VAT increase starts the political arguments

MIDNIGHT on Tuesday saw the expected rise in VAT from 17.5% to 20%.  This policy is part of the spending deficit that the country finds itself in, and already – the political parties are at war.  Chancellor George Osbourne insists that this was the only way forward, whilst under pressure Labour leader Ed Miliband claims that it is ‘the wrong tax at the wrong time.’

The Treasury hopes to gain about £13billion because of the VAT increase, therefore cutting the expansive gap between government spending and income.  The new measure shouldn’t affect consumers too much, as it means that just 2p gets added onto every £1 item.  Only food and children’s clothes have survived the new increase, which is a permanent move, unlike the cut to 15%, put in place by former Chancellor Alistair Darling in November 2008.  However, the news won’t be great for some.

INCREASE: Petrol prices are set for another rise

Petrol prices, set to reach their highest levels for at least a decade later in the month, will increase by 3p a litre under the new restrictions.  Bigger and more expensive electrical items are also likely to be far more expensive than they were before Christmas.  Some televisions will be sold at £10 more than they were in 2010, whilst PC’s, laptops and game consoles will also be significantly affected. 

DECLINE: HMV faces an uncertain future

Retailers now have decisions to make and all are approaching it in different ways.  Debenhams has announced that it will only charge the new prices on its new season stock, whilst Superdrug has confirmed that its own branded products will remain at the same price.  However, with HMV and Next recently posting massive loss of profits over the festive season, the ways they want to implore the cost might well be as limited as a world class CD of your favourite songs. 

Retail outlets did report massive business over the course of last weekend, as television advertising campaigns were run regularly, urging customers to beat the VAT increase.  It seems like the ‘old’ tradition of the January sales have slumped to a halt.  Many retailers are very worried about the VAT hike, and are already forecasting tough years ahead of them, warning that thousands of jobs could go, due to the price increase.  Retail analysts do predict that on a long-term basis, it will be the customers who end up losing out the most under the new method. 

The Chancellor seemed confident about the changes, when he spoke to the media on Tuesday: “VAT is a powerful weapon to tackle debt and if we don’t use it, then the spending cuts would be over £13billion pounds bigger.”  

Unsurprisingly, Labour and its leader disagree; “When family budgets are already squeezed, now is not the time for a VAT rise to make it even harder for ends to meet.”

Whatever the final outcome, the retail industry is in for a very challenging and demanding year.

Tax demonstrations add to coalition issues

LAST weekend, the fast-growing movement UK Uncut stepped up their campaign over evasion of taxation regulations.  Across the country, demonstrations and blockades of shop entrances led to several major top-chain stores being forced to close their branches on their busiest day of the calendar year.  Why are these big businesses and individual avoiding the system and is it fair?  Journalism student Simon Wright looks into this controversial detail in closer form.

WITH the highly anticipated tuition fees vote in the House of Commons tomorrow, the budget cuts that the coalition government have come under severe fire in recent weeks. 

DEMOS: Protests take place last weekend at Oxford Street

One issue that seems to be dodged by all politicians is the lack of action on tax avoidance by some of the wealthiest in our country.  Last Saturday, campaigners from UK Uncut carried out some deep pop-up protests about the regulations, which force several branches of TopShop and Vodafone around the country to close their doors, on one of the busiest trading days of the year.  Several campaigners and journalists were ejected by security guards as demonstrations took place in 21 towns and cities across the UK.

UK Uncut is a fast-growing movement that is gathering growing support via social networking sites Twitter and Facebook.  Already, demonstrations have been planned this weekend for Aberystwyth, Chester and Bury St Edmunds.  A website was set-up as recently as November 28, with many people already getting involved.

A spokesman for UK Uncut, James Kelly told the Guardian; “Tax avoidance is a big issue and we believe this is the alternative to the cuts the government are making.”  UK Uncut is taking their action on two organisations in particular.

Vodafone dodge

TAXING: UK Uncut's strong opinion of Vodafone

OVER the last ten years, communications giant Vodafone have been fighting tooth and nail to avoid paying the government around £6billion in tax.  After a defeat this summer in court to HM Revenue and Customs, current chancellor George Osbourne let Vodafone off the hook, rather than force through the payment in October.  The UK Uncut called the action ‘shameless’ and furious ex-Vodafone customer Tamika Short agrees; “Everyone has to pay their way and the higher should pay more than poorer families and students.  What Vodafone are doing is an absolute disgrace!”

