A cut in VAT should be strongly supported - by Ken Livingstone
It would be astonishing if, after the briefing to the Sunday Times, Observer, Sunday Telegraph, The Independent and other newspapers, tomorrow’s government economic statement did not centre on a reduction in VAT. If so this is measure which should be strongly supported - not only for immediate but for strategic economic reasons.
One of the most iniquitous features of Tory tax policy, particularly from Thatcher onwards, was the shifting of the tax burden from direct to indirect taxation.
Indirect taxation hits the lowest paid proportionately more than the high paid and is therefore deeply socially regressive - which is exactly why it was a policy pursued by the Tories and Thatcher. Cutting VAT will therefore hit two birds with one stone.
First, as part of the government’s measures to combat the economic downturn, this is one of the most effective measures in keeping up consumer demand. A reduction in VAT will aid all sections of the population. But, precisely because indirect taxation is socially regressive, reducing VAT will aid the lowest paid most.
The lower an income the more certainly any available income is spent, as the low paid can least afford to save. A reduction in VAT has almost exactly the same effect as a boost in income because it allows a greater quantity of goods to be bought with the same money. Reduction in VAT is therefore one of the surest ways to ensure that the maximum amount of any economic package is translated into an increase in consumer demand - one of the key measures required to fight the economic downturn.
Reduction in VAT is also, politically, just the type of measure required to ensure Labour holds together the alliance of those on around average incomes and the low paid which it should be based on.
Second, strategically, this should be the beginning of a reshaping of the taxation system. It is being briefed that this reduction in VAT will be temporary, and it will then be restored to its previous level to reduce the budget deficit during an economic upturn. This is not what should occur - any increase in VAT would be deeply regressive for the reasons already outlined. Instead, when taxation increases again to reduce the budget deficit during an economic upturn, an increase in direct taxation on the highest incomes should take place. That is, any reduction in VAT should be used to begin a reshaping of the tax system in a more equitable direction.
Livingstone is 100% correct, we also see the Tories opening clear blue water with their opposition based upon advocacy of thatcherite neo-liberlaism.
This is a clear and important opportunity for the left to widen the gap between labour and the Tories, further discredit neo-liberalism, and make firmer the socially progressive political agenda in the trade unions.
If VAT does come down 2% or more, then the left should fully support this move, and it will increase the importance of gaining re-election of a labour government
Comment by Andy Newman — 23 November, 2008 @ 1:51 pm
The change in VAT will not filter down in full to the consumer.
1 - The cost of implementing price changes on such a vast scale is huge - both in terms of hours needed and materials
2 - Retailers work on price points - the old 49p/99p thing etc - we have all see it and retailing will not suddenly shift towards 93p or 47p. This means a huge percentage of prices will not change - it might delay price increases - but it will not see a reduction in the cost of living.
3 - It will not happen quickly enough to encourage greater consumer spending - people are counting pennies because of massive increases in gas and electricity prices. The reduction will only make a slight dint in these increases.
It is all about posturing not really helping people.
Take people out of income tax completely - that is where you make a real difference. And can be done with much greater speed and efficacy than this headline-grabbing, empty gesture
Comment by theo — 23 November, 2008 @ 2:04 pm
Andy
The move towards new labour by leading Respect members is gathering pace.
Comment by alf — 23 November, 2008 @ 2:10 pm
Mr Livingstone got badly burnt getting too close to those wealthy bankers in London.He seems to have got caught up in the economic hypo mania that tripped the system out.
Mr Livingstone now looks a bit foolish Andy. I would be careful about pushing this mix of the soft Labour left, Galloway and Livingstone.
Remember how Mr Livingstone used to spout about how unregulated London was. Before the financial sector, based on London, destroyed the financial system of course
Now Vat is a bad tax but small cuts in vat do not amount to anything and certainly not redistribution.
Pay for some things that cost 100 pounds pay 17.5 pounds VAT 117.5 or 15 pounds vat 115… big deal.. it is not really redistributing tax to the poor is it, especially when the Rail fares go up by 6-12 percent, gas up 50% and electricity 40% food 30% and your wages are held to 2.5 percent, like health workers, ie real wage cuts of nearly 2 percent a year. If you really want to do something put the 10p income tax back for all the low paid and increase tax on the rich. Increase the minimum wage to Eight pounds an hour… 320 a month for 40 hours
Or think about who will benefit from an immediate vat cut all those retailers and businesses that collect vat will get to keep 2 percent more of sales price they will not be cutting prices….
