has bugger all say in this latest Broon con. Why couldn't he just have lowered income tax, or even better, abolished VAT on energy prices, that's what the people need not this 'go out and spend nonsense'. This is an election minded political stunt which is not only reckless but it is also an insult to the intelligence of any right minded working man or woman who trust me will have to pay for it later. Borrowing more money and adding to an already spiralling debt is just unbelievable, who in their right mind would borrow more money when you already owe a fortune? Yeah, a fraudster or a con-man perhaps and that's what Broon is, a con-man and a fraud. The British people need to wake up fast and see through these two tricksters before we end up in the same mess as Iceland. Another way to save money would be to stop the parasite MP's abusing our tax payments with their greedy expenses and second home allowances paid for by us the taxpayers.
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Q) What does he do in 6 or 9 months time when he realises that the measures taken thus far are in effectual - public borrowing has soared, recession is deeper, and we can see through his lies?
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" ...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. "
Surely it not so much that Labour has ditched the cornerstone of Thacherism. rather that recent events have shown the the cornerstone was a complete falsehood?
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To be honest the package put out was the only option available. VAT on energy bills could not be taken off as it would contravene EU law, the same reason that VAT could only go down to 15%. I hope it works.
People would appear to have short memories, black Monday, the bailing out of sterling that was inadequate and failed and made George Soros a very rich man. The recession and depression of the late eighties and early nineties, the cutting of tax on the top 1% of the population (how equitable) all Tory policies and mistakes. I for one would rather have this Labour government in than a cabal of Public Schoolboys who will come in and serve their own constituency, the rich. It has ever been thus. There is NO EVIDENCE of the trickle down effect so espoused and loved by Josephian economists and Maggie Thatcher. The only people that will prosper under a tory government are the rich and those in the South East because for the torys the UK ends at the Watford gap. It was the tories who sat and watched the erosion of the UKs industrial base, emasculated trade unions and workers rights.
I hope this package works and it is a conservative one that will allow further action later. All countries will be undertaking a keynesian fiscal stimulus package. It shows that monetarism and the banks have failed. Osbornes cut interest rates and freeze council tax would have no effect in Scotland where Council tax is frozen for the next few years as a result of the concordat with Local Government. This once again shows the Tories ignorance of what happens outside the Westminster bubble.
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The chancellor assumes that, in a while, the British economy will pick up and growth will return as it has in the past.
He ignores the fact that the world has changed. In this brave new world, we will be competing with China and India for scarce raw materials, which will be hideously expensive.
We cannot, any more, assume that this country has a divine right to growth, let alone strong growth.
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To GV HEARD 55 - Darling and his department seem to be incapable of basic mathematics - the VAT changes are supposed to be offset by the changes in, inter alia, alcohol duty. The VAT change is a temporary measure whereas the alcohol duty is a permanent one.
as for the markets hiking yesterday - this was absolutely nothing to do with darling's report -peston can we please not mislead...
On the plus side Labour are once again changing their course and having once vowed they would not tax the rich as it would we now have the 45% tax band. Final nail in the coffin to the realism of the New Labour ideology. their political relativistim is becoming every day more apparent.
as to prudence - i think we saw the last of that a while ago....
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Having gained experience in borrowing to pay tax bills, my advice is don't do it, (debts get bigger).
It's simple mathematics, the final straw that broke the camels back had two thousand straws beneath it.
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Mr Darlings options were very limited.
A cut in income tax would guarantee increased spending. Increased investment in big infrastructure projects would take months or years to have an effect. The only alternative left was to reduce VAT, and Euro law limited that to a minimum of 15%. He wanted something that would work now.
Of course he could have:
Boosted the housing sector by raising the stamp duty threshold to a sensible level of say £250,000. And perhaps even re-introduced tax relief on mortgages.
Applied more pressure as an important shareholder on the banks to increase lending levels.
Promised money for big infrastructure improvements - roads, rail and new energy sources.
At least that way the public would have got something in return for the debt that we are taking on.
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The bit I like is the £5 billion in "efficiency savings". Is it just me and my cynical mind, or is £5 billion a suspiciously round number? Sounds to me like it was just plucked out of the air rather than something that has any basis in reality.
