VAT remains regressive, so why don't people care?

They did it. I hoped they wouldn't. They raised VAT to 20%.

I really wish we could have a serious discussion about tax.

VAT is the easy option to raise. People notice it at the time but quickly forget about it. It isn't a fair tax, in that it hits the poorest hardest. It has been widely blogged that this tax rise hits the lowest incomes harder as they spend more of their income on VATable stuff. On luxuries like food and fuel.

The problem is that prices go up. Everyone is nostalgic for when you could get change from a penny/groat/schilling/pound/tenner [delete as applicable] when buying something. We accept inflation today, so the hit on what we can buy is small and one off. So prices go up now, and the tax take continues despite no further change, but people won't notice as prices go up anyway.

The result of this I have no idea how much of my income goes in VAT, but I get reminded how much goes in income tax every month because it is printed on my payslip.

In the States many years ago I saw shops explicitly put sales tax figures on their bills. I hated this as it looked anti-tax and made the costs clear without linking the benefits. However this same charge goes on the tax deductions on our payslip. Would it be healthier to ask shops to make the VAT explicit on more receipts, so we see when we are paying tax?

Of course we'd need to defend the benefits of taxation: health, education and other public services. This needs doing within the coalition anyway (and is why I'm still glad the LibDems are on board: we can be the conscience or handbrake for the Tory party's natural instincts) and in fact amongst the general public. Noone likes to pay tax, but we should benefit from our society and government.

However until people see how much of their pay goes in VAT it will still be a more invisible hit than income tax. That means that it will hurt less at the ballot box and be the easier option.

Would this transparency help, or would it (like my initial reaction) just make people more anti-tax in general.

Budget Blues*

The rhetoric has been getting more and more over the top.

I suspect this means that the budget today will be less extravagant than people fear.

I do hope that the coalition doesn't whack VAT up across the board. I fear however it will.

My only budget prediction is Labour hypocrisy. Remember they promised in the budget last year, that if re-elected, they'd perform £44bn of public sector cuts. However suddenly sticking to Labour's plans is cruel and regressive and nasty and...

This is not going to be a fun day to be a Liberal Democrat.

* and, to be fair, yellows too.

Public Sector Pay

It looks like those (like me) who work in the public sector are to be hit for the excesses of the bankers. Mustn't grumble too much as I did chose to go into the public sector despite knowing it was the whipping boy of politicians when things get sticky!


I have spent some time thinking about what I would and wouldn't accept personally.

Pay freezes are fine. I won't be getting an increment this year so it would mean a real terms cut, but when I've worked in industry I've accepted pay freezes when the company was not doing well. I'd even accept it despite a prior agreement.


Increased pension contributions: within reason fine. Public sector pensions are good. I think too many public sector employees don't realise how much better their schemes are than cash purchase which seems to be the usual method for most companies. I do think we need to pay more for the benefits. The 2.5% reported today would not make me flinch. Most public sector pensions are small but we do need to recognise the index linked final salary schemes are better than those most people get. The Unions won't get sympathy here.

Anything to hit the high paid. I do question the justification for the number of 100k+ employees. I'd certainly support a cap in the pension they can receive. It does need to be acknowledged by the Tory right that we do need people to run complex organisations.

Pay cuts. This is a tricky one. I think that there are some areas where the public sector pays too much, and others where it doesn't pay enough. I dislike privatising services immensely, and I also appreciate that you do get better cleaning if you pay more than minimum wage. Personally, though, if my job took a pay cut I would consider my options. I would seriously consider moving back to industry. Would I strike over a pay cut? Maybe, it would depend on the severity and the damage I felt it was doing to the area I work in. If too many people leave then frontline services(tm) are damaged. However my IT background makes me inclined to move on rather than strike!

Closing the pension scheme to new applicants. Not a good idea. I'd be very unhappy about this even though I'm inside it. This would seriously damage the attractiveness of public sector working: job security went years ago, pay has recovered from the damage it took in the 80s, but I could earn far more elsewhere. The pension scheme is a considerable boon. I'd rather see us paying more for it than it closing. Would I support industrial action on this? Possibly. This isn't about me but protecting the quality of new staff coming in.

Raising retirement age: OK, but I'd really rather not work until I'm 105. I also hope that some arrangement can be made to allow people to leave some jobs and do other work before claiming pensions without penalising them.

However whatever is done I'd like to see increased taxes on Capital Gains, taxes on banks and bankers, and something to reduce the tax load on the lowest paid: a pay freeze might not affect take home on the lowest paid if we increase the threshold substantially.

I do hope Mr Osbourne remembers it isn't our fault the economy melted down. Mr Brown and his City friends have a bigger share of the responsibility. We will take more than our share of the hit, but try and remember we do vital jobs. If we don't get that then many of us will leave, and many who don't will strike, and the steady erosion of goodwill goes another step.