"were all in this together" "

[bhadebenhams]

Dean Wilkins was sacked when New Labour were in charge, so I am NEVER voting for those Trots again

 

[beorhthelm]

If you look at the findings of the Institute of Fiscal Studies, who are not particularly left leaning, they conclude that the poorest 10% of the population will be 2.2% worse off as a result of the VAT rise, compared to 0.95% for the richest 10%. This is based on consumers not changing their spending habits, which as far as I am aware, is not one of Gideon's goals.

far be it from me to question the findings of the IFS, but it would be interesting to see the bootnotes and assumptions made to arrival at those numbers. instinctivly they appear the wrong way round. the poorest 10% should i expect be spending a very large proportion of their income on 0% rated food - and i would want to know why not if this isnt the case! maybe there is a fundemental problem in spending/eating habits? bear in mind most of the poorest 10% are out of work so cost of travel is muted, and energy hasnt gone up (two largest non-food bills i can think of).

as for the rich, the only explaination i can think of is they are spending a large amount overseas outside of the EU, or maybe on books and gourmet food ingredients?

 

[West Hoathly Seagull]

Adult clothing - dependant on what it is and how often it may be used but could be a luxury purchase
petrol - Luxury
alcohol - Luxury
fags - Luxury
confectionery - Luxury

All a matter of lifestyle choice and not essentials, anyone could decide not to buy any of those items during a month and therefore pay zero in VAT on these items.

I'd agree with all those except petrol. Trying to get to work by public transport up here would not be a great deal of fun, but the rest are all optional.

While I can find plenty of things I don't like about what the coalition is doing, it is worth noting that there is heavy disagreement among Labour people. Darling, to be fair, was a pretty competent Chancellor, who himself realised the deficit had to be cut. If the complaints made by his wife are anything to go by, he received continuous grief from Brown over this. The likes of Balls don't even get the need and think you can just go on spending. Ed Milliband seems to take this line too. Come the next election, they have to win places such as Hastings and Crawley to win; what Barnsley and Consett vote is irrelevant to the outcome of a General Election. I admit I am a Tory, but I have yet to hear a positive reason as to why I should vote Labour. "Isn't the coalition awful?" wouldn't change my vote, even if I was minded to change it.

 

[drew]

far be it from me to question the findings of the IFS, but it would be interesting to see the bootnotes and assumptions made to arrival at those numbers. instinctivly they appear the wrong way round. the poorest 10% should i expect be spending a very large proportion of their income on 0% rated food - and i would want to know why not if this isnt the case! maybe there is a fundemental problem in spending/eating habits? bear in mind most of the poorest 10% are out of work so cost of travel is muted, and energy hasnt gone up (two largest non-food bills i can think of).

as for the rich, the only explaination i can think of is they are spending a large amount overseas outside of the EU, or maybe on books and gourmet food ingredients?

It was based on the fact that the spending habits are the same pre and post VAT increase. Why would you think that it won't hit the poorest the hardest. The increase represents a greater proportion of their total income than it would for the wealthiest. What has your asssertion that they should be spending all their money on food got to do with it. Are you saying they are not allowed to have cars, buy clothes etc. As for the rich, they don't spend all their money. They use it to make more, ie investments upon which you don't pay VAT!

 

[drew]

I'd agree with all those except petrol. Trying to get to work by public transport up here would not be a great deal of fun, but the rest are all optional.

While I can find plenty of things I don't like about what the coalition is doing, it is worth noting that there is heavy disagreement among Labour people. Darling, to be fair, was a pretty competent Chancellor, who himself realised the deficit had to be cut. If the complaints made by his wife are anything to go by, he received continuous grief from Brown over this. The likes of Balls don't even get the need and think you can just go on spending. Ed Milliband seems to take this line too. Come the next election, they have to win places such as Hastings and Crawley to win; what Barnsley and Consett vote is irrelevant to the outcome of a General Election. I admit I am a Tory, but I have yet to hear a positive reason as to why I should vote Labour. "Isn't the coalition awful?" wouldn't change my vote, even if I was minded to change it.

When did Ed Milliband say we don't need to cut the deficit. That's news to me!!!!

 

[beorhthelm]

It was based on the fact that the spending habits are the same pre and post VAT increase. Why would you think that it won't hit the poorest the hardest. The increase represents a greater proportion of their total income than it would for the wealthiest. What has your asssertion that they should be spending all their money on food got to do with it. Are you saying they are not allowed to have cars, buy clothes etc. As for the rich, they don't spend all their money. They use it to make more, ie investments upon which you don't pay VAT!

oh dear, not really understanding the points asked are you. if everything was VATable, then all else being equal 2.5% rise would be exactly the same proportion rich or poor or median. we accept that not all is equal and there are non-VATable items. so how is a poorer person supposedly spending a larger proportion on VATable items than a rich person? i didnt say they cannot have cars, im making the obsevation they, in particular the poorest 10%, are unlikly to have a car or travel much. you know of many unemployed who are going to be commuting to London? plenty of the wealthest are. if i... no when as a student i was on an income similar to the poorest 10%, i know the largest proportion of my expediture was on food, then beer ( ) then electricty. if food and electricity isnt using up the vast majority of a poor/unemployed person's income, what are they spending it on?


edit: maybe, and this is rather th point, i have it quite wrong. the lowest earners are in fact spending most of their money on booze, fags, takaways, primark clothes, cheap electronics etc, after all you can get an awfull lot of food cheaply if buying Value/Economy. in which case, this raises questions about what sort of lifestyle health wise the poorest are living and what can be done about that. that should be of far greater concern than the effects of a 2.5% VAT rise, but seems cheap political points will be scored without asking more deeper questions.

