• Quick note - the problem with Youtube videos not embedding on the forum appears to have been fixed, thanks to ZiprHead. If you do still see problems let me know.

UK - Election 2015

Francesca R said:
One of the harshest ways the poorest can end up paying is by being out of work.
Click to expand...


True. But then you get to the whole issue of the responsibilities of the welfare state.

If - to do a deliberate reductio ad absurdum - the whole country were out of work, then there would be zero productivity, zero output, zero GDP, and entirely unfunded consumption. That would of course lead to a death spiral of debt. In the real world, Greece is in a minor version of that spiral, where the huge numbers of unemployed and consequently low GDP - coupled with a level of consumption that has not fallen by a proportionate amount - means that Greece is in a horrific situation (one from which I think it's wholly unlikely to recover unless there's a Grexit and massive devaluation of the new Drachma).

Clearly, an advanced society has a responsibility to provide a decent safety net for those who are either poor, out of work, unable to work or too old to work. But the solution is not to keep increasing benefits - especially in times of fiscal hardship. The solution is to try to stimulate growth, so that more jobs will become available, so that more people will be lifted out of poverty, and so that therefore the "safety net pot" has fewer people to service (and thus the fewer people who need the safety net can get a better safety net).

In the same way, the best solution to reducing public borrowing is not to place an even higher burden on the wealthy than is already imposed by the state. It may sound like a great solution - especially to class warriors and naive politicians - but in practice it usually has the unintended opposite effect. Just ask Francois Hollande about it :)

Like it or not, in the current environment, the only sensible way to reduce public borrowing is not through increased tax rates, but through imposing tight controls on public spending - and the main areas of public spending are the welfare state, health and education. Education and health are (rightly) ringfenced on account of their universal benefit and their long-term importance, so it's inevitable that most of the cuts will come in the area of the welfare state.


(For clarity - as per Rat's indignation - I'm not suggesting you don't know this subject well. I'm just trying to expand upon what you wrote)
 
LondonJohn said:
But if someone's a raving left wing ideologue, then I guess realities such as these get swept away on a tide of anti-capitalist invective :D
Click to expand...
Francesca R is a raving left wing ideologue? Dear me.
Francesca R said:
No not all tax is levied on income. VAT is slightly progressive as a function of consumption, rather regressive as a function of income. Some of VAT is paid by producers (shareholders) in the sense that if VAT was cut their profits would benefit.
Click to expand...
 
This debt that needs to be repaid, is it still the outstanding debt from the banking crisis?
 
The Daily Mail reports on the Blairite backlash against red Ed after the disaster. The party must move back to the centre before it can return to power. We've seen all this before but it prompts a couple of thoughts:

1 the Labour Party is a socialist, or at least social democratic, party of the lower social classes. 'Moving to the centre' means watering down or abandoning altogether 'socialist' policies in order to increase their appeal to the lower middle and middle middle classes. So the strategy essentially involves a betrayal. They lose before they have won.

2 lefties (loony or otherwise) could be more honest and true to themselves under PR. 150-200 lefties in the commons could clamour for, say, a return to the Rent Acts or nationalisation of the railways etc and would exert more or less influence according to the political winds. Of course, in coalition with other parties they would have to compromise, but the compromising would be open and obvious and would not take the form of a battle for control of a monolithic party which is in truth an awkward and cumbersome coalition.

PR would be good in other ways too.
 
Last edited:
PR would be great. I seem to remember most people hating it.

Under winner takes all, yes Labour has to move to the centre. That's what it did in the 1990s. That's what the Tories did in the late 2000s.
 
LondonJohn said:
in the current environment, the only sensible way to reduce public borrowing is not through increased tax rates, but through imposing tight controls on public spending
Click to expand...
It can be done either way from the current starting point.

But I think the country in aggregate just voted for the second way not the first.
 
Francesca R said:
I am pretty sure that's not correct. I think the IFS has published on this several times.
Click to expand...


This is a highly contentious issue, and one for which the IFS has been criticised in the past.

The main problems are a) whether you use net disposable income (i.e. after housing, essential food, utilities and household bills) as your baseline, or gross after-tax income; b) whether you factor in the fact that the poorest fifth actually spend more than their gross disposable income on average, while the richest fifth spend less than their gross disposable income.

It's indisputable that VAT is progressive on a consumption basis. And the problems in measuring it on an income basis only arises when you factor in the differences in average expenditure vs average income for the different wealth brackets.
 
