Season Of Goodwill

The Major has made his view very clear:

"Why the bloody hell should we law-abiding taxpayers tolerate a bunch of freeloading welfare scroungers smashing up London? We spend God knows how much on these revolting students - and will still do so even after the fees increase. But just look how they thank us! Why should we give them anything?! If they want to spend three years dossing around and rioting, let them pay for it themselves. And I'll bet half those scum desecrating the Cenotaph yesterday aren't even students at all - they'll be anarchists. And we'll be paying them! Housing benefit, child benefit, incapacity benefit... you name it.

It's time to draw the line - anybody convicted of violent disorder should go to jail - hard labour - and then lose all their welfare benefits for ever. Period. In future, if they want to eat they have to work like everyone else. And if they think they can rob instead, we'll lock them up somewhere where they will have to work. I'll get my mate Gomulka to organise something with the Soviets out East - that'll soon wipe the smile off their faces."

Now, of course, nobody objects to peaceful protest. No, indeed.

Well, that is, nobody objects to peaceful protest as long as it doesn't inconvenience us. And as long as it doesn't require us to pick up some huge tab for police overtime. So long as it takes place on a Sunday afternoon in say, a field somewhere outside Milton Keynes, and so long as the protesters pay for the policing, like in a football match, then everything's cool. In fact, under those circs, we might even allow a little recreational effigy burning - a weekly bonfire night for young people to let off steam. Kind of idea.

But who exactly are these rioters, and who is paying to keep them alive?

According to police hunting down those involved in the previous riot - the one last month at Tory HQ in Millbank - they are mainly teenage students of one kind or another. They say:

"We are finding that many of these people are young students who do not seem to have been in any trouble before. It appears they may have been provoked by more anarchist groups.

From a parent's point of view it must be very concerning. These are young people committing really serious offences which I suspect may result in prison sentences for some." (The maximum sentence for violent disorder is 5 years)

Provoked by anarchists? Certainly when you look at the wanted poster, one or two do look older than teenage:

.
But who are these anarchists exactly?

Google's anarchist UK trail leads straight to the Anarchist Federation. But can they be in any way credible? Are real anarchists allowed to participate in such a restrictive and preposterous construct as a federation? It sounds more like the Mothers' Union. Besides, there's something seriously hollow about an organisation that wants to abolish oppressive government on the one hand, while maintaining Big Government spending on the other.

Googling Operation Malone - the police man-hunt for November's rioters - gives some far more promising leads.

Ian Bone (great name) is a veteran anarchist of 63. During the 80s he ran a newspaper called Class War, featuring pix of beaten-up policemen. And here he is addressing a Class War meeting in 1985 (parental discretion advised - some of his opinions are seriously juvenile - precisely the kind of thing which might appeal to disaffected teenagers at the University of Neverpay):



Anyway, Bone has some blogposts on the current riots that simply blew the Major away. For example, under the headline What a magnificent inspiring day - the London mob is fucking back Mr B writes:

"I salute everyone who atacked the police, the treasury, the Supreme Court, the Royal family, the tax avoiders today – a quite heroic and brave acievement. Full report tomorrow – ALL HAIL – IT’S THE POLL TAX RIOT MARK 2 – ‘we come from the slums of London……"

Now that's more like it. According to his own autobiography, Bone is the son of a butler and a housemaid (no, really) and obviously carries deep psychological scars from his parents' life below stairs:

"It is fucking phenomenol. the rich are targets whether its the Bullingdon Club, the Royals or Sir Philip Green... Yesterday was reminiscent of both the poll Tax Riot and the Gordon riots as a rich hating mob stormed through the streets... Organise and celebrate yesterday comrades…but theres more coming the way of the fucking rich…..much more.’WE COME FROM THE SLUMS OF LONDON’

All of which is absolutely fine.

Well, fine except for any incitement to riot bits obviously.

But what we need to know is how does Bone support himself?

He has published three books, including the carefully nuanced "Bash the Rich". But given that B the R is currently standing at 76,361 in the Amazon best seller list, you'd have to guess he has some other source of income. And his website gives no other clues.

One of those oldies' jobs in B&Q? At 63 it's possible.

A family inheritance? Seems a tad unlikely.

Money from Putin? In the 80s, Class War and its ilk were widely thought to have been financed by the KGB, so that has to be a runner.

But the Major reckons Bone and his like must be on some kind of welfare deal.

Unfortunately we have no way of finding out.

In this season of goodwill to all men, let's hope someone round at the DWP is looking into the entire question right now.

****

Meanwhile on an altogether more seasonal level, we've just updated the TaxPayers' Alliance Tax on Christmas paper.

We reckon that taxes on Xmas spending this year will cost the average family £283. The overall bill will be £7.2bn, an astonishing 40% increase on 2008, when we last did the calc.

Part of the increase has been driven by the growth in Xmas spending, 2008 coming immediately after the Lehman crisis. But the majority of it reflects higher tax rates - the hike in VAT from 15% back up to 17.5%, plus increases in various fuel and excise duties.

And the really bad news is that VAT increases again on 4 Jan to 20%. According to Treasury forecasts, the rise will cost the average family nearly £500 pa, taking the average family VAT bill above £4000 pa for the very first time.

Happy Xmas everyone.

