The Choice

So here’s the choice.

Do we want to push the economy forward by helping consumers with lower VAT, tax relief for middle income household, and lower fuel prices and up front capital spending while helping small businesses by making £7 billion of loans and supports for small firms.

Or do we want to do nothing, cross our fingers and hope that low interest rates will solve the problem eventually.

We all get to choose which strategy we prefer.

48 Responses to “The Choice”

  1. newmania

    Thus far I am not following tax relief for middle income households ? We have had a tax rise haven’t we , the national Insurance ? Fuel prices have not gone down so I am immediately informed by the office taxes have been raised .

    What amazes me about all this is that small firms are suddenly all the rage .It has been my impression thats New Labour wanted to wipe us out for the last ten years . Done a pretty good job of it in my business actually .

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  2. Mike

    “and lower fuel prices” ????
    You obviously missed the increase in fuel duty to offset the VAT reduction on fuels! Blinded by your own faith – so sad!!!

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  3. HOLDEN

    Not sure how a 2.5% VAT reduction will stimulate the economy given the pain that will be felt by the majority in a hike in taxes on petrol and alcohol – not mentioning cigarettes as not sure what percentage of the population smoke.

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  4. Peter Burrage

    The VAT reduction is unlikely to be passed onto the general consumer base. It will mainly aid those in business themselves, but they will not see themselves have any increase in profit/disposable income.

    If anything the government will lose 1.4p in the pound from businesses, reducing the tax income, and therefore increasing government borrowing.

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  5. Gavin D

    A Labour supporter with a blog just goes to prove you do not need opposable thumbs to type.

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  6. Jonathan

    You are such a typical Labourite. Don’t you think if it were that easy we would have been able to dig ourselves out in the 70s as well?

    All this stimulus will have to be paid for eventually you know. This will be nigh on impossible with all the debt that has already been racked up and with our currency falling like a stone.

    All Labour governments run out of money and this one is no different.

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  7. JCH

    It strikes me that this is not the ladder to get us out of the hole New Labour has put us in. In fact they just keep on digging. Last one out of the UK please switch off the lights as we cannot afford the bills here anymore!

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  8. Kevin Boatang

    What tax relief? What lower fuel prices?

    The VAT relief is a drop in the ocean easily regained from the increase in tax on alcohol, fags and, yes, petrol. NI has gone up at the cost of billions. I have no idea what you were watching, but it must have been something else.

    This country now owes nearly £700 billion. Fantastic.

    And to say, as Darling has, that the recession will end in 2009 is one of the absurd things I’ve heard so far.

    What this shows, as all the leftish blogs fall into line, is how hopelessly out of touch the Left are.

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  9. Paul

    Help consumers with lower VAT? Oh come on. That will effectively mean pennies off shopping bills. How about the increased fuel, alcohol and tobacco duties? The huge increase in National Insurance that will have to be introduced? And this is all assuming the measures work – if they don’t our national debt has just exploded and made even bigger tax hikes unavoidable. Never mind the fact that the Chancellor’s figures are incredibly optimistic compared to independent evaluations of our economy.

    Nobody is going to benefit from this, even if there are short term gains absolutely everybody is going to be hit by huge tax increases [conveniently] after the next election, and we won’t even begin paying the debt back until the election after that!

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  10. Huw Jass

    “I write about politics as a loyal Labour supporter”
    A contradiction in terms, then.

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  11. Robert Bastin

    You’re talking rubbish. Fuel isn’t going to go down as duty has been increased. Falling interest rates means less disposable income for those who have saved (this doesn’t include civil servants pensions which should not be either inflation proof or final salary based). It also means significant price increases for everything imported priced in either Dollars or Euros. This is completely the wrong policy from a financially incompetant Government.

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  12. Simon

    Ho,ho,ho.. I understand why you left the Labour Party after this shambles of a PBR. Why can’t the Government admit that it got it’s sums wrong and be honest about the current situation. If it is necessary to increase taxes, why not do it now? Because they won’t be in power after the next election! This cynicism does not fool the public but obviously fools former Labour Party employees.

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  13. Jim Turner

    If Brown is so keen on helping small businesses, why, having given a nil rate band for corporation tax in 2002, did he take it away in 2006 and replace it with a rate of 19%?

