In reality, however, the first budget has to include tax rises, both to show the new government means business and to buy time before the spending review that will detail the cuts. Put simply, tax hikes are straightforward and visible, while spending cuts become real only when delivered.
On this, all roads lead to Vat. An increase to 20%, introduced on January 1 next year (it could be phased, but retailers and businesses would probably prefer to get it out of the way) would press most of the right buttons. Those who fear it would derail recovery should remember the economy grew through the reimposition of Vat at 17.5% at the start of the year, a 2.5-point rise from its temporary level of 15%. Retail sales were hit in January, when snow also affected sales, but bounced back in February and March.
How damaging would a Vat rise be politically, when the Tories and Lib Dems spent most of the campaign talking about tax cuts? Voters are not as dumb as they sometimes look, and know something has to be done. A Vat hike at the time of a scrapped NI rise would at least fit in with the Tory philosophy of taxing spending not income.
Read the whole thing.
David Smith–Can anyone survive the deficit poisoned chalice?
In reality, however, the first budget has to include tax rises, both to show the new government means business and to buy time before the spending review that will detail the cuts. Put simply, tax hikes are straightforward and visible, while spending cuts become real only when delivered.
On this, all roads lead to Vat. An increase to 20%, introduced on January 1 next year (it could be phased, but retailers and businesses would probably prefer to get it out of the way) would press most of the right buttons. Those who fear it would derail recovery should remember the economy grew through the reimposition of Vat at 17.5% at the start of the year, a 2.5-point rise from its temporary level of 15%. Retail sales were hit in January, when snow also affected sales, but bounced back in February and March.
How damaging would a Vat rise be politically, when the Tories and Lib Dems spent most of the campaign talking about tax cuts? Voters are not as dumb as they sometimes look, and know something has to be done. A Vat hike at the time of a scrapped NI rise would at least fit in with the Tory philosophy of taxing spending not income.
Read the whole thing.