Then think how Mr Livingstone pals in the Labour Party refuse to regulate the banks by putting people on the boards of the banks recieving public money.
Or see how Mr Livingstone Labour pals treat the utilities who hike electric and gas prices 20-30, 60 percent, citing the price of oil, make huge profits pass them on in dividends whilst our elderly freeze. Labours toothless business friendly regulators turn a blind eye.
Where are the price controls, rent laws and rent controls, the re nationalisation of the Utilities
the real regulation of the bankers
the regulation of profiteering ?
The disgusting warmongering racist Labour Party is a business party and it is a dead end for the left.
Comment by ANIN — 23 November, 2008 @ 2:12 pm
‘The move towards new labour by leading Respect members is gathering pace.’?
I am a member of the Green Party, Ken is someone we work with but criticise…its not difficult, would have been great to see him beat Boris but he is part of New Labour.
Ken in my view has been too close to the city of London but on Venezuela and incinerators, for example, he is excellent.
You have to make choices in politics and work with those you disagree with on some issues…however I don’t see New Labour outside of Ken’s domain as something that many of we Greens, Green Left or not would support.
Comment by Derek Wall — 23 November, 2008 @ 2:15 pm
Andy you may not have noticed but Labours already in its third disgusting term.
Yep three terms of War, Murdoch and the Privatisation and Looting of the public sector and you think we should have some more.
Comment by ANIN — 23 November, 2008 @ 2:19 pm
Ken bit soft on world financial capitalism but very good on incinerators and that sums up the Green Party
Comment by ANIN — 23 November, 2008 @ 2:23 pm
Let’s be honest. Labour have created a regressive tax regime that the Tories could only dream of. And they’ve done so with the full complicity of the major unions.
Income inequality has widened, and child poverty has increased under Labour. And according to the most recent report by the Institute of Fiscal Studies (IFS) the total poverty gap - the income by which families fall short of the povery line - has increased since 1997.
In addition IFS calculates that since 1997 the national income going to the richest fifth of households has risen from 41% to 43% while the share taken by the poorest has declined from 8% to 7%.
I won’t even mention the record number of deaths due to winter fuel poverty under Labour’s fiscal tutelage.
In this context the electorate are not going to forget Brown’s scrapping of the 10p basic tax rate and go rushing back to Brown because of a temporary cut in VAT designed to keep a debt based retail sector on life support for another 6 months.
Comment by Sergioleonine — 23 November, 2008 @ 2:36 pm
Derek, Nick Griffin’s terrible on immigration and far too close to New Labour. But he’s excellent on captial controls; the Council Tax; the war in Iraq and renewable energy.
And when it comes to the mass murder of people of colour he’s a rank amateur compared to the Labour Party/TUC.
Reductio ad absurdum, anyone…?
Comment by Sergioleonine — 23 November, 2008 @ 2:52 pm
I ask you. More of the same nonsense. The Tories have not been in power for a number of years and yet this numpty
begins his article complaining about the iniquity of Tory
tax policy! You have had over a decade for your party to
change tax policy in any way it wishes, Ken!
Comment by kardinal birkutzki — 23 November, 2008 @ 3:12 pm
We need to demand a lot more in all of this. Of course any cut in the rate of VAT is better then no cut. But what we should be demanding is the abolition of VAT and all other forms of indirect taxation as well as a substantial raising of the income tax threshold. We should also demand a substantial rise in income tax rates for top earners, corporation tax etc as an alterntive to government borrowing to make up for the financial shortfall.
Indirect taxation is a form of economic subterfuge that forces the burden of taxation onto the working class. When people think of taxation they generally think of what is deducted at source from their wage or salary in the form of national insurance contributions and PAYE income tax. Of course they also pay VAT and other indirect taxes on the goods they buy. The poorer people are the greater proportion of their income they will spend and the less they will have to save, that is a greater proportion of their income will be spent on taxable goods.
Comment by Patrick Scott — 23 November, 2008 @ 3:23 pm
yes, in my haste I miscounted which the next election would be.
