Up until this budget I had thought that the government were acting in a fairly sensible way to try and mitigate the effects of the recession and that there seemed to be some sort of cross party unified approach to getting us out of it.Here in the bookshop the budget doesn’t really effect anything much as books don’t carry VAT, however the most expensive part of the budget in terms of what the government has borrowed on our behalf is the cut in VAT.
It did occur to me though that this will be a very difficult and expensive reduction for many retailers to implement, I reckon that the paperback fiction in the shop runs to about 15,000 titles most I believe are priced at £1.99 consider the logistics of reducing them to £1.94.
Looked at another way say I am going to buy a new computer that is £400, will it being £390 make any difference?
While in a broad sense I am in favour of doing something but the VAT cut suggests a complete misunderstanding of how retail pricing works. Much of the thing is about thresholds, i.e. trying to get it under a particular round amount.
I will give you an example of what I mean using a book off the shelf, as steam boats are very much on my mind I have chosen; Turbine Steamers of the British Isles by Nick Robins.
The book was published to sell at £11.99 obviously the publisher was getting below the £12 threshold here. I managed to buy the bin end of it 10 copies for £30 and am selling it at £4.99 to get below the £5 threshold, 12 ½ p in this equation doesn’t really get you anywhere.
I am afraid the only way that I can see that this could possibly work, is that if the government is going to borrow n thousand pounds on behalf of every family in the country for repayment in 2011, 12, 13…………., would be to send us all a cheque for whatever it is, and a letter begging us to go out and spend it.
Could I suggest that if retailers keep their prices the same, they will make extra profit, stay in business, keep employing staff that they otherwise may not have done.
ReplyDeleteWell I would have thought if the American model of giving everyone a few hundred rebate didn't work (middle classes/earners saved/invested) that a sure fire way to get people spending would be to give it to the lowest paid/benefit types.
ReplyDeleteComing up to xmas, those without much money would surely use the windfall to spend in retail outlets, which is the idea surely?
I cannot imagine anyone rejoicing at getting 2.5p in the £1, especially when the price of fuel booze and tobacco will remain constant.
The only time it would make a difference is if I were to buy say a £60,000 car, the £1,500 saving would be good. However in the current sales climate i could negotiate that saving and more anyway.
Imho a one off, sliding scale 'bonus' to those getting tax credits would have been better
Nige
(1) abandon HIPS. It costs a few hundred quid just to put a house on to test the market. Some quick training course b-ll sh-tter draws up a worthless report for what ?
ReplyDelete(2) Outlaw redundancy compensation as it is economic madness to reward someone, who has already been paid, for failure.
(3) Cut the public sector (once redundancy payments are outlawed)
(4) Renege on public sector parasite pensions as we cannot afford to both have paid that sector out of public funds and to provide the 700 billion pot to service their pensions.
(5) Public housing projects whilst land is cheap.
(6) Stop all publicly funded courses in non-useful subjects (Drama Studies, Sociology, Business Studies, Womens Studies, Human Rights, Media Studies, etc)
(7) Suspend the Human Rights Act and emphasise common law.
(8) Ration publicly funded air time for non elected people who court influence. Hence Ms Chakrabarti would have to pay a substantial fine for already exceeding ten lifetimes worth of air time telling everyone else how to think.
(9) Put Jonathan Ross on national minimum wage.
(10) Repeal the laws of distress for debt recovery and avail public work by debtors for which pay goes direct to creditor at a rate set by District Judge end of story.
(11) Reduce benefits for claimants who refuse to relocate to take work.
(12) Abandon the current benefits system and replace it with one department also dealing with taxation. Do this after outlawing redundancy payments so all the benefits civil servants can be sacked without comepnsation.
(13) Make me Home Secretary so I can stop the office being an unlawful Czar of Crime and Overlord of Police and return the admin of justice and policing to the Crown in accordance with law.
(14) Require the resignation of Kent Chief constable and make his pension payable to a charity of my choice.
It is obvious what must be done I hope the above pointers are helpful.
Rick after the budget and peoples reaction in the shop today, everybody seems to think its crazy that I have spoken to, I have done a bit of a rant myself.
ReplyDeleteI am a bit tied up sorting out a book on The Ripper in Ramsgate, which may have influenced it a bit.
David, believe me when I say that at the moment things are really tough in retail and retailers problems all relate to lack of sales and ever increasing overheads. All of the retailers I know are cutting prices as far as they can to attract sales. However VAT, with its pass it down the line aspect, is really not the one to cut. It is a very time consuming tax to administer, every manufacturer deducts the VAT on everything they purchase from the VAT on everything they sell and pays the difference to the revenue, then the end of the line retailer does the same. Like all taxes that don’t relate to income it’s inherently unfair. But most of all it’s very expensive to administer, if one is going to make changes that cost an enormous amount of money at the moment I would say the best approach is to have some environmental and health related taxes, booze, fags and fuel, scrap everything but local and national income tax, and make it simple and impossible to avoid.
