Tuesday, 22 June 2010

Osborne's VAT attack on the poor

George Osborne, with Nick Clegg and Danny Alexander as Lib Dem cover beside him, delivered his much-touted Bloody Tuesday budget.
Having hyped up the savagery of the cuts, most people will be surprised that a cull of the first born wasn't a key policy announcement.

But make no mistake, the new ConDem coalition's budget was an attack on the poor. VAT is a flat tax that punishes those on low incomes more than the wealthy. That's not just our view, here's another critic:

In particular it will be recognised that VAT is a regressive tax that hits the poorest and middle income earners the hardest because they spend more of their wages than the rich. If VAT is to be the Tories get out of jail card and partially used to fund a reduction in inheritance tax then effectively they will be asking some of the hardest pressed families in Britain to effectively fund a tax cut for the 3,000 richest people in Britain and their estates.

How does that fit in with Cameron's compassionate conservatism

And how indeed does it fit into the Lib Dems' claim to be a radical progressive party?

Although food, books and children's clothes are VAT exempt, they all need to be transported. Increased fuel costs due to the VAT rise will also increase all families' costs.

The Financial Times has already revealed that poor areas such as West Wales will be hit hardest by the cuts. The research

showed the regional distribution of cutting a fifth of spending in sectors dominated by the public sector (public administration, education and defence).

Again, the poorest areas suffered most, with the local economy of West Wales taking a 3.3 per cent hit.

Now which area was least affected? You guessed it: Cheshire. The well-to-do home of Osborne’s constituency only saw a 1.5 per cent dip in its economic prospects.

Meanwhile, the banking industry gets a £2 billion levy - the lightest slap on the wrist possible from a government of millionaires - and the slight increase in Capital Gains Tax to 28% means the buy-to-let brigade are paying less tax than they should.

Plaid estimates up to 60,000 jobs in the public sector jobs could go because of the cuts in public spending. Osborne of course won't have to make those cuts - it will be left to the Welsh Government, local councils and others to juggle reduced budgets.

A bad budget for the poor, a bad budget for Wales.

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