 

[beorhthelm]

this "proportion of total income" thing is bugging me as im sure its total bollocks. i cant remeber how to do the maths properly, but lets say the IFS numbers were 2.25% and 1.25% worse off respectivly for the lowest and highest decile of the population. that would mean the lowest income of say 100 p/w was only spending £10 a week on non-VAT goods and energy, while our highest income of say 1000 p/w (way short i know) would be spending £500 a week on non-VAT goods and energy to end up at 2.3% and 1.25% worse off. or something along those lines, be great if a maths boffin could show the numbers properly or correct.

 

[Dandyman]

oh dear, not really understanding the points asked are you. if everything was VATable, then all else being equal 2.5% rise would be exactly the same proportion rich or poor or median. we accept that not all is equal and there are non-VATable items. so how is a poorer person supposedly spending a larger proportion on VATable items than a rich person? i didnt say they cannot have cars, im making the obsevation they, in particular the poorest 10%, are unlikly to have a car or travel much. you know of many unemployed who are going to be commuting to London? plenty of the wealthest are. if i... no when as a student i was on an income similar to the poorest 10%, i know the largest proportion of my expediture was on food, then beer ( ) then electricty. if food and electricity isnt using up the vast majority of a poor/unemployed person's income, what are they spending it on?


edit: maybe, and this is rather th point, i have it quite wrong. the lowest earners are in fact spending most of their money on booze, fags, takaways, primark clothes, cheap electronics etc, after all you can get an awfull lot of food cheaply if buying Value/Economy. in which case, this raises questions about what sort of lifestyle health wise the poorest are living and what can be done about that. that should be of far greater concern than the effects of a 2.5% VAT rise, but seems cheap political points will be scored without asking more deeper questions.

1. Any rise in the cost of petrol will be passed onto consumers eventually.
2. Raising VAT rather than Income Tax is a deliberate choice to use regressive rather than progressive taxation and as such clear Tory class politics.

 

[ROSM]

this "proportion of total income" thing is bugging me as im sure its total bollocks. i cant remeber how to do the maths properly, but lets say the IFS numbers were 2.25% and 1.25% worse off respectivly for the lowest and highest decile of the population. that would mean the lowest income of say 100 p/w was only spending £10 a week on non-VAT goods and energy, while our highest income of say 1000 p/w (way short i know) would be spending £500 a week on non-VAT goods and energy to end up at 2.3% and 1.25% worse off. or something along those lines, be great if a maths boffin could show the numbers properly or correct.

It's simpler than that. The lower decile spend more of their income so therefore shoulder more of the increase. The higher decile spend less of their income on goods and services so therefore see a lower rise in terms of impact on income.

 

[beorhthelm]

1. Any rise in the cost of petrol will be passed onto consumers eventually.
2. Raising VAT rather than Income Tax is a deliberate choice to use regressive rather than progressive taxation and as such clear Tory class politics.

1. fair point.
2. the regressive/progressive argument is unproven or undemonstrated. seems to me it is neither, just some like to claim its regressive as default from it not being overtly progressive. for example, the cost of transportion increase effects all the same. price increases passed indirectly to non-VAT goods will be the same for all, rich or poor.

It's simpler than that. The lower decile spend more of their income so therefore shoulder more of the increase. The higher decile spend less of their income on goods and services so therefore see a lower rise in terms of impact on income.

i thought of that, the wealthy could save more. but the effects are supposed to be "based on consumers not changing their spending habits" (el pres words, i assume thats paraphrased from the IFA). saving isnt spending by definition, so i hope this is not included to deliberatly skew the numbers. and besides, this still doesnt explain the outcome of how little the lowest decile is supposed to be spending on non-VAT and energy.

 

[ROSM]

I actually wrote a long riposte to your initial post (#104) but NSC decided to delete it for me rather than posting. You state that the debt was 43% of GDP in 1997 and then would be 57% without the bank bailout. That's a 14% increase over 11(?) years, which is a fair old rate, especially when you consider that GDP grew by around 3% per annum over the same period. You also defend the increase post-2002 by saying that it went on needed infrastructure; however I'd imagine that if the infrastructure was that desperately required surely it would have been initiated as soon as Labour came into power, rather than five years later?