Yes I do mean all of it business rates, stamp duty the whole lot, get it cheap to administer and hard to defraud.
With VAT because books carry no VAT, I could do all the necessary accounting and the revenue would pay me a few hundred pounds a year, in practice I have an exemption certificate as I would have to pay more in accountancy fees than I would gain.
Look at Pleasurama, an off shore company set up to avoid uk taxes, crazy.
Nige sounds reasonable, I think a lot of people don’t realise that scrapping child tax allowance for child tax credit has put a great many people on benefit just because they have children.
Of course if the retailers 'keep' the vat, they will be accused of 'ripping us plebs' off.
ReplyDeleteMore importantly, what dear old gord and darling have done is to increase the cost of our food drink and bodily essentials. The haulage industry can claim vat back, but by reducing vat on fuel and increasing other taxes to compensate, the haulage industry will only be able to claim 15% back. Result increased costs that will be passed on to us the punter.
Michael
ReplyDeleteIt was not a rant. It was a toe in the water. I would say that people think the situation is not that serious that we should, for example, outlaw redundancy pay, cut the public sector and gear education to the needs of the economy. Or take measures approaching that magnitude.
Fiddle whilst Rome burns. The economy of the Soviet failed but with their long term strategy, of educating more technical and scientific expertise than the West, still intact. (Airey Neave warned about this)
Our economy has failed but with decades behind us of training too few engineers and scientists. At a time the National Grid is running at its lowest spare capacity ever and our reliance on Russia for energy and France for generation.
Musashi "The enemy artisan is also his soldier think well on this".
We come to your country and set up grant aided industry but no apprenticeships or R and D. You end up with no artisans. Then we have won.
Professor R V Jones warned us. Airey Neave sounded warnings.
Now we must face the consequence. Perhaps there will be more false dawns but in the end no amount of doctoring the books or discounting can alter the fundamental strategic truth.
Michael
ReplyDeleteI dont get your arguement, you say VAT is unfair because it doesnt relate to income, then you say it shouldnt be cut?
Nige & Ken
I agree, the VAT cut is not the popularist approach. Giving a handout would have been, but chances are that people wouldnt have spent it, but would have paid off debt or saved it.
Econmically, it doesnt really matter if retailers pass the cut on or not,its still a modest cut in the ammount of money the government takes out of the economy, ie a stimulus and is fast and efficient.
Taken with the other measures helping small and medium businesses, the idea is to keep as many people as possible in work, earning and spending.
I know you were critical of what the Tories did (or didnt do)under Thatcher Ken, this lot would make the same mistakes
David
ReplyDeleteYou are pruning an orchard, that was planted in the wrong place, hoping for an improvement of yield.
Yes let's give more help to people on tax credits. Let's give even bigger handouts to those who have children with no regard to how they are actually going to pay for them.
ReplyDeleteBest thing is to cut tax credits and let people become a bit more responsible for their actions instead of expecting other taxpayers to bail them out.
David what I mean is that VAT is a very expensive tax to administer, both for government and business, is also takes a very long time for the affect of changing it to be felt.
ReplyDeleteSorry about the delay replying I got rather tied up with the Cervia issue.
Anon 20 34
ReplyDeleteWe need to improve tax credit and expand it as a system to replace the whole benefits system.
This creating one government agency drawing tax from and paying credit to the people.
We must end the various categories of inactivity (sick, unemployed, single mother, pensioner) and use one system which scales from economic inactivity through subsidized economic activity to taxed economic activity.
In the process (having first outlawed redundancy compensation) we could sack hundreds of thousands of civil and public servants from the overmanned public sector parasite benefits admin departments.
As for who foresaw this crisis looming first. I think gold medal first place in the awareness stakes was a gent called Tony Blair.
What are you like as an after din speaker Michael ? Seems to be the way to go.
David, I think not, thats why I joined them. I also think that the Labour Party is once again in the grip of the unions, and therefore we are in for a 'bumpy' ride. I loath mr Brown and most of that which he stand for. I had respect for Blair, and could see him leaving before he was pushed. I might not have agreed with him, but he did understand the English way of life. Brown only seems to understand the Scottish way.
ReplyDeleteA further thought on the VAT reduction. As I said before as books don’t carry VAT I am not very much affected by this, it knocks a small amount off of the cost of paper and ink I buy, not enough to pass on because of price pointing and because I have already paid VAT on enough to last me for about 6 months.
ReplyDeleteHowever some of the other businessmen I have spoken to, who are not really doing at all well at the moment, have said that in a normal trading climate the VAT reduction would have been helpful, they would have been ordering in as much new stock as normal so it would have balanced. However at the moment with sales right down their customers are expecting to pay 15% VAT on stock that these businessmen bought with 17.5% VAT on it.
Having 2.5% less actual cash coming in is not helping the cash flow situation at all although ultimately their VAT bill will be less.