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For the first time since this whole thing began I am seriously worried. I watched the news last night with nothing less than incredulity as Messrs Brown and Darling commited themselves to a level of public debt that will, if things go to plan will see us working to pay this off for the next 10 years. The alternative, if things don't go to plan, is that Britain will be bankrupted, plain and simple.
The Chancellor has just taken the losing gambler's final throw. He is betting the farm! In this sense he is no different from all the people who went out to buy 52 inch plasma TVs without a thought on how it could possibly be paid back.
The music has stopped. Prolonged recession is inevitable and we must just simply knuckle down and take the nasty medicine. The idea that this can be feather-bedded is ridiculous and we are simply storing up disaster, if not for ourselves then for our children.
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I agree with comment 179, he should of just cut the vat on electric and gas for a year, that would of helped everybody across the board.
I heard a young girl singing a lyric on the wireless as this all unfolded
''why does everything have to be so complicated''
I wish I could tell you 'young un ! '
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Would anyone care to explain to me exactly how NI isn't just another component of PAYE?
It comes out of the pay packet in the same way and goes to the government coffers, it doesn't seem to be earmarked for anything in particular; I don't get it.
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This so called fiscus stimilus now introduced by the government has only one objective.
Its not about saving the country. Its about the retention of power by the present government and general election victory. Its part of a programme which is being introduced by this government at every opportunity. Increase public sector workers and immigration who will undoubtedly vote Labour coupled with a cynical piece of gesture politics. Its 11 years of reckless profligacy and it must stopped for the sake of saving the country not the Labour Party.
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While there has been a great deal of promotion of a Keynesian styled fiscal stimulus, of which the Prime Minister is being hailed as an innovative and experienced leader in international finance, the nuances of a Keynesian injection appears to have been overlooked.
The Keynesian application in Roosevelt?s new deal targeted the public sector so as to absorb the masses of workers who were suffering unemployment induced by the recession and through this boosting consumption, commencing with basic goods.
Britain in the current climate faces two challenges that are the key factors in fuelling this recession.
Firstly, a fall in consumption that is translating into unemployment and recession because household balance sheets need to be restructured to shed indebtedness and introduce savings for future consumption while maintaining a level of current consumption funded by the portion of current take-home earned income.
Secondly, there is a lack of liquidity due to a severe fall in risk distribution so that liquidity can lubricate the wheels of the British economy. The focus here would be to smaller businesses, especially those who form the supply element to the larger companies.
There is also the need to recognise that high fuel costs have damaged the public but have not harmed the suppliers? bottom line. In any case, the suppliers? have modern instruments to manage such exposure and the failure to use them properly is a problem to the business inefficiency that need not be funded in full by the consumer.
So targeting stimuli on public sector works by bring it forward and other initiatives announced in the budget are unlikely to eradicate the recession quickly but actually deepen it. The announcement of a 2.5% VAT reduction, increases in tax credit, etc, that will be paid for by an increase in national income will lead to people saving more now, over and above the need to rise above personal indebtedness, for the fiscal tightening to come. A move as bold as the pronouncements made by the Prime Minister in leading the world to recovery, as drastic times require drastic measures, would be to obtain a temporary reprieve from European law and have a deeper cut in VAT by another 10%, if not fully abolishing it for 2 years. France and Germany are looking to provide targeted assistance to industry which will not only boost their business but also affect EU competitiveness. A compromise would be to deeply reduce VAT for domestic consumption only and limit it to a 2.5% reduction for exports. The increase in economic activity will assist to repay the cost of the stimulus when VAT is re-introduced after two years and perhaps at a rate that is slightly higher for the following three years.
Liquidity has been constrained by severe mistakes in the banking industry and severe short-comings by the regulators and the government?s oversight of the regulators. The solutions offered and implemented only serve to constrain lending by increasing the cost of capital required to be set aside and the increased rate of return now required for this capital, especially by banks assisted by the government. While financial and regulatory discipline should not be compromised, assistance to small businesses can be offered by giving tax relief on loans and credit granted to SME?s. This will also reduce the need for government guarantees, which do cost SMEs. It will also work to reviving the banking sector. SMEs and property companies would be further assisted by abolishing business rates on empty properties for three years and then introduce the measures now proposed. Furthermore, abolish stamp duties on property transfers for the same period. If property is not sold or bought, this stamp duty will not be incurred anyway.