The campaign continues against Vodafone, and they aren’t the only businesses to be affected, with Boots, HSBC and Barclays Bank avoiding similar laws.

Greedy Green

THE ninth richest man in the UK, Phillip Green is also taking a lot of stick from UK Uncut.  Green, whose wealth was, estimated at £4.4billion in 2008 runs some of the biggest names on Britain’s high streets.  His retail empire includes TopShop, BHS and Dorothy Perkins.  Even though Green lives in the UK, he runs the Arcadia retail group that he doesn’t even own.  His wife does, and by living in the tax haven of Monaco, doesn’t have to pay a single penny.  One of the demonstrators, Chris_Coltrane posted this chant on Phillip Green in London on his Twitter account last weekend; “Where did all the money go?  He sent it off to Monaco!”

In 2005, Green awarded himself a cool £1.2billion, and divided it via tax havens in Monaco and Jersey.  It is costing the annual taxpayer around £300million, which angered protestor Benjamin Neem.  Neem told the BBC; “Phillip Green’s missing millions need to be reclaimed and invested into public services, not his wife’s bank account.”

Recently, Green was made an advisor on the spending cuts by David Cameron, which adds to the pain for many protestors, including James Kelly; “Phillip Green is a well-known tax avoider and today, we’re bringing our campaign right to the heart of the empire.”  In fact, his £285million dodge could pay the salaries of 20,000 NHS nurses and the full tuition fees of £9,000 for almost 32,000 students, an extraordinary statistic. 

Link with students

I ASKED accounting and finance expert at the University of Northampton, Christopher Cook on the issue, but he declined to comment, only saying “It would cause heated and long debates.”

The evasion of tax payments links in with the tuition fees issue, as these were two of the Liberal Democrats four key pledges that have been broken from their manifesto.  The newly-formed group UK Uncut is also believed to feature public sector workers, the unemployed and pensioners.

This is one debate that won’t go away, and the coalition government have now got major tests infront of them, if they are to control the growing frustration from many on the spending cuts.

The Spending Cuts - A Hard, But Not Disastrous Outcome

IN LITTLE over an hour yesterday, Chancellor George Osbourne has made the deepest cuts in decades.  However, is it a wise move, or George’s great gamble?

Labour have slammed the cuts, with Shadow Chancellor Allan Johnson saying that these ‘aggressive methods could lead to a double-dip recession.’  They think it is a wreckless gamble, but Osbourne claims that it is a ‘tough, but fair’ cut.  I would have to agree with Osbourne’s viewpoint, rather than Johnson’s opinion and we have to stick together through this.

As it was leaked in the papers yesterday morning, 490,000 jobs have been axed in the public sector, as the harsh economic realities have set in.  One of the surprises was the decision to raise the state pension age upto 66 by 2020.  Within four years, 27% will be cut in council budgets, and there is a 7% cut in welfare.  The most controversial area was the expected demise of child benefits.  As previously announced at the Tory press conference, 2.5billion will be saved in this area, meaning that other affected areas didn’t take as hard a hit as some departments were expecting. 

Despite a 3.4% spending cut in education over four years, meaning there will no new schools for a while, the schools budget will go up overall by four billion.  For the elderly, it was a positive outlook, as the coalition government announced that all elderly budgets will remain untouched.  This means that free eye tests, free bus passes and free TV licenses for the over 75’s will remain untouched, as previously promised by David Cameron during the TV leadership debates.  NHS health spending will rise by 1.5% and there will be good news for current university students too.  With no announcement on an increase in tuition fees and UCAS applications starting within the next month, the current payment of £3,290 will remain in place for the next academic year.

Other areas that were significantly hit were foreign office spending (cut by 24%), police spending (cut by 14%) and the Home Office (cut by 23%).  Rail fares are set to increase by 30%, but Foreign Aid will go up massively, following the staggering donations that the UK gave to the appeals in Haiti and Pakistan earlier this year.  The Treasury believe that the private sector will improve, so unemployment won’t be an issue, despite the significant public sector cuts. 