However it is absolutely absurd to describe Ken Livingstone as new labour, becasue he clearly is outside the neo-liberal blairite consensus of new labour.
Thos ewho fail to make any distinction between mainstream historical labourismn and the neo-liberal particularity of New Labour have really understood nothing of what has happened in the British labour movement this last twenty years.
The utter idiocy of the ultra left can be seen by comment #9 that accuses the TUC of being racist murderes, worse than the BNP!
It is time for some of you to get real:
i) it is importnat that when the government does take progressive measures that we support them
ii) the main ideological opposition is coming from the neo-liberal orthodoxy of cameron and Osborne. we have the opportubnity to make a very serious defect of neo-liberalism by attacking the Tories, and encouraging any steps away from neo-liberlaism by Labour
iii) It is importnat for the left to align with the progressive political agenda of the trade unions arguing for urgent action to stave off recessio0n and to protect the jobs and livelihoods of working people.
Comment by Andy Newman — 23 November, 2008 @ 3:49 pm
Actually, cutting VAT is regressive.
Bentleys get cheaper by 2.3 percent, domestic gas and power are unchanged (at 5 percent now, not 17.5 percent) and basic food like bread and milk is already zero rated (although caviar falls in price). Poor people in work are little better off unless they’re boozers and smokers, but bankers get extra pocket money. Huzzah!
No-one likes VAT, Patrick Scott, but abolition is not possible without withdrawal from the EU - levying VAT is a condition of membership, and the current 15 percent lower limit is set by the EU.
Still, let’s not allow facts to stand in the way of a good Thatcher-bash, eh?
Comment by Drew — 23 November, 2008 @ 3:59 pm
It is regressive don’t be silly and there has been a massive shift from income and corporation tax to indirect taxes.
It would be great if shifted in the other way…
Comment by Derek Wall — 23 November, 2008 @ 4:27 pm
‘Ken bit soft on world financial capitalism but very good on incinerators and that sums up the Green Party’
anyone for Boris then!
Comment by Derek Wall — 23 November, 2008 @ 4:29 pm
#13. “No-one likes VAT, Patrick Scott, but abolition is not possible without withdrawal from the EU - levying VAT is a condition of membership, and the current 15 percent lower limit is set by the EU.”
Well Drew what’s so sacrosanct about Britain’s membership of the EU? I’d love to know.
Comment by Patrick Scott — 23 November, 2008 @ 4:37 pm
Andy
When Ken Livingstone opposed new labour measures to tax non doms and placed himself to the the right of the tories is this new labour, old labour, neo liberal or what?
Comment by alf — 23 November, 2008 @ 4:41 pm
I certainly am not in favour of the return of a neo-liberal Labour government. Only those on the Labour left that have some kind of record of defending working class people against the Blair and Brown governments deserve any support. No way does Brown’s current Keynesian posturing deserve any support or bolstering from the left either. There is not a hint of class independence in this, just this government desperately trying to save its own skin. Since Brown has the support of the US bourgeoisie and the IMF, the CBI, the Institute of Directors, etc, for what he is doing, I don’t see how this can be dignified as anything remotely progressive or pro-working class. Unless the IMF etc. are to be deemed progressive.
We should be agitating for trade unions to break with New Labour, not bostering the politics of those wretches like Derek Simpson who are up Blair’s arse, or giving support for their perennial pleading for help from New Labour. This cuts in the direction of continued TU support for Labour, reclaiming Labour, etc, when in fact we should be cutting against that. Stop feeding the hand that bites us, that should still be the thrust of our criticism of Brown as it was under Blair.
One salient example: Labour’s Phil Woolas is currently attacking Boris Johnson for his call for an amnesty for illegal immigrants. So who says that New Labour is to the left of the Tories. In many ways, they are to the right.
A vote for New Labour is a vote for ID cards, for 42 days detention, for criminalising consensual sex and ‘extreme’ pornography among other things. Since on many of these questions the Tories are currently to be on the left of New Labour, but obviously we cannot even consider a vote for them, the best outcome from the point of view of the working class would be a hung parliament. We should also be for proportional representation as a democratic principle, which would mean the end of the kinds of elective dictatorships we have had under Thatcher, Blair and now Brown.