LondonJohn said:
It's indisputable that VAT is progressive on a consumption basis. And the problems in measuring it on an income basis only arises when you factor in the differences in average expenditure vs average income for the different wealth brackets.
Click to expand...
That's right. If you don't look at such data you don't see any problem at all.
 
Francesca R said:
Not the latest word from them, but at short notice:



Fig 10.1, page 197 (page 4 of this PDF)
Click to expand...



Yes.... but you might notice two things:

1) The headline for that section was: "Myth 2: VAT is a regressive form of taxation"

2) The report specifically highlights consumption smoothing and imbalances of expenditure to net income (as I mentioned above) as a distorting factor. Indeed, the report suggests that this means that a better comparator is VAT as a percentage of expenditure. And by that measure, the poorer deciles (as one would expect) pay a lower proportion of VAT than the wealthier deciles.
 
Francesca R said:
It can be done either way from the current starting point.

But I think the country in aggregate just voted for the second way not the first.
Click to expand...


Well sure, it can be done either way in theory. And the theory of higher taxation rates - especially higher taxation of the wealthy - is undoubtedly seductive (especially among a certain political class.....).

But in practice, higher taxation rates have been shown time and again simply not to work in the intended manner. They slow down consumption, slow down growth, and rarely even result in the expected increase in tax take anyhow.
 
LondonJohn said:
I'm not sure I understand what you mean by this........
Click to expand...
I was referring to your idea that
the problems in measuring it on an income basis only arises when you factor in the differences in average expenditure vs average income for the different wealth brackets.
Click to expand...
If you don't factor in these data it is indeed the case that the problems in measuring it will not arise, but if you do factor them in, will VAT not be seen to be income regressive?
 
anglolawyer said:
The Daily Mail reports on the Blairite backlash against red Ed after the disaster. The party must move back to the centre before it can return to power. We've seen all this before but it prompts a couple of thoughts:

1 the Labour Party is a socialist, or at least social democratic, party of the lower social classes. 'Moving to the centre' means watering down or abandoning altogether 'socialist' policies in order to increase their appeal to the lower middle and middle middle classes. So the strategy essentially involves a betrayal. They lose before they have won.

2 lefties (loony or otherwise) could be more honest and true to themselves under PR. 150-200 lefties in the commons could clamour for, say, a return to the Rent Acts or nationalisation of the railways etc and would exert more or less influence according to the political winds. Of course, in coalition with other parties they would have to compromise, but the compromising would be open and obvious and would not take the form of a battle for control of a monolithic party which is in truth an awkward and cumbersome coalition.

PR would be good in other ways too.
Click to expand...


But Blair already moved the party to the centre (with just a whiff of left). Therefore when one talks of the Labour party "moving to the centre", one actually means "moving back to the centre". The Labour party abandoned its socialist policies long before the Milifiasco.

I think the Labour party has to realise that this in not about abandoning cherished principles in order to chase power. It's about the fact that the UK has fundamentally changed in a very dramatic way since the 1970s (and since the 1920s before that). Political parties have to reflect a perceived need/want among the public - not create that perceived need/want. Indeed, that's exactly why the Labour movement was founded in the first place.

The only reasonable future for the Labour party is to base its policies on a centrist social democratic model, and non-interventionist government. It can do so while still differentiating itself sufficiently from the Conservatives and other parties. And it would be a Very Good Thing for the UK (in my opinion), since it would offer two credible alternatives with different approaches. Socialism (not to mention Marxism) is a busted flush now, and it will never again galvanise people in the way it did up to the 1970s. People have changed, society has changed, and politics must change - across the whole spectrum - to reflect this.
 
Francesca R said:
You cannot argue that VAT is a progressive function of income that way. Which is what you said.
Click to expand...


I can indeed argue that, since I argue that the income ratio is improperly distorted by the expenditure imbalance.

To put it another way, one could simply apply a correcting factor to income to account for this distortion. Or one could simply compare for people living within their means.

The distortion factor renders the raw results somewhat moot: if a household with £10k disposable income spends £15k, then of course that household is likely to spend a much higher proportion of its "£10k income" on VAT.

Indeed, it would be statistically (and philosophically) correct to say that where poorer households are spending more than their nominal net income, one should in fact add the amount of debt to this income figure. (And that's without even considering* the fact that wealthier people save far more proportionately than poorer people, which again distorts the "nominal net income" ratio).

* Not that this should be considered in the comparison of course - I'm just articulating it as a factor.
 
You must log in or register to reply here.

Back
Top Bottom