The theory behind these cuts is short-term pain, long-term gain.  George Osbourne still maintains that there will be a 1.3% economic growth for the remainder of 2010, 2.5% in 2011 and 3% in 2012.  The City in London say that is hugely optimistic and Dragons Den entrepreneur Deborah Meaden isn’t convinced by these figures either.  However, you must praise the current Chancellor for his ambition.  By also confirming that the Tories have come to a final overall cut of 19%, a 1% decrease on what Labour had planned back in March, it was clever politics from Osbourne and it has consequently put the newly reformed opposition in a very tricky position. 

Painful measures had to be taken and some groups in our society will claim that it wasn’t fair, but it was a fairly reasonable spending review.  It is best to take one big hit, rather than smaller dozes over the course of a year.  If the figures are current, 80billion pounds of saving is expected over the next four years.  Millions of people in the UK have been affected by the spending cuts, but fundamentally, there was no choice and it wasn’t as bad as several forecasters had earlier predicted.

The Emergency Budget - Grim News For Everyone

Last week’s emergency budget brought the expected grim news for everyone in the country, as we attempt to deal with the misery from the recent economic crisis and the deficit that Britain faces.  Chancellor of the coalition government, George Osborne has attempted to keep things as positive as they could be, but has still taken the opportunity to hammer people the best as possible.

The most notable change is the increase in VAT, from 17.5% to 20%.  The change will take place, as in effect from January 4^th 2011.  The VAT measures will consequently see a litre of unleaded petrol rise by 3p, a pint of lager go up by 7p and a Ford Focus car, rise in price by over £300.  This VAT alteration will stick for good, unlike the emergency reduction taken out by former Chancellor, Alistair Darling back in November 2008.

Benefits for families, such as the controversial child tax credits will be removed, and public spending has also been reduced, with schools, universities and the police seeing their budgets restricted by a further 25%.  Other big announcements included the rise of the state pension age to 66, and in the recent days, there have been growing suggestions that the retirement age will be increased, so people may be forced to work longer, than they previously thought.  Osbourne also confirmed the selling off by the government of the Student Finance Company.  Student Finance has borne the brunt of thousands of complaints for delays and cancellations of loan and grant payments to hundreds of University students across the country.  This news could make things even more uncertain for students, attempting to beat the recession issue.  Surprisingly, tuition fees were not raised though, which raised an eyebrow with some.

Personal tax allowances have been raised to £7,475 from next April and there will also be a freeze on council tax for a year.  Below are some of the other key points from the Osbourne speech at the House of Commons last Tuesday:

• ·         A two-year pay freeze on the public sector, but there will be a £250 pay rise for workers who earn under £21,000 a year.
• ·         A probe has been announced into public service pensions.
• ·         Economic growth is predicted to be lower than forecast at 1.2% this year. 
• ·         The 10% cider duty rise tax has been axed.
• ·         Tax credits to families earning over £40,000 have been cut.

Immediately, the government has received intense scrutiny, as anticipated, with Labour really pulling the punches in the House of Commons.  The acting leader Harriet Harman has condemned the budget as ‘unfair,’ whilst Ed Balls, a leadership contender for the opposition called it ‘The Budget from Hell.’  Deputy Prime Minister Nick Clegg is also feeling the heat, as it seems like he supported the VAT increase, despite claiming that was never an option in his election campaign.  How much influence David Cameron had on Clegg’s decision remains to be seen.  However, Clegg probably gave in, realising that if he disagreed, he was more than likely going to be outnumbered by Tory MP’s. 

Osbourne has claimed that it was an ‘unavoidable budget,’ and that there was no alternative, but to tackle the massive government borrowing, which has brought Britain onto its sorry knees.  This was a budget that was always going to hit the country hard, whatever the outcome.  Some areas have been hit harder, probably unfair on them, but these cuts/freezes have had to be sorted out, otherwise we will be in an even bigger mess than we were before.  This is something that as a country, we must unite and stick together through the expected pain, as Britain attempts to grapple with the aftermath from the recession.