This vile government doesn’t need to be re-elected. It needs to be destroyed.
Comment by ID — 23 November, 2008 @ 5:44 pm
Andy, as far as I can ascertain you believe that in some unspecified way that the ‘mystical body of the Labour Party’ continues to exist in metaphysical purity.
This is clearly some kind of Faith based knowledge that transcends anything as vulgar as historical evidence.
It was the TUC that voted narrowly against a card vote expressing clear cut opposition to the war in favour of a motion expressing support for the war if it enjoyed the “backing of the UN Security Council.”
It was trade union leader Roger Lyons who compared anti-war activists to members of the ‘Baghdad Trades Council.’
It was John Monks who reminded us that: “The TUC is not a pacifist organisation and has supported British forces on many occasions.” Thanks John. Too true.
Let’s call these people in the ‘labour movement’ exactly what they are: racist murderers and imperial enablers with the blood of 2 million, innocent Iraqis on their hands.
I’m sorry they’ve been more succesful at enabling racist murder than the BNP, but it’s not my fault, and it’s not idiocy to point it out.
Wake up and smell the GM coffee: the Labour party are much better at enforcing a neo-liberal agenda than the Tories. They can suborn the labour movement and the TUC, and ensure that social frustration is effectively canalised into bureaucratic and parliamentary dead ends.
None of this is some anamolous ‘particularity,’ soon to be rectified by Tony Benn and Ken Livingstone.
None of this has anything to do with some ‘ultra left.’
It’s just elementary morality and a reliance on evidence over faith.
Comment by Sergioleonine — 23 November, 2008 @ 7:36 pm
Ken lost the GLA mayoral election by cosying up to New Labour.
Now he supports Brown and Darling in almost each economic manouver they make.
I presume that this is to ensure he gets the Labour nomination for Mayor again.
The TUC follow the government come what may and do the usual sell-outs.
We had a pulic meeting on saturday down our way to build united front opposition locally to the Government’s continued cuts and privatisations.
I suspect that such things are happening elsewhere.
It’s only a beginning but without a real challenge nothing will ever change.
For instance where is the proposal for a higher rates of income tax for the highest earners say over £100,000 plus per year ?
That would go a long way to paying for their crisis.
I hear nothing about that from Brown, Darling or KL.
Comment by Halshall — 23 November, 2008 @ 7:56 pm
There’s no doubt that VAT is an utterly regressive tax, I’ve been active in socialist politics for 30 years or so and have always taken that position.
It’s regressive because the low paid spend just about every penny they earn on the necessities of life and therefore pay tax on as a far greater %age of their income than the rich who often get the things we are paying VAT on for nothing; expense account lunches, tax write offs on a whole range of things and a general freebie bonanza.
But surely socialists should be asking questions rather than joining in cheer leading a government that has shown absolutely no interest in righting the wrongs of a society in which the rich have grown richer on the backs of the working class over the past 11 years ?
Why are the Labour government suddenly needing to put money in the pockets of the
poor ?
What has been the role of the Labour government in creating the conditions that has resulted in the biggest financial crisis capitalism has faced in the post war period ?
These are the points that need to be raised, generalised ‘hurrah, isn’t it brilliant’ and the on cue ‘a Tory government would be the worst thing ever’ read like little more than a script written by New Labour’s spin doctors to pull in the left behind a government which has delivered neo liberalism in a way which Thatcher’s Tories could only have dreamed of.
Comment by Eddie Truman — 23 November, 2008 @ 8:18 pm
Eddie Truman, “Why are the Labour government suddenly needing to put money in the pockets of the
poor ”
Because they’re being forced to. They’re simply concerned with retail sales and the profit margins of their corporate sponsors. It’s a pretty lame attempt to increase aggregate demand that’s doomed to rapid failure.
The umentionable problem is peak credit and the systemic failure of the entire debt based monetary system. Easing regressive taxes now will make no real difference to effective demand, nor will lowering interest rates or any other monetarist measure.
It’s true that people may benefit temporarily from this measure, but any gains workers make now will almost certainly be wiped out in the substantial losses already incurred by Brown and Darlings handout to the bankers.