    Is a cut in VAT really going to get everyone rushing out to buy vatable goods (something costing £50 now, including VAT, will go down to £48.94, and that assumes the whole cut is passed on!).

    Also, is it really sensible to give lower income families more in their pockets and encourage them to go and spend it (almost certainly by credit card)?

    The main way to stimulate the economy is to help businesses so that redundancies will be lower than otherwise expected. This should be done by lowering corporation tax and by making the banks lend again.

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  14. Mark

    Er, please point me to one, just one comment by a member of the political Opposition that says we should ‘do nothing’. This is absolute rubbish and there are numerous speeches by messrs Cable, Osborne, Clarke and others that identify what to do – it just happens to be different from Labour and rooted in realism – not pushing the economy towards debt levels last seen in the 1970s when the IMF bailed us out.

    I am really struggling here. Lets assume I have maxed out my credit card and cannot borrow more. My bank overdraft is at it’s limit and the bank have told me to borrow less. I therefore should be spending less and returning my financies to some sort of order. Ah, no problem. The Chancellor is going to borrow on my behalf, without my agreement and is then going to force me to pay it back through higher taxes at a time of his chosing, not mine. Hardly prudent.

    Last one out please turn off the lights.

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  15. NB

    Neither, you ignorant dingbat. What a silly way to phrase a blog. That’s like saying, do we want to a) jump in front of a train or b) jump on the live rail?

    Now here’s a revolutionary idea, how about we cut some of the wasted bureaucracy out of the public sector (several tens of £bns worth) and fund income tax decreases? Also if we left Europe we’d save a further c£100bn, which equates to about a 6p drop in income tax rates.

    People will only hoard these savings – no-one will spend or speculate if confidence is low – and we shall have to pay dearly for them later. Even the govt must pay interest on their borrowings, so 2.5% off VAT now will equate to almost double that in increases later (interest + bureaucracy wastage fee).

    It sounds to me like Hopi Sen is another brainwashed poodle of the Brown client state.

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  16. Tez

    If you don’t think we should be crossing our figures after today’s announcement then you really haven’t grasped the gravitas of the situation.

    There is nothing left in the kitty, and if anything unexpected comes along if I were you I would get on a plane out of here! Of course that will be more expensive thanks to more taxes!

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  17. hopisen

    Fuel is going down because fuel duty falls as the fuel price falls, which is opposed to what the Tory policy which would lead to Fuel duty increases at the moment due to the fuel duty stabiliser they proposed last year. If the Tores were in power I think fuel would be between 7- 9p a litre higher.

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  18. Graham B

    Let’s be clear, the mess we are in is as a result of Labour’s policy of getting the country to borrow to spend, as confirmed by Eddie George. And the proposed way out? More borrow and spend, with a tax rise thrown in just for a change. As a non-smoker but car driver who pays tax, I’ve done a quick calculation that even after saving £2.50 for every £117.50 I spend (ex fuel, food, etc), I will be worse off again. The sooner this bunch of incompetents are evicted from power, the better.

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  19. Bill

    Given the choice of a bunch of cobbled together political nonsense put together by a couple of idiots like Brown & Darling versus the market acting sensibly through low interest rates I’d take the interest rate option without any shadow of doubt!

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  20. Mike

    The choice that people made over 11 years ago has resulted in the FTSE 100 not increasing at all in 11 years, and government borrowing increase at a time when the economy was booming. Gordon has broken every single one of his rules and the sham of economic prudence has crashed around him.

    Today’s ‘action’ is going to prolong economic stagnation for a generation.

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  21. karl

    Yay! 2.5% off VAT. Unfortunately the retailers will, at most, reduce prices by 1% and keep the other 1.5% for themselves. Walk around any shopping center or high street and you see posters with “Sale! 20% off!” etc, with no effect, so what is 2.5% going to acheive?

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  22. Steve A

    you didn’t mention the third choice, take the recession hit now or spend/borrow even more to turn it into a bigger hit in a year or so. This sounds like something purely for labour to survive until the next election.

