UK facing VAT rise?

N1AK

HAMISH_MCTAVISH wrote: »

According to Krugman, they don't.

So Paul Krugman thinks that austerity is wrong and as the speaker of the divine word we should all fall in line? Personally I think Krugman is an attention seeker at best so forgive me if I don't fall in line.

The other aspect of austerity that is often ignored by those who criticise it is that austerity is also about managing risk. If the global economy had suffered more, Europe had collapsed etc then the financial stability of the UK would be even more critical than it is in the current conditions.

It is generally accepted wisdom that you should have some savings available for emergencies; even though you likely won't need them and could make more money by investing them. Someone who keeps a rainy day fund and doesn't ever need it isn't being stupid, they are being responsible.

ILW

silverchair wrote: »

If money runs out & they stop being paid, then they will find new jobs in a different sector, meaning a mass exodus of teachers & other public sectors. Im not sure how that is a solution to overspending. I for one do not spend money on a long commute & go to work in order to work for free.

Many would have no chance in the private sector, where you succeed or fail based on results.

N1AK

coastline wrote: »

Can you expand a bit about what you mean...we went into a financial crisis with deficit spending and no financial reserves.
What are financial reserves...I keep hearing it...yet if you look at the figures over the decades there isn't a government who have ran a steady surplus..
All they ever do is spend the funds they bring in...balance the books...if not they add more to the national debt..

http://newsimg.bbc.co.uk/media/images/47530000/gif/_47530170_uk_budget2010_466x345.gif

Moderate borrowing isn't automatically a problem, although I will happily accept that UK governments seem ideologically opposed to long periods of balanced spending. Our economy managed 2.7% pa growth in GDP during 1992-1997; in other words the UK economy grew 50% larger yet we continued to increase spending enough that we still didn't balance the books.

StevieJ

Wookster wrote: »

There are bucket loads of unemployed accountants out there (accounting having been badly hit in the recession) - they should be deployed into councils and government departments to find and eliminate waste.

If there are it would be very unusual, accountants usually rub their hands in glee at the thought of a recession, think, bankruptcy etc

coastline

N1AK wrote: »

Moderate borrowing isn't automatically a problem, although I will happily accept that UK governments seem ideologically opposed to long periods of balanced spending. Our economy managed 2.7% pa growth in GDP during 1992-1997; in other words the UK economy grew 50% larger yet we continued to increase spending enough that we still didn't balance the books.

We had growth in the early 90's and still ran a budget deficit..
The Tories were in power and had been 14 years..
Until governments run a surplus and physically show it in the books then we'll always have these cutbacks.

Hadrian

When VAT was first charged the then govt said that those firms charging it should include it in the price asked for. Lidl, et al, add this on the end of ones bill, much to my annoyance! Food, No VAT?? my dogs' food has it at 20%! It's cheaper to feed them my scraps, no VAT!, as we did before tinned dog food.

N1AK

coastline wrote: »

The Tories were in power and had been 14 years..
Until governments run a surplus and physically show it in the books then we'll always have these cutbacks.

I actually agree that the Tory spending in the mid-90s was too high, although that was forced by the general view of the electorate and labour simply took the ball and ran with it.

That said, Maggie came into power when national debt was 43% of GDP and Major left with it at 42% and falling rapidly. Factor in that Labour followed the Tory budget initially and they actually got got it down to around 30% of GDP; the lowest it had been since WWI.

What happened under Labour? They increased it back from 30% to 52% before we kicked them out, and it's currently at over 60% (and given Labour's abhorrence of cuts we can be confident it would be higher had they won). In other words, 12 years of Labour has left our debt back at the levels of the 1960s; a time when we were still massively indebted from WWII.

Graham_Devon

I think most of us can accept debt increasing as a percentage of GDP in a crisis.

I'm no sure what the 100% increase over the last labour term actually gave us though? It gave us a boost, for sure, but what tangible stuff did it bring?

Other countries existed in the boom times without seeing debt levels increase like we did. On the flip side, some of the countries now receiving bailouts spent like there was no tommorow. They do not seem to have achieved much either from their debt & spending, nothing tangible anyway. Look at Germany, Sweden, Switzerland and it's a slightly different story. You can see real beneficial changes, especially in transport and the like.

zagfles

MacMickster wrote: »

No VAT is charged on food. Lower rate (5%) VAT on gas and electricity and at 0% on bus fares, childrens clothing etc.

As I said, increase benefits and the minimum wage by 2% to assist the poor with the small amount of their spending on which they do pay VAT.

You don't need to. VAT rises feed into inflation (both RPI and CPI) so as long as benefits and the minimum wage are indexed, they won't lose out. The poor would be better off, as like you say they spend proportionally less on VAT'able items.

It's those in work earning more than NMW who don't get inflation linked rises who will lose out. And those with savings, as they'll pay more when they eventually spend.

grizzly1911

zagfles wrote: »

You don't need to. VAT rises feed into inflation (both RPI and CPI) so as long as benefits and the minimum wage are indexed, they won't lose out. The poor would be better off, as like you say they spend proportionally less on VAT'able items.

It's those in work earning more than NMW who don't get inflation linked rises who will lose out. And those with savings, as they'll pay more when they eventually spend.

Feed into inflation with perhaps a an 18months lag, but as the inflation figures are a weighted pot the true effects for the subsistence level isn't fully reflected.