Finally, as drastic times require drastic measures, a windfall tax on energy companies is required perhaps at a lower level of that originally wanted and all this is transferred to the consumer by a subsidy in energy bills and lower duty on petrol for two years. Lower road tax is a one-off non-progressive relief that does not help in the costs to companies, people who need to use their vehicles and also to commuters, who effective incur more duty every time there is travel or distribution.
The government has missed an opportunity to bring the country out of recession and show the world how this is done by not understanding the principles or rationale of implementing a Keynesian stimulus and in a manner that will be paid for efficiently and less painlessly in the future. In proposing the measures announced, the government is likely to induce a deeper and prolonged recession, when these stimulating measures do not work well and the country ends up having to pay for flawed, inefficient policies that do not solve the problem at hand.
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I can't see the reduction in VAT making much change to my life. All the essentials are not affected. Food (zero rated), Gas and Electric (not in 17.5% band), petrol, alcohol and tobacco (offset by increase in duty). It might make my phone bill come down a bit provided the prices come down.
Why didn't Alistair just say, "The next few years are going to be terrible. Just hunker down and try to make the best of it. I commend this non-budget to the house."
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The Govt used to be good on producing ideas... good on spinning the presentation and forecasts...but poor on actually executing on them.
But most of us didn't care too much in the nice decade because we were all getting too rich , thank you; as our houses out-earned our salaries...
The most depressing thing about the present situation now is that even the ideas aren't good anymore .
All those big impressive buildings along Whitehall and what, exactly, are the people inside doing every day??
Reading here off and on since BNR (Before Northern Rock that is) I have seen better predictive ability and analysis---and possible solutions---than in almost any of the dozens of Govt statements.
Just one example to close with will have to do (because this will run feet long if I get started)--- Is there anyone out there who believes the Treasury stated predictions in yesterdays Pre-Budget Budget--on PBSR, GDP etc from which all the assumptions flow??
And ...okay I said just one!! I know.!.... And am I the only person who feels somebody should be telling GB and AD to stop blaming "A global situation" for the woes now----if only because for years they never, ever, credited a "Global situation" with the begging (if ultimately malignant) conditions for the faux prosperity..... a seven year old would be connecting the dots on this one
AND...last one-- promise!!.... the decision to equalise capital gains tax for people warking hard to produce businesses employing people working hard and earning money to pay tax...and vat... and company tax--------- with people who bought a second home???
Tax incentives for productive investment versus tax incentives to continue piling into a property bubble ----- !!
Actually, maybe the ideas never were that good...but they didn't need to be... perhaps it's only now we're paying attention we are begining to notice?
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Can anyone explain to me just where these massive loans are acquired from?
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> 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.
Just think of the 100's of billions that could have been
saved if we'd dumped those fat-cats years ago, instead of
waiting for the crunch.
We've left it too late now. Having enriched themselves,
they've even trashed our pensions funds before getting
out. Well, at least I never voted for Mrs T and her
hare-brained ideas.
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#186, ok i guess there is someone dumb enough to believe Labour propaganda. No wonder they keep repeating it.
"Black" ***Wednesay*** was the start of the return of the UK market to health. You can see a straight line healthy growth from that day until 1997 - roughly around the time Labour came in by a billion to one coincidence. The high interest rates Brown crows about were EXACTLY what he should have done in 2003 to kill this bubble dead, instead he is desperately trying to reinflate. I guess because he knows there is now at least one person thick enough to agree with him.
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#182, actually it was the welfare state that bankrupted Britain after WW2. Back in the day Labour was so much quicker, it only took them 2 years.
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#200, the 100s of billions that was p*ssed away over the last 8 years? And it was Brown who put the final nail in the coffin of pensions but hey who needs facts when you can blame it on someone who hasn't been in power for 18 years. I mean it is not like Labour has had a massive majority in Parliament for the last 11 years is it?