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  23. Colin W

    Basically no change in food (exempt) booze or petrol . What is left to buy for me to make my savings on ?
    Will all businesses pass on the change? For instance can I expect my football club to charge less for tickets and other items ?

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  24. NB

    Oh Hopi, the maths clearly isn’t a strong point (then again, if you had GB or AD as a mentor…)

    Just because the tax is regressive doesn’t mean an increase in rates won’t lead to an increase in prices.
    Furthermore anyone not currently living in a glass bubble will know that the oil producing countries are seriously considering restricting supply to drive the price of oil back up, as it’s currently becoming inefficient for them to produce at this level (and, of course, because they’re greedy). If oil prices rise, which they will do, and soon, then these tax hikes will infinitely outweigh the VAT reduction.

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  25. Enough

    Thanks a lot Labour, I thought you were supposed to be helping small business.
    I will now be over 1000 pounds worse off a year due to this reduction of VAT from 17.5 to 15. I work under the FlatRate scheme and it looks like this has not been reduced to compensate.

    Never, Never will I vote labour again.

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  26. Jimbo Jones

    “1601 Alcohol, tobacco and petrol taxes will be raised to offset the VAT cut, Mr Darling says.”

    Clearly Labour supporters are so entrenched and brainwashed in their views that they can no longer identify with the common man.

    Increasing Petrol taxes is a sure fire way to kick the middle class in the nuts.

    Congrats to the Labour party on yet another stealth tax hike .

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  27. ltl

    Why is this a choice? If any don’t agree with Labours pronouncements in the pre-budget report how can we stop them happening? I don’t get it?

    Maybe it’s a typical Labour choice – you can either agree with us or you are wrong and we’ll ignore you.

    Yeah, I guess that’s probably what it is.

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  28. Pete S

    Can anyne actually see the saving in VAT being passed on anyway? All the retailer needs to do is leave the shelf price the same and keep the additional profit.

    Try printing off a page from any electrical retailer and check the prices again next week… see how much prices have actually gone down

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  29. Simon

    Here’s the real choice. Leave the decisions in the hands of someone who inherited a vibrant, growing economy, but still raised taxes every year for 11 years to leave everyone in the country worse off, and didn’t save a penny for when the inevitable downturn happened. Brown’s “prudence” will leave us a trillion pounds in debt, and 3 million unemployed.

    The alternative; anyone but Brown.

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  30. HOLDEN

    Speaking of switching off the lights – I own a successful business and on Friday meet my accountant to discuss planning to leave this country – love it though I do, I will not sit back and pay for the mistakes of this overinflated government (not mentioning the final salary pensions else my anger will boil over). If you don’t want to be subject to ever increasing taxes on the law abiding middle Englishman then suggest you join me.

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  31. hopisen

    First of all, welcome to the Blog all those who are here from the BBC. I was wondering what had suddenly inspired such interest!

    We are facing a recession. The policy of the Government is to spend more and tax less in the short term to ensure businesses get through this. This approach is support by the Bank of England and the IMF. It’s also exactly what the Americans are planning to do.

    To quote the governor of the Bank of England “n these extraordinary circumstances it would be perfectly reasonable to see some use of fiscal stimulus, provided I think two conditions are met. One is that it would be temporary, purely temporary, and secondly that it would be clear that there was a medium term plan to bring tax and spending back into a sustainable balance over the medium term.”

    That’s what this PBR is doing.

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  32. Tez

    The Government keeps saying “it’s a global crisis” and “it’s a result of the US economy” then why on earth do they think that they can fix it?! The US isn’t in recession we are. Are they planning on fixing the whole worlds problems too?

    Last throw of the dice…and thanks Brown for making the next 3 bad years 7 bad years.

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  33. Mike

    “there was a medium term plan to bring tax and spending back into a sustainable balance over the medium term.”

    Brown’s plan in 1997 was to remove boom and bust – why on earth would anyone trust Labour to do anything “sustainable” – ever??!!

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  34. Erebus

    Fuel is not going down, as fuel duty has just been increased to keep fuel prices “at current levels” (direct quote). And OPEC will cut production to keep prices above $50 a barrel.

    And a VAT cut of 2.5% for 13 months will not end recession. As Jeff Randall put it so eloquently: When money is tight, people stop spending – are you listening Mr Darling?

