Yay! More tax with which to absolutely destroy our economy.

As recently as Sunday, Cameron in an interview on BBCTV denied that the Conservatives had plans to raise VAT:

“Mr Cameron insisted the Conservatives had no plans to put up VAT, although he refused to rule it out completely.”
http://www.telegraph.co.uk/news/election-2010/7667989/General-Election-2010-David-Cameron-promises-to-be-responsible-in-hung-parliament.html

But then, as we know, Labour went into the 2001 election promising not to introduce top-up fees for students at university.

[3] Well, if Cameron doesn’t say – after becoming PM – “the situation is much worse than we thought, so all previous promises/guarantees are off” I’ll eat my socks in front of you all. Anyway, I think whoever wins will put VAT up to 20%. As Dan Harkin says, it is the accompanying measures which are in question.

And on another topic altogether… the Killometer was last seen predicting a 75% chance of a Tory landslide. I’ve since looked inside it and got the grit out of its gears. It is now predicting a 100% chance of a Tory landslide at the October election, on the grounds that the Tories will be the only party with funds to pay for their campaign.

while a regressive tax can be counterbalanced by progressive welfare provision a progressive tax creates a progressive outcome without us having to apply for the crumbs from the table.
So, no thanks, let’s focus on the equalising income tax aspect of the Scandinavian model before looking at the charity redistribution aspect.

Alister Darling “refused to rule out increasing VAT if Labour is returned to power.”
http://www.scotsman.com/news/General-Election-2010-Alistair-Darling39s.6264110.jp

@4 or we could look at the more equitable pay policies of the Japanese who don’t need a progressive tax system, because their pay is more fairly distributed before taxation.

@6: “we could look at the more equitable pay policies of the Japanese who don’t need a progressive tax system, because their pay is more fairly distributed before taxation.”

It’s a challenging proposition to attempt to introduce one institutionalised feature of another national economy without also understanding and introducing its many other supporting props and balances.

The overall tax burden (tax revenues as a percentage of national GDP) is lower in Japan – which carries implications about the extent of state welfare systems. Japanese big companies have all sorts of implict staff bonding systems (quality control groups and team binges) alongside company expense account perks which will doubtless be familiar to business visitors to Japan. Women in Japan hardly have equal status with men.

“Government statistics show nearly 57 percent of women under the age of 34 are unmarried, while some 3,800 firms in Japan offer match-making services.”
http://www.reuters.com/article/idUSTRE54C1E720090513

So after ten years in which the tories have attacked so called ‘stealth taxes’ they now plan to indroduce more themselves. Yea that would be right.

The poor have to pay for the big give away to the middle classes. It is the normal tory way.

Once again Call me Dave shows he has not changed at all.

But surely the reason VAT impacts on the poorest is because it is on crap like booze and cigarettes, and if the poor stopped spending so much of what little money they have on booze and fags, they’d be ok?

Lesson: tell the poor to stop buying crap, or we won’t pay them benefits. Simples.

“But if it is a tax policy used to support a generous welfare state and redistributive policies then it is not necessarily going to have regressive effects once everything is taken into account.”

This is true. Key word – “if”. Under a Conservative government, it wouldn’t be used to support redistributive policies, therefore it would have regressive effects.

The basic point is well made. But there’s more:

http://worthwhile.typepad.com/worthwhile_canadian_initi/2007/06/doing-it-by-the.html

If you want to have big state redistribution you simply got to finance it by consumption taxes. The rich don’t have enough money to pay for it all and high capital and corporate taxation kills off future growth.

The Nordics, for all their socially democratic wonderfulness, actually have tax systems designed around the insights of neo-liberalism…..even neo-classical ideas.

Isn’t this a little bit of a redundant argument? Yes you can tax people more if you redistribute it better… but if our VAT goes up the purpose it’ll be used for is *not* to redistribute it better.

. Blanco gives the usual brownshirt response. Love to watch these tory “get the govt off our backs” people telling the poor what they can and can’t do.

Not all poor people are on welfare. Low paid workers have to buy everyday stuff which has VAT on it . Cloths for work, perhaps running a small car, with VAT on all bills. The majority of people earn less than £20,000 -£25,000

A person earning a million a year would have seen a benefit of £200,000 a year after Lawson cut Income tax from 60% to 40% Indirect taxation is regressive.

Higher VAT needn’t be more of a burden to the poor if it includes legal provisions, like in the Scandinavian countries, to give VAT relief (pay no VAT) on food and essentials to the poor (only). This is an essential component of why it works in those countries and omitting it from a VAT hike in the UK would push the poorest back under the waterline.

The poor, or at least some, could be compensated for a higher VAT rate by raising social security benefits and the threshold for income tax, which was much higher up the income scale in the early post-war years than now.

Thank Tim Worstall that is an interesting link. The “Nordic Model” countries also tend to have relatively liberal product and labour markets too. Perhaps they do more consistently apply neo-classical ideas.

Hi Bob B – as I understand the general lesson is that an increase in social spending is always worth more than a tax cut to those on the lowest incomes. Increases in personal allowances (as the LibDems propose, for instance) are not redistributive or progressive.

@10 I agree with you JSlayerUK, that was the point I tried to make in the last paragraph. The main reason not to vote for the Conservatives (if you care about this sort of thing) is that the overall effect will be regressive, adversely affecting the least-advantaged the most.

“The “Nordic Model” countries also tend to have relatively liberal product and labour markets too. Perhaps they do more consistently apply neo-classical ideas.”

It’s a point I make a lot (ever since I stole it from there basically). Absent the high levels of redistribution the Nordics are very much neo-classical/classical liberal economies. That’s why they can have both economic growth and high redistribution.

“it is relatively cheap to administer”

Only because all the work is done by the businesses involved! Vat is charged and reclaimed at every stage in production and distribution – it is a bureaucrat’s dream, and is only really workable with the aid of computers. The old purchase tax was far simpler, and lives on as sales taxes in the US. These are genuinely cheap to administer, as they only go in one direction, and at the end of the chain. Brussels would hate them, so perhaps UKIP is the only answer…

That’s okay; I buy all my luxuries from Amazon Jersey, so it won’t affect me.