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"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."
Quite right.
This always was a great steaming pile of buffalo droppings.
Giving the rich extra income is of benefit only to those who want to be au pairs and other domestic servants.
Far better for the us, the poverty-stricken majority, just to take their ill-gotten loot and redistribute it.
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the stock market liked the fact that companies will not pass on the 2.5%! A gift for them not the consumer and who can blame them. Silly old chancellor!
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#194: It's really very simple. New Labour have "pledged" not to increase PAYE income tax. Therefore if they want to increase income tax, it suits them to divide it into PAYE and NI so that they can increase NI and then say how good they've been to stick to their pledges.
The really staggering thing is that New Labour have the brass cojones to think that anyone would be fooled by this little sleight of hand.
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I guess the other point is that we all need to continue consuming for our economic model to work which means it conflicts with our sustainability credentials which are now consigned to the recycle bin of history.
No consumption = property crash.
The only other points wort mentioning is Mortage Interest Relief would have boosted the property market more than SDLT holiday and removed pressure of the banks to reduce mortgage costs.
Also after the war people where given grants to build houses up until the 70's will these incentives return?
Maybe councils up and down the land should give developers windows of opportunitiy on difficult sites . i.e we will give you planning but you start building immediately.
Empty Rates is a joke and rates should be scrapped. Companies would rather pay higher corporation tax than rates and government would collect the tax through one department than using every council in the land which is highly inefficient.
The government should set up a national gas and electric energy provider and seriously up the ante with the current utility companies.
And finally in my rant, all deemed strategically important national assets should be owned by 100% british companies which are not subsiduaries. Part of the reason CT tax tax has declined so much as once powerful companies like BAA are saddled with too much debt.
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The poor devils can't do much more than tinker, and hope to look serious.
I enjoyed watching AD on TV and thought he gave quite a good political impression, but GB's discomfort was delicious, and the row of Nodding Donkeys was fascinating.
Subject to a check on my arithmetic, I think the retailers can just add a line of code to apply a 'Temporary VAT Adjustment Discount' of -2.1276595744680851063829787234043 % (or thereabouts) at the end of their invoices,
like they do for a Multibuy or a Toofer.
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In a Recession
(a) Businesses cut back operations and implement redundancies
(b) Bureaucrats increase operations and spend more money
If only the Civil Service could be run like a business employing intelligent qualified professionals, our lives would be so much better.
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Scandinavian tinge? Robert are you ill? This country can only DREAM to be anything like those countries. You also cannot compare the UK with Scandinavia. First and foremost it doesn't have a chancellor wasting billions on waste. It has higher taxes (like the rest of Northern Europe) which pays for schooling and hospitals (that are of good standard) I should know, I enjoyed the greats of the North of Europe for a long time.
Don't for a minute try and make us think we are now moving to a model (a very successful one) like they operate there. This is a move back to Old Labour. The poor man of Europe. Hence in 1970s we were seen as that and the rest of Europe moved on. We had to have the 80s to catch up and they have managed to save in the boom where we went out and spent the lot.
Peston when I se you on telly I am surprised I cannot see Campbell with his hand in your face moving your lips because you may as well admit you are not biased at all?
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Does the 2.5% cut in VAT have a corresponding downward effect on inflation? Does this in turn give greater scope for the Bank of England to cut interest rates further and quicker than it might otherwise have done (further stemming the effects of recession)? And finally does the resumption to the 17.5% VAT level at the beginning of 2010 provide a mirror image step increase in inflation at that time, perhaps timed nicely to avert any dip into deflation?
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Today on Bloomberg Michael Clarke while disparaging the fiscal stimulus did say that if it had to be done the reduction in VAT was the way to go.
On the same station the chief economist of the OECD said that he welcomed the UK fiscal measures.
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RE: Numero 199. At 3:52pm on 25 Nov 2008, 007ronnie wrote:
Can anyone explain to me just where these massive loans are acquired from?
