Yesterday, Tories were nervously expecting Labour to steal a tax-cutting march. What Darling finally announced is complex, irrelevant and unaffordable. The main economic effect of the flagship VAT policy will be felt by the big spenders who spend more on goods that attract the full rate. But of course, the massive movements in the updated borrowing forecasts (
previously shown by Dizzy to be systematically optimistic) are the most shocking element of the PBR as shown below.
Clearly the 45% tax rate and 0.5% NI rises aren't going to plug the gap. You might reasonably ask where the other future tax rises were in Darling's announcement. They are missing because the government is banking on spending cuts and efficiency savings the likes of which they have never achieved in the past... The message is clear - we're in the shit and our grandchildren will be paying for it.
3 comments:
Does Labour not realise that this is not only a "tax timebomb" but it is a "vote timebomb".
People's taxes will go up to such an extent in future years that they won't vote Labour back in for generations. This is how serious it is.
It's not about the economy, it's about the next election and trying to box the Tories into a corner.
The Conservatives need to stick to their guns on fiscal responsibility, the public will be ready to accept the message.
Latest PBR figures from the DT
Of total expenditure of 623bn in 2008/09 the debt interest paid element is 34bn.
By simple arithmetic this represents:
at interest of 3.5% = debt of £971bn = 155% of total expenditure
at interest of 4.0% = debt of £850bn = 136% of total expenditure
at interest of 4.5% = debt of £755bn = 121% of total expenditure
at interest of 5.0% = debt of £680bn = 109% of total expenditure
Or am I missing something?
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