Comment by Sergioleonine — 23 November, 2008 @ 8:39 pm
While Nl is going to help many people with the Tax and Vat cuts etc, the poorest, those on benefits, disabled people, fixed incomes like pensioners, etc, are getting nowt, in fact for those on Incapacity Benefits, there are to be severe cuts, and more harassment, while unemployment benefit has hardly risen in ten years, etc, why no comment on that?
Comment by frenetic — 23 November, 2008 @ 8:59 pm
“It’s regressive because the low paid spend just about every penny they earn on the necessities of life”
Like food, which has no VAT on it, clothes for their growing kids (no VAT), rent (no VAT), and heating (low rate of VAT that can’t legally be cut tomorrow.
This cuts the price of wide-screen TVs and new cars. It doesn’t make it cheaper to live.
Comment by John — 23 November, 2008 @ 9:15 pm
Because the dreaded Tories are the pantomime baddies and the unfortunate ‘particularities’ of the last 20 years of history are inadmissable evidence to the True Believers in the Holy Ghost of Labour Party exceptionalism.
Comment by Sergioleonine — 23 November, 2008 @ 9:19 pm
That’s a good point #24 John. The ‘necessities’ I was thinking of, fuel etc, are indeed a lower rate. So the VAT cut is indeed aimed at stimulating sales of consumer goods.
Which, in my opinion, makes it doubly absurd that socialists should be championing it as a progressive triumph.
Quite apart from the fact that the 17.5 rate has been happily maintained by New Labour for the past 11 years without a hint that there may be anything regressive about it.
Comment by Eddie Truman — 23 November, 2008 @ 9:43 pm
Wake up Ken - VAT does not affect the price of goods that most affect the low paid.
Comment by Francis — 23 November, 2008 @ 9:44 pm
Has anyone noticed that virtually every contributor to this blog is suffering from what post # 12 refers to as ‘ultra left idiocy?”
In fact the entire community seems to be suffering from a bout of something similar - an inexplicable mixture of intellectual independence and moral integrity that’s clearly upsetting all the right people!
Comment by Sergioleonine — 23 November, 2008 @ 9:56 pm
Halshall #20: “For instance where is the proposal for a higher rates of income tax for the highest earners say over £100,000 plus per year ?”
BBC: http://news.bbc.co.uk/1/hi/uk_politics/7745070.stm
Comment by Andy Newman — 23 November, 2008 @ 10:09 pm
#28
What was utter idiocy was to suggest that thr TUC are racist murderers.
Anyone who argues such self-indulgent self-righteous bollocks will simply discredit socialism among progressive trade union activists.
Comment by Andy Newman — 23 November, 2008 @ 10:10 pm
Well Andy, instead of indulging in tantrums just answer two very simple questions:
1. Was the Iraq war a racist, colonial, murderous enterprise, or not?
2. Did significant sections of the TUC leadership (as wll as the majority of the PLP) intially support the war?
If the answer to both questions is ‘yes’ then my characterisation of the TUC as racist murderers is substantially accurate. It’s just elementary logic.
Now ask yourself whose really ‘discrediting’ socialism. Me, or the cynical leaders of a corrupt and ossified bureaucracy?
Comment by Sergioleonine — 23 November, 2008 @ 10:41 pm
sergioleonine , if you really want to equate the trade union movement with the nazi’s go ahead but fucking hell you are off your trolley.On this small point I agree with Andy.. shock horror lol.
Now on the news re new labour and 45% top tax rate. It is interesting development and one the left needs to respond to. I am not convinved that simply saying its fucking useless is going to get us very far. We do need to see this as likely to be a popular move amongst workers and we should be pleased that that is the case. We need to start from a position that obviously the rich need to pay more and clearly go on to a discussion about the nature of capitalism and the resal source of wealth in society. However the left cannot simply give left cover to New Labour, we need to be critical and point out their huge limitations and the need for workers to fight redundancies and evictions. New Labour as the govt own Northern Rock for example, so we should demand no more evicitions of home owners.
Comment by ll — 23 November, 2008 @ 11:01 pm
Well, II, I’m not equating the ‘trade union movement’ with Nazism. Im simply making the rather obvious point that the war remains both racist and murderous, and that it’s supporters are obviously complicit in both.