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www.gudanggrosiran.com Categories: riots, tax, vat

It Was One Of Wilde's

Don't blame us - it was St Vince's idea

The Times headline says it all:

"Get ready for VAT rise to pay for £17bn Lib Dem tax cuts, economists warn"

So in the noble spirit of compromise and The National Interest, George will set aside narrow party politics and grant the LibDems their much-trailed £10 grand personal tax allowance. However, sadly, our present grim fiscal circumstances dictate the LD policy can only be afforded by simultaneously and reluctantly increasing VAT to 20%, or maybe more.

Now, as it happens, there are very many Tories - including Tyler - who think there is much merit in such a tax switch. Of course, we don't want to increase VAT or any other tax - we want to see the whole lot lower. But in the circs, this is a least bad option. And it's not a million miles from what Thatcher/Howe did in 1979 (albeit they cut rates rather than increasing allowances).

You will be familiar with the key argument: that cutting the tax on work will incentivise people to get off their butts, while increasing the tax on consumption will incentivise people to save. Sound Victorian values all round, nudging us once again to become the nation of hard-working, prudent folk that God intended us to be*.

What's more, our 17.5% standard VAT rate is quite low by European standards. Germany is on 19%, France on 19.6%, and Italy on 20%, with further increases looking quite likely. Lucky old Sweden, Denmark, and Hungary are already on 25%.

Of course, increasing the personal tax allowance all the way to £10 grand would be expensive. St Vince costed it at £17bn, and to fund that we'd need to whack up the standard rate of VAT to around 21%. But that would still leave us comfortably in the European pack.

And there is another option, which is that instead of increasing the standard rate, George could extend the standard VAT rate to cover more items, such a food and children's clothing, both currently on a VAT rate of 0%.

That was the approach proposed by the Reform think tank in March. They pointed out that "the UK is one of only four EU countries to apply a zero rate to food and one of only three to apply a zero or reduced rate to children’s clothes". Overall, the items on zero or reduced VAT rates are extimated by the Treasury to cost over £30bn pa in lost revenue. Here's Reform's useful summary:

So simply by extending the standard rate of VAT to all items, HMT could raise another £30bn (well, maybe not quite that much because of behavioural changes - but still A Lot).

Now there is a well-known objection to VAT, which is that it's a regressive tax. In other words, because the poor consume a greater proportion of their incomes than the rich, they end up paying proportionately more tax. When the TPA looked at this just before the election, they found the poorest 20% shell out around 11% of their gross incomes on VAT, whereas it only costs the richest 20% just over 4%.

That's something we should all take very seriously, and extending the standard 17.5% rate to all the items shown in Reform's chart would make the problem much worse.

Which is why Reform coupled its proposal with a recommendation to cushion the poorest with a compensating increase in cash benefits. According to their calculations that could be done for around half the extra revenue flowing from the increase in VAT.

So in summary, making everything subject to 17.5% VAT, and cushioning the poor, would still leave enough to pretty well fund the £17bn pa estimated cost of the LD's £10 grand personal tax allowance.

And the very best bit?

George can say the whole shooting match was one of Wilde's.

*Footnote - for economics fetishists only Although Tyler's gut tells him that switching the tax burden from income taxes to consumption taxes would be A Good Thing Ltd, it has to be said that the econometric evidence is mixed. Indeed, even the theory is mixed - after all, we work to earn to consume, so it shouldn't make too much difference whether we pay our taxes in our wage packets or at the shop counter. Yes, I know we also save, but theoretically we save so we can consume later in life after we retire (indeed one Nobel winning economist built his early career on the proposition that the fully rational, fully informed man spends his last and final penny on having the last and final screw driven into his coffin lid).

M'learned friend Andrew Lilico at Policy Exchange is big on this, and in a recent paper we've already blogged, he used an economic model to compare the economic impact of changes in the basic income tax rate with changes in the standard VAT rate. He concluded:

"...recent academic evidence and experiments on the model suggest that increasing VAT may be as bad as, or worse, than increasing the basic rate of income. Some firms will try to absorb some of the effects of a VAT rise – e.g. because they do not operate in competitive markets, or because they are in financial difficulties and need to maintain turnover. Consequently, not all prices will necessarily rise by the same amount, distorting relative prices, re-directing economic activity inefficiently and so reducing growth. Not all goods attract the same level of VAT – e.g. some are subject to reduced or zero rates increasing the distorting effect."

So - shamelessly putting words into his mouth - Andrew might agree with Reform's proposal to extend the standard VAT rate in order to remove distortions, but would seriously doubt that an overall switch from income tax to VAT would have much long-term beneficial effect on the stuff we really care about - GDP growth, employment, etc.

He goes on to make another interesting point:

"In the 1970s, rates of income tax were high, income tax complexities excessive, and union power higher (increasing the distorting effects of income tax) whilst rates of VAT were low (so that the effects of distortions were small). Until the index-linking of benefits during the 1980s,VAT increases also effectively reduced the value of benefits, increasing work incentives. At this point the trade-off may well have been more favourable to increasing VAT and reducing income tax. Now the rate of VAT is approaching the basic rate of income tax it may be the case that VAT rises will dominate over income tax related distortions."

On one level that would suggest George shouldn't do a Thatcher/Howe because the 70s were another country. But on the other hand, increasing VAT would be a way of whittling down the real value of welfare benefits in a world of low inflation - ie freeze benefits as part of the cuts package and let the simultaneous VAT hike do its work.

That's how you start thinking when you shack up with the Lib Dems.

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www.gudanggrosiran.com Categories: cuts, lib dems, vat