are cuts necessary?

Yes, cuts are necessary. Over-spending should never have happened in the first place, but where you over-eat jam yesterday, you forego bread today and go hungry tomorrow. It's that simple.

The Maastricht Treaty is, in this respect, a red herring. Obligated government spending, however, which originates from other implementations of European directives, remain the more insidious problem.

thedarkman wrote:

The alternative to cuts are rising taxes.VAT to say 25%, income tax and NI.Probably better in the long run to stop spending so much.

Or get the banks to repay their debts?

There is £850b of toxic loans belonging to RBS insured by the Government, this is more than the National Debt. Yet we don't have any idea what the situation is with these toxic loans.

Whoa! You're just a radical aren't you?

Yes, VAT will undoubtedly increase because it's instant - no waiting around for year end assessments. To soften the blow, it might be accompanied by the phased introduction of the £10k income tax limit - say £1000/year over five years.

So how much is VAT going to increase? The recent temporary drop to 15% didn't seem to have much effect, so they might conclude that an increase

to 20% wouldn't frighten the horses, and it would bring in £13 Billion/year. Combined with the £6 Billion already announced, it will certainly reduce the deficit significantly - and still leave the UK in the middle ranks of VAT rates.

I'm sort of optimistic that other spending reductions will occur, so that we don't over-tax ourselves and stop the recovery.

Which should *not* have been temporary. VAT was increased to 17.5% to fund the (short term) extra expenditure[1] involved in the move from Community Charge (aka Poll Tax) to Council Tax.

Although 20% VAT would be comparible to other countries remember that we are more heavily taxed in other areas.

In addition increasing VAT and raising income tax rates could just be a sleight of hand where overall tax rates are about the same. However it might help the poor a little which I would be in favour of.

As long as the cuts are in the "right" places, which I doubt.

And kept on to fund the decreasing spiral down to 20% Income Tax.

tim

But not in all. Most countries have NI rates which are twice ours

tim

And some countries do not tax heavily fuel, alcohol, tabacco etc....

I think you will have difficulty finding an EU country that doesn't tax petrol as heavily. Diesel perhaps, but even then the percentage difference is small

tim

But which fund decent state pensions, unemployment benefit etc, ie a proper insurance not a tax. In the UK over the last few decades NI has gone up while contributory benefits have gone down (in earnings terms).

Apart from, erm, the vast majority of them?

I'd forgotten that, thanks.

Actually, I'm more concerned about local taxes. My council tax has increased around 8%/year it seems for years. I could look it up, I guess, but each year it busts inflation by some margin.

One of the fascinating ways of doing business with the government is that if you quote for a job, you are allowed to adjust it for inflation. Try that with ordinary businesses, and they'd laugh in your face (except for very large projects, of course).

Inflation proof supplies - the RPI should be a reflection on costs, not an excuse for increasing costs - it distorts prices as soon as you do that.

Um, I'm surprised. I would have thought that the 30% drop in the pound had equalised most of them, which IME were never 30% cheaper.

I note that that have created these figures to a nominal 2009 exchange rate. I wonder what they used?

tim

It depends on what figure you take for inflation. The CPI is completely unrealistic IMHO as it excludes significant expenditure such as housing costs. The RPI is better but also underestimates the real inflation rates for many of us.

You can calculate your own personal rate of inflation at the ONS web site here:

I think you've got that the wrong way round. If the pound drops 30% then UK duties become cheaper measured in EUR.

That's right.

I meant the other countries weren't 30% cheaper.

tim

Ah, I see what you mean. But our fuel duty has gone up over the last 4 years or so whereas most other countries haven't much by the looks of it, some have even gone down. So the fall in the pound has been offset by UK duties rising about 20% over the last 4 years.

If you look at France for example, for 2000-2008 their duty was higher than ours based on the 2009 exchange rate they used, but is now lower.

You can see the underlying figures if you click on the graph.