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  35. Paul

    There is no chance anybody can honestly say they think the government is capable of a sustainable balance of tax and spending. Look what they did with the economy over the past 11 years. Then again I suppose the quote only said “a plan” to bring about a balance, though I’m not sure this lot could even do that properly.

    I’m still intrigued as to how we all get to choose our preferred strategy, by the way…

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  36. ChrisP

    Nice to see your fame has brought you a savaging from a load more people hopi.

    Four words on the PBR

    Silk Purse Pigs Ear

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  37. Jim Turner

    Danny

    I know, but when he scrapped the nil rate band he introduced the 19% rate. It’s gone up since then, and will be going up again.

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  38. Tim McLoughlin

    Labour has presented the country with a choice, that is clear. Trying to stimulate the economy against the Tory option of doing nothing. This is commendable. However, I’m not sure that the measures announced today will suddenly make everyone release their purse strings. The PRB was politically bold, but economically uncertain. Remember that it all has to be paid for and paid for out of plans that depend on Labour winning the next election, which is far from certain.

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  39. madasafish

    Nice to see a Chancellor admit his forecasts are crap.

    Hopi.
    Remember being annoyed in March when I said on pb.com they were and you quoted the IMF forecasts at me and said you would read no further?

    Without wishing to rub your nose in the brown and smelly, perhaps you might like to consider what happens WHEN (not if) the Darling forecast for 2009 growth (-0.75 to -1.5% ) is wrong…

    Frankly Darling’s speech.. well if he was the Finance Director of a company you would fire him… like the CEO of RBS.

    An admission of total failure.

    Where is the stimulus?

    £18 billion till 2010 is nothing…

    This time next year I will say the same based on achievement – rather failure…

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  40. Bobbie

    “We are facing a recession.”

    No we are not. We are facing The Greater Depression and hyper-deflation.

    In these circumstances, Government must ring fence itself from the Market, or it will lose access to funding. Remember you can offer all manner of debt to investors, but that doesn’t mean they will buy what you offer (this published 13th November – “A German 10-year bond auction failed – something more or less unheard of until this year – as cash-strapped banks and investors snubbed the government offering.”).

    Unless the Government is ring fenced against the Market, this is PRECISELY what will happen to all hopes of raising billions in Government sales of bonds and treasuries.

    The Market will only become interested in investing again, when transparency and mark to market become the rule of the day.

    We are facing the inescapable forcing of massive contraction of Government at every level, as well Civil Service and ‘paper shufflers’ at every level, and unless we are careful and ensure the removal of far too many Chiefs, all the remaining Indians will be gone too.

    Local Government needs to ditch the onerus responsibilities placed upon them by the EU, Regional Government needs to be scrapped, the size of Westminster (how many Ministers are there now?) needs to be reduced, and we need the EU to shut up shop asap (Angela Merkel confronted reality when she said it was now up to each Nation to look after their own Nations best interest – make no mistake, that was the end of the EU, but she was right).

    We couldn’t afford this surplus Governing capacity in good times, and we most certainly can’t even begin to entertain it, in times coming that will be worse than bad.

    We need to get back to properly implemented long term ‘genuine’ apprenticeships for young people, no more emphasis on useless courses that leave our young unfit and unable to cope with the real World, and we need to get back to an emphisis on manufacturing, engineering and Industry, without which, a service led economy has a foundation built on rapidly shifting quicksand (now in the process of collapsing all around us).

    Reality will have its way, the Market has been bucked, it is bucking back with a vengeance, and if Government refuses necessary change, then necessary change will be forced upon it.

    This won’t be comfortable for us, but it will leave a World more aligned with reality for the benefit of our children. For decades there’s been far too much detached from reality theorising and mumbo jumbo surrounding politics, resulting in things like Political Correctness and viewing the World through rose tinted glasses.

    The return to sanity should be welcomed by all, once the rose tinted glasses get forcibly removed.

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  41. Simon

    Those who keep repeating that the Tories alternative is to do nothing, are reminiscent of a toddler sat on the floor covering his ears and screaming.

    Meanwhile Brown and Darlings fiddling will be as effective as Neros while Rome burnt.

    Reply

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