However that wasn't really the point of my post (#115). Labour's spending was not reckless necessarily because of the size of it, but more because they were actually doing it, when a more sensible policy may have been to put some of it aside for a rainy day. Gordon's folly was seemingly truly believing that he had reached the end of boom and bust; then, when the bust inevitably arrived there wasn't a freely available pot of money to spend to help us out of it.

The 'increase' between 1997 and 2007 was actually a decrease of 3% of GDP. The rise between 2007 and 2008 was 14% and was due to reduced taxes and increased unemployment benefit following the start of the financial crisis. Whoever was in power would have suffered that.

As for spending projects starting in 2002 rather than 1997, labour and Blair admit they wasted much of their first time on correcting infrastructure before commencing investment. I think they're being harsh on themselves.

As for not planning for a rainy day, the net reduction over 10 years was surely a sign they had improved the situation as opposed to say Greece or Ireland or even the us who are currently at 72% of GDP and growing.

 

[ROSM]

1. fair point.
2. the regressive/progressive argument is unproven or undemonstrated. seems to me it is neither, just some like to claim its regressive as default from it not being overtly progressive. for example, the cost of transportion increase effects all the same. price increases passed indirectly to non-VAT goods will be the same for all, rich or poor.




i thought of that, the wealthy could save more. but the effects are supposed to be "based on consumers not changing their spending habits" (el pres words, i assume thats paraphrased from the IFA). saving isnt spending by definition, so i hope this is included to deliberatly skew the numbers.

But if someone has £100 income and they spend 90 on goods that are vat able then they will suffer 90% of 2.5% which is 2.25% impact. Someone who has £1000 and spends £500 of it on vat able items will suffer a 1.25% impact so in those terms the impact is regressive. I accept there are contra arguments but I'm trying to explain the maths

 

[Westdene Seagull]

It was based on the fact that the spending habits are the same pre and post VAT increase. Why would you think that it won't hit the poorest the hardest. The increase represents a greater proportion of their total income than it would for the wealthiest. What has your asssertion that they should be spending all their money on food got to do with it. Are you saying they are not allowed to have cars, buy clothes etc. As for the rich, they don't spend all their money. They use it to make more, ie investments upon which you don't pay VAT!

Oh dear - lets ignore income tax and CGT both of which are higher than VAT !

 

[beorhthelm]

But if someone has £100 income and they spend 90 on goods that are vat able then they will suffer 90% of 2.5% which is 2.25% impact. Someone who has £1000 and spends £500 of it on vat able items will suffer a 1.25% impact so in those terms the impact is regressive. I accept there are contra arguments but I'm trying to explain the maths

i think you miss the point, or do you accept these numbers are realistic? who can live on £10 food and energy? nearer £50. meanwhile £500 would be a massive weekly food and energy bill, i'd expect half that at a push without going onto VAT items (thats £50 energy plus £50 food per person for family of 4). so 1.25% increase for the poor example and 1.875% for the rich example. as i say, all depends how those numbers are arrived at.

 

[Dandyman]

i think you miss the point, or do you accept these numbers are realistic? who can live on £10 food and energy? nearer £50. meanwhile £500 would be a massive weekly food and energy bill, i'd expect half that at a push without going onto VAT items (thats £50 energy plus £50 food per person for family of 4). so 1.25% increase for the poor example and 1.875% for the rich example. as i say, all depends how those numbers are arrived at.

The point is any rise in costs for someone on a low income will clearly have a greater impact on their real standard of living that on someone with a high income who can absorb the rise with little or no affect. When you couple this with savage politically motivated cuts in public services, cuts to Housing Benefit, the attempted gerrymandering of constituencies and imposition of parliaments that have outlived their support the picture simply gets worse and worse.

 

[Beach Hut]

Notwithstanding the very low interest rates so many people have had huge reductions in mortgage payments, it is a small price to pay in my opinion to try and sort out the issues Labour created. Before anyone starts stop blaming the banks they were poorly regulated by the bodies set up by Labour.

 

[El Presidente]

Notwithstanding the very low interest rates so many people have had huge reductions in mortgage payments, it is a small price to pay in my opinion to try and sort out the issues Labour created. Before anyone starts stop blaming the banks they were poorly regulated by the bodies set up by Labour.

I wasn't aware that Gordon Brown was in charge of regulating Lehman...

 

[El Presidente]

Oh dear - lets ignore income tax and CGT both of which are higher than VAT !

But you are also ignoring that both IT and CGT have a threshold below which nothing is paid.

 

[Beach Hut]

I wasn't aware that Gordon Brown was in charge of regulating Lehman...

It goes back further than that and a cheap shot. The main banks were regulated by a body set by the government that failed to do their job or the rules were wrong.

I don't blame any business for stretching the rules as they will, I have first hand experience and it is not pleasant in my view what goes on.

 

[beorhthelm]

The point is any rise in costs for someone on a low income will clearly have a greater impact on their real standard of living that on someone with a high income who can absorb the rise with little or no affect.

no, i think thats a slightly different point, one that neatly tries to side step the question of legitimacy of the numbers and the claims based on them are arrived at.