Saturday, September 18, 2010

Cuts will be a disaster for the UK

The Coalition is right about cuts, but it has some explaining to do

the Coalition has no mandate for cuts, and has not properly debated them. It is trying to frighten us with a "There is no alternative" line, when the plain alternative is to cut the deficit much more slowly and nurse the economy to recovery rather than slice it to ribbons.

Posted by devo @ 10:38 PM (1435 views)
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13 thoughts on “Cuts will be a disaster for the UK

  • Of course, if the Coalition was smart enough they’d realise there isn’t going to be a recovery during their term of office, whether they try to cut the deficit or not. Rather them than me.

    Cue widespread domestic opprobium.

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  • the number cruncher says:

    I thoroughly agree the condems will be vilified for the sins of others. Although I would not cut – I would introduce a Land Value Tax to replace all other taxes. Cut back other taxes over three years. Fist reduce Vat and take personal allowances up to 25K, then NI and then other forms of Income tax and corporation tax. The staggered cut in unproductive taxes would pay for the budget deficient.

    Balance the books and keep the economy afloat. Very happy for a root and branch change in how we spend taxes – such as get rid of HB and start building council houses, but I would keep government spending levels at today’s values.

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  • @tnc

    What would be the benefits/disadvantages of “a Land Value Tax to replace all other taxes” for different levels of society? For instance:

    a) a housing benefit recipient
    b) an employed house renter
    c) an employed house owner with a mortgage
    d) a house owner whose mortgage is paid
    e) a landlord
    f) a commercial land owner
    g) an agricultural land owner?

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  • As far as I can see there are no cuts. The amount spent by the UK government is set to rise over the term of the parliament. How is that a cut? All they are doing is rearranging the deck chairs whilst the boats sinking under them. The lefties are “bigging up” these alleged cuts for their own purposes yet nobody is even discussing reducing the enormous debt that Gordo has left us. Say goodbye to the pound which has already lost more than 30% of it’s value in the last few years. That’s a far worse tax then even Labour could sneak in.

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  • I’m surprised that the Lib Dems don’t have LVT at the heart of their wish list. They’ve been largely anonymous in this coalition so far and LVT would be a such massive departure from Tory driven policy, the leadership may be able to dig their heels in to achieve (what I believe, would be a popular tax, certainly for the majority) a policy which they can claim for their own. The Tories could disown it, knowing full well their own grass roots will disapprove. The vast majority of the electorate will gain, the minority of landowners will have to start to paying a fair share AND the cost of land should fall …….Win Win Win.

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  • Tbc

    What a fantastic shock to the system that would be. At least they could point to the lack of recovery (if it hadn’t started by yr4) on the fact they’d changed the system and by then people would have got to like not being taxed on their productive income and probably give them another term.

    I do agree, the general public are quite happy keeping the party going and their heads in the sand and really don’t want to pay back all that money.

    If I were in power I’d be doing very regular party political broadcasts at the moment, just so it was crystal clear what a mess labour have made behind the scenes of the glossy cover.

    And people really need to get their heads around paying £60 billion a year in interest payments on government debts.

    If they don’t make all these things very, very clear now, then they may get kicked out again at the next election, which will be on us sooner than you think. Only 4 years to go now before they all start gearing up for the next election.

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  • Looks like you and poss mw have a big question to answer from devo there.

    But I want to know why council housing is better than low cost housing actually being owned by the occupier.

    By that I mean, the upfront build costs need to be born by the local authority etc. In the conventional sense.
    Why shouldn’t those that will live their be made to fund the build of their home with a mortgage.
    The unit build cost would only be about £75k and say another £25k towards infrastructure.

    A £100k repayment mortgage for a 3 bed semi can’t be hardly any more than the rent they’d have to pay in rent and they they wouldn’t need funding in retirement.

    Also if any are currently unemployed, what a good opportunity to get involved in the building of the houses combined with some day release.

    A much better system I’d have thought than just gigging someone a council house.

    And of course so much more pride in the up keep of the estate would be taken of all homes were actually owned.

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  • Str2007; the biggest cost to the local authority is the land and it has crossed my mind that all land in the UK should be owned by the state and leased therefore eliminating speculation from the equation. This would provide the land for cost effective local planning and prevent valuable space being left idle or to rot in urban areas by private individuals, companies and government bodies.

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  • I should forget the notion of LVT being a panacea – it’s too easy to confuse Joe Sixpack…..and the Landowners, RWP, and other VI’s, like taxation ‘advisors’ would set about doing just that.
    It’s been a theory for over a century now – save yourself the time and heartache……don’t chase rainbows.

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  • Enuii
    Personally I quite like the idea of owning a bit of my own country, but the point about the value of land is that it only gains in value substantially with the ‘planning permission’ stamp granted by local authorities. Therefore it’s not inconceivable this cost element can be taken away from ‘low cost’ housing.
    Truth is it’s not low cost housing, in fact it should be ‘re-branded low land cost housing’.

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  • Devo @1 Cue widespread domestic opprobium.

    Oh Dear – someone toking on their ‘opprobium’ pipe again…….or was it a few too many Schandes

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  • Please explain to us all why you think the Government has a mandate to spend more than it collects in taxes .

    To quote Lord Miners “there is nothing progressive about a Govt that spends more than it collects in taxes” as the last government did 11 in 13 years .