Tax, it's like when governments promise to cut military expenditure by 50% and start a war instead.. they drop a Tax Bomb shell to up the ante.
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186#
I wondered which of the hyenas would be first to start the circle after your post. Not surprised that it was LBS who while darting in and out on the prey likes nothing better than to snarl weasel words.
202#
Your usual diatribe.
203#
Facts have never been your strong point when posting!
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RE: 199
You could call our Pre-Budget a future tax bomb connection for a whole heap of bombs. These are not the same as terrorist bombs though.
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210#
You obviously did not read 99# the Real Viking's post.Your anatomy is not very good, if Campbell's hand (singular) was moving Robert's lips you would not see the lips ,if you see the lips you would not see the hand.Try fingers next time that would fit your scenario but it is not very amusing however you put it.
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The comments on this bulletin board are wholly hostile to the measures announced yesterday, and it does seem that people feel that Mr. Peston misjudged things. (I'd certainly agree that yesterday's rise in the FTSE was not in celebration of Mr. Darling's package).
Is there any way in which a block package such as this (I have never seen a series of comments that were so consistent and so overwhemingly at odds with those of the commentator) can be passed to the people in charge?
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Has anyone considered the enormity of changing the country's computer systems to handle the VAT change. I have a few e-commerce website to look after, and I'm sure we will have some problems. Goodness only knows how the complex systems are going to cope. When was the last time we had a VAT change - 1991? So any software for carrying out this change is over 15 years old, and probably never tested! This could knock the so-called millennium bug into a cocked hat!
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What do you expect from a party run by ex teachers,lecturers , civil rights lawyers and professional politicians . As far as I am aware not a single cabinet minister has been involved in running a FTSE 100 company at even middle management level. Would you as chairman of a footsie company put an ex marxist solicitor in charge of the finances of BP, because that's what we have got in Alistair Darling. Mind you his boss is even worse as far as I know he has never worked outside the Public sector . I must admit I don't know if Brown had a paper round so I may be doing him an injustice
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Surely there is more sense in putting VAT up rather than down as most consumers will not notice a 1.5% fall in VAT as if offers such a little difference, put VAT up 1%, people will still spend and the governemnt could then afford to cut taxes, surley a more effective way of getting people to spend is actualy giving them more money.
This could also lead to more weathly living in Britain to save on tax, who will then contribute to the economy.
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I am a pensioner so on a limited budget but although I agree all must pay a fair share of income tax, I think that many of the lefties who are delighted at the new tax on higher earners are what I call "back-pocket" workers. Many business men and workers are known to receive cash for work done. This cash is slipped into a back pocket and so hidden from the Inland Revenue.
If someone comes to my home to do any repairs or garden maintenance, they usually ask for cash payment. "Give me cash and there will be no VAT." What a joke
If I were David Cameron I would be delighted to lose the next election because the winner will have an unenviable task. On Sunday he said that he jumps out of bed shouting "I want an election" (at least I think he said "election") and it seems to me that he should leave Comrade Brown to sort out the mess his incompetence has got us into.
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Gordon lets explain the stalemate
two brothers were sitting in the sun
and sharing a bottle of beer
a fine lady comes along asks them
Can you buy me a beer
they look at themselves
they look in their empty pockets
they look at the lady
and say stalemate
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The budget is a disgrace.
We have a major problem with Government debt - policy response to borrow more
We have a problem with over-leverage with our banks - policy response to get banks to lend more
UK consumers have too much debt - policy response to get consumers to spend more by cutting VAT
It seems the the destination of all Labour Governments is the IMF when the money runs out. My concern is that the Government will run out of bullets as it still does not know the extent of the demands on the Governemnt purse through the downturn.
This Government has failed to take any tough decisions on spending....the answer to every problem is to chuck more money at it. In my view this huge gamble will fail as people who are worried about losing their jobs will not spend to get 2.5% off items. When New Labour came to power in 1997, the savings ratio was 7% (as it has been for decades)....it is now zero!!! Thus creating the illusion of growth in the economy.
