Monday, January 03, 2011

2011 comes with a UK tax hike

Despite all the nonsensical blusterings of the British Labour Party and others on the left who think that government halting the rise of the state is somehow some neo-liberal revolution, the truth is that the Conservative-Liberal Democrat government is not driven by an ambition to shrink the state.
Proof of this has been seen twice in four days.  On 1 January, the UK's fuel excise duty (fuel tax), one of the highest in the world, went up by another £0.0075 a litre.  Not much, and yes it was a decision from the Brown Government, but the money is entirely to help reduce the budget deficit.  You seen, unlike NZ, the UK's fuel excise duty is entirely revenue for the Crown, none of it is dedicated to roads or transport spending at all (and it corresponds to about five times the total government expenditure on roads).  Fuel tax in the UK is now nearly 59p per litre (NZ$1.18).  That plus VAT makes tax more than half the price of petrol.

Speaking of VAT, that rises to 20% from 4 January, up from 17.5%.  Now VAT in the UK does not include food not served in restaurants, childrens' clothes, books and other items, but this tax increase has provoked considerable buying of bigger items such as cars, electronics and clothes in the post Xmas sales.

All in all, it is more money for the UK government, less for consumers, retailers, wholesalers, producers.  Labour's Ed Miliband is opposing the increase, but like an ostrich in the sand he never says what spending he would cut, what taxes he would increase, and given Labour is so overwhelmingly to blame for a decade of reckless overspending, he has no credibility except for the whinging unionised public sector workforce and those who don't want to be weaned from the state tit. 

The Opposition's only response is to say that the UK government should not cut its overspending so fast, delaying the inevitable, and increasing overall public debt levels - but if you're a socialist who wants to remain willfully blind about government borrowing why shouldn't you just be on the side of "the people" in promoting the same ignorance?

Of course there is no need to increase either tax, it will suppress demand and suppress the private sector.  There is still plenty of scope to cut public spending, such as eliminating child benefits and winter fuel allowances for those not in poverty, getting rid of subsidies for "green energy", not pursuing an unprofitable high speed railway pet project and not increasing foreign state aid.   The British state has grown like an obese nanny never sated on desserts.   Tax increases delay economic recovery and help cement the fact the UK economy is now 50% consumed by the state.

Thatcherite government? hardly.

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