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  • Adam Smith Fan says:

    What would be the benefits/disadvantages of “a Land Value Tax to replace all other taxes” for different levels of society? For instance:

    a) a housing benefit recipient – Net Win for all
    Benefits – no VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to better chance of finding a job because of improved economy. No income tax or NI leading to a higher wage from that job.
    Disadvantages – Improved economy means higher rents.

    b) an employed house renter – Net Win for all
    Benefits – No VAT leading to living expenses. Deadweight costs caused by “all other taxes” disappear leading to lower chance of losing a job because of improved economy. No income tax or NI leading to a higher wage from that job.
    Disadvantages – Improved economy means higher rents.

    c) an employed house owner with a mortgage – Net Win for the majority, net loss for a few
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to lower chance of losing a job because of improved economy. No income tax or NI leading to a higher wage from that job. Higher incomes more than offset LVT for most people with less valuable houses leading to increase in house prices. Ending of Council tax will mean that house owners are no longer penalised by increased tax bills for improving their houses.
    Disadvantages – Those who own enormous houses will find that the LVT increase over Council tax is larger than their income increase and so will not be so well off.

    d) a house owner whose mortgage is paid – Net Win for the majority, net loss for a few
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to lower chance of losing a job because of improved economy. No income tax or NI leading to a higher wage from that job. Higher incomes more than offset LVT for most people with less valuable houses leading to increase in house prices. Ending of Council tax will mean that house owners are no longer penalised by increased tax bills for improving their houses.
    Disadvantages – Those who own enormous houses will find that the LVT increase over Council tax is larger than their income increase and so will not be so well off because LVT has taken a bigger bite out of their income than income tax did.

    e) a landlord – Net win for some, net loss for others.
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to higher rents because of improved economy. Ending of Council tax will mean that landlords are no longer penalised by increased tax bills for improving their houses. Landlords who own nicer houses will pay the same amount of LVT as those who own the house next door but will be able to rent at a higher price. Under LVT they get to keep all of that difference whereas under income tax they only keep a percentage.
    Disadvantages – Those who own slums or empty land will find that the LVT increase over Council tax is larger than their rental income increase and so will not be so well off because LVT has taken a bigger bite out of their income than income tax did.

    f) a commercial land owner – Net win for some, net loss for others
    Several subcases
    1) a commercial land owner who leases the land only – Net loss
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to higher rents because of improved economy. Can develop property with no tax penalty.
    Disadvantages – LVT increase over Council tax is larger than their rental income increase and so will not be so well off because LVT has taken a bigger bite out of their income than income tax did.

    2) a commercial land owner who leases the land and buildings – Net Win for some, net Loss for others
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to higher rents because of improved economy. Ending of Council tax will mean that landlords are no longer penalised by increased tax bills for improving their buildings. Land owners who own nicer buildings will pay the same amount of LVT as those who own the property next door but will be able to rent at a higher price. Under LVT they get to keep all of that difference whereas under income tax they only keep a percentage.
    Disadvantages – Those who own low quality properties will find that the LVT increase over Council tax is larger than their rental income increase and so will not be so well off because LVT has taken a bigger bite out of their income than income tax did.

    3) a commercial land owner who uses the land – Net Win for the majority, net Loss for a few
    Benefits – No VAT leading to cheaper living expenses and large reduction in paperwork and accounting costs. Deadweight costs caused by “all other taxes” disappear leading to revenue and reduced expenses because of improved economy. Ending of UBR will mean that land owners are no longer penalised by increased tax bills for improving their buildings. Ending of Income tax/NI means reduced labour costs.
    Disadvantages – None.

    g) an agricultural land owner? – Net win for some, net loss for others
    Several subcases
    1) an agricultural land owner who leases the land only – Net Loss
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to higher rents because of improved economy. Can develop property with no tax penalty.
    Disadvantages – LVT increase over Council tax is larger than their rental income increase and so will not be so well off because LVT has taken a bigger bite out of their income than income tax did.

    2) an agricultural land owner who leases the land and buildings – Net Win for the majority, net Loss for a few
    Benefits – No VAT leading to cheaper living expenses. Deadweight costs caused by “all other taxes” disappear leading to higher rents because of improved economy. Ending of Council tax will mean that landlords are no longer penalised by increased tax bills for improving their buildings. Land owners who own nicer buildings will pay the same amount of LVT as those who own the property next door but will be able to rent at a higher price. Under LVT they get to keep all of that difference whereas under income tax they only keep a percentage.
    Disadvantages – Those who own low quality properties will find that the LVT increase over Council tax is larger than their rental income increase and so will not be so well off because LVT has taken a bigger bite out of their income than income tax did.

    3) an agricultural land owner who uses the land – Net Win
    Benefits – No VAT leading to cheaper living expenses and large reduction in paperwork and accounting costs. Deadweight costs caused by “all other taxes” disappear leading to revenue and reduced expenses because of improved economy. Ending of Income tax/NI means reduced labour costs.
    Disadvantages – None.

    You also forgot the following category which covers tenant farmers and most small businesses. In other words the majority of employers in the UK.

    4) Employer which leases from an agricultural or a commercial landowner – Net Win
    Benefits – No VAT leading to cheaper living expenses and large reduction in paperwork and accounting costs. Deadweight costs caused by “all other taxes” disappear leading to higher revenue and reduced expenses because of improved economy. Ending of Income tax/NI means reduced labour costs.
    Disadvantages – Higher rents because of improved economy.

    So basically just about everybody is a net winner. Some are much bigger winners than others of course. In particular small businesses and small farmers should do very well in an LVT environment.

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