Wednesday, May 14, 2008

The £2.7bn tax rise

Whilst many people are talking about the £2.7bn "unfunded" tax cut that Darling announced yesterday, and the fact that the Government has just neutralised the argument they always make against the Tories, it's worth noting that this isn't really a tax cut but is instead a deferred tax rise.

Were this measure being funded by surplus money on the balance sheet, or by genuinely cutting spending, then it would be a tax cut, but it isn't. It is being funded by BORROWING. When the Government borrows money what it is really doing is saying it is borrowing non-existant money from us... the taxpayer.

It is not "tax and spend" anymore, it's "spend then tax". That is the result of using borrowing to fund things. It is a way of deferring the problem of raising taxes - and hopefully you will be able to defer them long enough that you will lose power, and then the Opposition will be forced into corrective and unpopular measures.

Here therefore is a little prediction for you. Watch the Pre-Budget Report after the summer veryclosely. If there are not lots of tiny incremental increases buried deep in the appendices that conveniently adds up £2.7bn I will eat my hat (I would have to buy one first of course).

The Sun has only got it half right this morning. Yes it's a by-election bribe, but it 's also money that he's going to have claw back in a later budget with different rises. Like I say, we don't have a "tax and spend" Prime Minister, we have a "spend then tax" one instead. At least with the former you know what is happening, with the latter it is all done by stealth.


ianvisits said...

Bascially, each tax payer borrowed £130 from the bank - gave it to the taxman who then later gave £120 back to us - losing £10 in administration costs.

Letters From A Tory said...

Then again, he might not use the Budget to sort this out. He could just avoid the issue until the general election when Conservatives come into power and dump it on them instead.

Jonathan M. Scott said...

He'll not claw it back - he'll simply fail to move the threshold in future years. It's a 1 Year Only Offer, in return for Labour Votes. It won't wash with the electorate.

Labour has lost its credibility. "I don't believe a word you say," is what the voters are now saying.

Anonymous said...

Takes the piss!

Treating the public like fools, etc. etc.

I do so hope they still lose the by-election - all this week's announcements will be worthless as we'll get another few days of headlines and commentary on how useless Brown is.

Labour need to get rid of him NOW - they can then elect a new leader and explicitly outline plans for a General Election in the autumn, giving all the parties ample time to show us what they're made of.

mint said...

darling got his announcement wrong.

the higher rate threshold will be reduced by £1200 not £600 as he announced in parliament.

see the hmrc website for the correction.

Perry Neeham said...

It must be the ultimate irony - the Chancellor borrowing (to pay his way out of a problem of entirely of his party's making) just as the UK's over-extended credit problem peaks which itself was created by too much borrowing in the first place.

John Pickworth said...

You have to ask yourself, given all the additional North Sea revenues and fuel tax recipts from the higher cost of oil/petrol... why were they needing to borrow the money?

Where's the money gone? The ink isn't dried on the Budget yet, surely they haven't spent it all already?

Anonymous said...

this is a uniquely badly written blog entry even by your standards baby

dizzy said...

Do you have a reason other than my usual typos?

lola said...

I like your typos - it looks like your ire leaked out onto the page.

Anyway, back to business. Brown Darling is a wanker.

This borrowing is just like an individual forever increasing his overdraft to fund current spending. Not spending on capital purchases that may bring a yield, but lifes little necessities like food.

This overdraft is of course a secured one and therefore attracts a favourable rate. Gilts curretly have a low yield. But it is secured against assets the government does not own, our - the citizens - property and investments; and servicing it is underwritten by our - the citizens - future earnings.

If I hear once more Darling Brown say 'Government money' rather than 'public money' I shall...I don't know what.

Get it into your fathead Brown Darling - governments don't have any money. It's our money.

Anonymous said...

Yes. Yawn factor 1,000,000; also repetition of 'spend then tax' non-mantra introducted by toe-curling 'like i say'.
Like I say, you always make reasonable points but god you need to get a style.

dizzy said...

Oooh anonymous commenter slags off blogger for having no style but keeps coming back anyway. I think I may have to cry. Personally, I think that if you don't like you should sod off and not read it.

dick wishart said...

Whats the betting that personal allowances will NOT go up next year, this will allow him to claw back about half of the money.

TrevorH said...

£1200 ?

I still do not get it. Lower the allowance and you pay more at the 40% rate so you pay more tax, much more than you save with the personal allowance increased by £600.