George Osborne has become a bete noir for the socialists as a result of his holiday companions, but I would rather have Ozzy Osborne as Chancellor rather than Darling and this shower of a Government
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Kettle, frying pan, black. Words that spring to mind when listening to the Tory's bleating yesterday and today.
Whinging about a possible 2,5% rise in VAT?
What about doubling VAT and get it over with?
I am old enough to remember the "re-structuring" carried out by the Tory's when they DOUBLED VAT the last time they came to power.
This is extracted from the BBC archive.
"1979 (June) Budget (Sir Geoffrey Howe)
The first Budget of the new Conservative administration was introduced very quickly after the election. It represented a major change of direction for the economy. The increased reliance on interest rates and monetary policy to control inflation and a shift in the base of taxation towards taxes on spending rather than on income were two important aspects of this.
Sir Geoffrey Howe had been `Shadow Chancellor since 1975. In his first Budget he raised VAT from 12.5% (on 'luxury' items) and 8% (on most other goods) to a single rate of 15%. The basic rate of income tax was cut to 30% (from 33%) and the top rate from 83% to 60% on 'earned income'. The government set a long term aim for the basic rate of 25% (achieved in 1988). Reductions in public spending were announced. The Chancellor states that 'we cannot go on avoiding difficult choices'.
The changes in VAT were seized on by the government's critics as evidence that the Conservatives had betrayed an election campaign promise contained in a press release that Labour allegations that they would double VAT were unfounded.
Other measures announced by the Chancellor included an increase in interest rates from 12% to 14%; an increase in prescription charges from 20p to 45p and a major relaxation of exchange controls.
1980 Budget (Sir Geoffrey Howe)
Increases in prescription charges and indirect taxes; broad reductions in public spending announced but more resources would be made available for the police and defence. James Callaghan described it as the 'meanest since 1931'.
1988 Budget (Nigel Lawson)
Reduced the basic rate of tax by 2% to 25% and reduced the higher rates of taxation to 40%. A new ultimate objective of a 20% basic rate declared. Multiple tax relief for home buyers was to end in August. The Budget speech was marked by a series of interruptions and the outbreak of 'grave disorder'.
The Deputy Speaker, Harold Walker ordered the suspension of the House
1991 Budget (Norman Lamont)
Raised VAT by 2.5% to 17.5%.
When talking about betrayal the Tory's have no equal.
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It seems there is mass misconception that everyone will be worse off from the measures set out in the Pre-Budget report. Clearly, people are too influenced by the Tory-biased media (as they were in Labour-biased 1997).
The income tax personal allowance and starting limit for the payment of National Insurance usually rise in line with inflation. Both these and the income tax basic rate band threshold have been lifted at above-inflation rates (and the inflation rate used was September RPI when inflation was at its peak).
All earners will be paying less tax and NI as a result. Even once the tapering of the personal allowance for people with incomes over £100k per annum, 45% income tax rate and 0.5% increase in NI are introduced most people will be better off.
This is partly because there is to be a substantial rise in the starting earnings threshold for NI at the time of the 0.5% rate increase to realign it with the income tax personal allowance which was forced up over the 10% tax row.
Only the minority of high earners will be paying more tax.
The change in VAT will make very little difference to the average individual which is why the biased media has obsessed over it and neglected to inform people of the overall changes.
It is quite conceivable that the key reason for the change in VAT rate is because the main beneficiary of the change will be the Government themselves who will pay 2.5% less on its also-announced multi-million pound brought forward capital projects and 2012 Olympics construction.
I am no Labour fanatic but remember who the Tory key demographic are. Voting Conservative will only ensure tax changes will favour the highly paid.
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Help for mortgage arrears what about those renting?
There's much about helping those in mortgage arrears. What about people in similar straightened circumstances who rent?
May I tell you that in council properties Local Authorities will apply for a repossession order after considerably less than six weeks - let alone six months.
And while anyone repossessed from a private property may apply for council re-housing on the grounds of being homeless, those evicted from a council property for exactly the same reason are deemed to have made themselves homeless!
So, 75,000 repossessions are expected next year, are they? I respectfully suggest that this represents a sufficient number of people who might like to meet up at Westminster some time in the near future
and express their views.
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