Comment by Sergioleonine — 23 November, 2008 @ 11:09 pm
So every person who was fooled into believing the war had to be supported is guilty of murder. This is middle class moralism. Those responsible for the murder are those that ordered the slaughter.
Comment by ll — 23 November, 2008 @ 11:55 pm
#30, 32, 33
I’m with you here Sergioleonine.
The TUC supported an illegal war.
It did so because it wasn’t that arsed about dead Iraqis.
(Not our members you see.) Old Labour always was perfectly capable of being institutionally racist, and on this issue, the TUC was racist, and does have blood on its hands.
Call it an inconvenient truth.
Comment by Strategist — 24 November, 2008 @ 12:02 am
#34 “So every person who was fooled into believing the war had to be supported is guilty of murder.”
Ha ha. I think the TUC are a bit beyond being easily fooled.
To quote Dubya Bush at you: Fool me once, shame on you. Fool me twice, er, er, you can’t get fooled again.”
Comment by Strategist — 24 November, 2008 @ 12:07 am
I’m afraid it’s precisely ‘middle class moralism’ that seeks to limit culpability in war crimes exclusively to the military and political executive - whilst simultaneoulsy exculpating the intellectual and poltitical classes more generally from war crimes.
And for obvious reaons. Guess whose providing the propaganda services, the ideology and apologetics? The middle classes.
Look, I’m not going to comment further on this. I’m going totally off topic and slowly drifting outside of the comments policy.
Anyway II, just for fun take a look at my original comment. The one that appears to have caused Andy a bit of upset (Comment #9). It’s quite funny to see it in context. Hilariously it’s only the three letter word after the backslash that caused a problem.
After all, nobody in their right mind would dream of defending New Labour from the accusation of racist murder!
Comment by Sergioleonine — 24 November, 2008 @ 12:35 am
Will there be a single person on the planet from ultra left to extreme right who doesn’t support a cut in VAT? Perhaps Eurocrats and those in receipt of Objective One funding. Is this the best tail-endism that KL can come up with? No doubt UKIP are all over it too. Certainly it will not make any difference to liquidity with VAT intake plunging anwyay due to rapidly collapsing prices just means the big retailers can keep more of our cash to stave off bankruptcy by paying their debts for another month or so. The banks win again.
Comment by Vatman — 24 November, 2008 @ 11:51 am
The TUC General Council voted twice against the war upon Iraq, including immediately before the invasion was launched. Does failing to check facts lead to outlandish sectarianism, or do outlandish sectarians fail to check facts?
Comment by StevieB — 24 November, 2008 @ 4:00 pm
StevieB, so far as I’m aware the only unequivocal (TSSA) amendment to oppose any war on Iraq was defeated by the ruling council of the TUC, which mobilised block votes to ensure its failure.
Incidentally, It’s the TSSA amendment that was characterised by Roger Lyons (Amicus) as having been drawn up by ‘The Baghdad Trades Council.’
The General Council did indeed pass a later resolution which declared ‘unambiguous opposition’ to ‘unilateral’ action against Iraq’ but crucially offered support for a war that had ‘UN authorisation,’ or where there was evidence a country was developing ‘weapons of mass destruction.’
We all know how things unfolded from there….
Comment by Sergioleonine — 24 November, 2008 @ 7:12 pm
The GC resolution said the case for war “has not been made”, and opposed the war.
Comment by StevieB — 26 November, 2008 @ 9:27 am
It is right to call for reductions in VAt and ultimately the abolition of VAT. But this move by New Labour has nothing to do with either. It is a short term measure designed to massage economic figures in an election year.
Everything beyond the next budget is up for granbs and open. The tax increases for the very rich, the NI increases for all, the level of VAT in 2010 are all just guesses, this budget doesnt tie the govt to any of them.
We now know that one option on the table is setting VAT at 18.5% after the election.
This is what Ken is supporting. He wants us to back the govt in an election year and wants to go along with dressing up the budget as a step in the right direction for New Labour.
Livingston is different from those on the left of labour who dont leave the party. He was outside and decided to re-join. He didnt watch Labour slide to the right and then decide to stay in and fight for socialist policies. He made a conscious decision to join New Labour.
Comment by Jim Monaghan — 26 November, 2008 @ 9:40 am