Spending VAT: Jobs for the Chavs
Posted in Hat Talk, Politics on December 31st, 2009 by doctormoTomorrow will see the increase of the Value Added Tax (VAT) similar to the sales tax in the USA, it will go back up to 17.5% from a year low of 15%.
This low VAT rate was introduced in order to increase the amount of spending going on in the UK.
This would make sense, if the problem in the UK economy was that money was being hoarded by common folk with large fat savings accounts. The problem is that money is not being hoarded by the middle or lower classes, most of it has moved either to the ultra rich or overseas as the products consumed in the UK are predominantly made overseas.
So lets see, the logic of this is that most of the money of increased spending will remain in the country… cycling around. Don’t forget money is a reflection of work/value added, so it’s not like you can just print more money, that doesn’t do anything over than devalue existing currency. A bit like diluting juice more and more, you technically get more drink, but you don’t get the same strong taste.
If value is leaking away into Chine and other producing countries, what you don’t focus on is getting people service jobs. That’s about as short sighted and dumb as one could be. Sure it’ll solve a short term problem, but it will increase fragility of the whole system and ultimately lead to cardiac arrest in the economy.
It’s similar to the Halton Council, who persist in attracting even more super market chains to set up shop in Widnes. As if having 400 supermarket jobs will somehow solve job problems and generate wealth, when in fact it’s likely to just drain away the market in massive dilution of a single industry sector.
My economic New Year’s wish is that local and national government see sense and set up more funds, grands and subsidies for creative people who can prove that they spend their free time working on business plans, art, software, music, what ever takes your fancy. Cultivating a sense that the community will support you as you find your feet with your work is surely more useful than giving grants and tax breaks to the likes of Tesco or Wallmart/Asda.
Thoughts?






