Tuesday 4 January 2011

VAT up and a fuel crisis to come?

Lots of focus on the VAT rise today, the first of the Coalition moves to reduce the Government deficit hits the tape so to speak. And not a moment too soon as the Government borrowing has been over-target for sometime.

However, VAT rises are not a pretty thing and there are many people against them. No doubt there are more ways to not spend money, but the Government is in the thrall of media and special interests who defend every penny of subsidy they get.

However, the small rise in VAT does have a big effect on prices at the pump. With a fuel duty rise too, 2p has been added to the cost of a litre, or £1.20 per fill up of CU's own typical family motor. Another 3p is slated to go on in April too in Fuel Duty.

The price of fuel has been at all time highs for a couple of months now and predictions are for the price of oil to go over $100 a barrel this year, moving the price per litre up to over £1.30 easily.  The petrol protests in 200 were over fuel at 80p a litre - in inflationary terms about the same a the price is now.

Of course, Gordon Brown bought off the haulage industry with tax breaks worth £2 billion a year, so the lead will have to come from elsewhere, but this is an issue that will be with us throughout 2010.


James Higham said...

VAT must rank just after Poll Tax as the most hated taxes. Oh yeah - company tax.

Mark Wadsworth said...

JH, I think Council Tax is the most hated tax (in terms of hatred divided by amount of tax raised - Council Tax is only a third as much as VAT). Doesn't augur well for Land Value Tax, does it?

Anyways, good to see George Osborne using the time-honoured "We've got to increase taxes it's for schools'n'hospitals innit" gambit.

Old BE said...

First sentence should read "lots of focus by the BBC on the VAT rise...". I checked The Sun's web site and I can see Jo Yeates and Manchester United but nothing about VAT on the front.

Admittedly further down the BBC site there is an article actually discussing whether the change is "progressive" or "regressive" and comes to the conclusion that it really depends on how you look at it. I suppose if you believe that everyone should have a constant supply of mod cons as of right then a VAT increase could be seen as against that.

We have still to hear from the left how they would cut the deficit. They won't cut and they won't raise taxes.

Anonymous said...

CU Can anyone remember 10 years ago, I wonder if Call Me Diva can remember, who is going to be given the order of the egg, it was just like Animal Farm, I think all politicos should read the book, it might might make them think before they start parading themselves and potificating "We are all in it together". The answer to not paying due tax and vat etc living abroad non doms, the country cannot afford to rescue them if in trouble abroad because they have not payed their due taxes.

CityUnslicker said...

Anon - I don;t see your point really. of course you would not pay VAT if you lived abroad - you would nto be buying things here?

The ills of the UK are not caused by a few rich people dodging tax. Google the laffer curve. The problems of this country are caused by too much being offered by Politicians to the electorate as prizes and people expecting a higher standard of services from the Government than we can afford.

It is a bit like dieting, there are a million diets, they all amount to eat less and do more exercise. The Government needs to cut the expectations of the public; I think this is one area where they are doing OK given the hysterical Media and Opposition.

For the record I am in the worst pay bracket for PAYE imaginable so pay as high pure rate of tax as is possible under the POAYE system!

Steven_L said...

"It is a bit like dieting, there are a million diets, they all amount to eat less and do more exercise.

No they don't! There's all manner of fairy tale diets out there, and these are the diets that the grassroots left will be trying to sell us this spring when they attempt their uprising.