Thursday, 22 March 2012

A Budget Of Containment

I recently wrote an article for Triond (and maybe if they approve my writing) about how an extra 37p on a packet of cigarettes is going to make people think about quitting rather than actually quitting (see ‘Money To Burn’). Naturally it is my sincere hope that those who do even think about quitting will buy my ebook – somewhat modestly priced in comparison to a packet of cigarettes – 'Stop Smoking: Diary Of A Quitter'
There are some excellent ethical reasons to make smoking unsociable and something to consign to the ashtray of history as soon as it can but I somehow feel that in the 2012 budget, the Chancellor of the Exchequer was not thinking about it when he hiked up the cost. With the country in such deep debt he would have been thinking only about where he could funnel yet more money out of the taxpayer. Some people might think that his view is not unreasonable given the circumstances.

But the fact remains that by the time he announced the entire package, it became clear that the poorest in society would end up becoming worse off. Regard for example the 5p cut in top rate tax from 50p to 45p. That gives a huge amount of money back to the very top earners in the UK.

By comparison, the lowest earners will see a rise in personal allowance from April 2013 to just over £9,000 before paying tax. But so will the top earners, meaning that in fairness the lowest earners are further apart from the highest earners.

The pensioners will have their tax allowances frozen to await catch up form others in order to harmonize the tax system. This is a great idea (to simplify tax systems that is) but why not increase the other taxes incrementally to catch up with the pensioners? Oh yeah, money. So why was it not ‘Oh yeah, money’ when the chancellor cut the top rate of tax?

The chancellor claims that if the tax rate of 50p was lowered then the highest paid might…. MIGHT… be tempted to pay their taxes. I thought I heard that wrong but it is true. It is almost as if the top earners in the UK have some kind of choice as to whether they pay their taxes or not. I was always under the impression that tax was compulsory.

The chancellor also mentioned about how he was sickened by abuses of companies avoiding tax by buying houses, so he slapped a 15% stamp duty on all houses over 2 million being bought by companies. My guess is he just stopped companies buying 2 million plus houses. Result? No revenue.

But should the chancellor, if he was really sickened by tax avoidance, close the £120 billion pounds worth of loopholes in the tax system of which he enjoys as much as the rest of the very rich? He would almost certainly recoup the UKs debt a damned sight faster than trying to shaft old ladies out of their pension allowance.

To be fair, the chancellor did say that he was going to give pensioners a ‘massive’ rise of £5.00 something a week. Compare that to the 5p tax cut for the rich, netting maybe £10,000 in a year and the pensioner might just ‘harmonize’ the net gain with them for their one year in around 38 years time.

Petrol was already set to go up by 16p a gallon. Strangely enough, UK residents may be surprised to learn that unleaded petrol in the UK is still lower than the rest of Europe but Diesel is the most expensive because other European governments place a lower tax tariff on it, presumably to help businesses (Note this please Mr Osborne).

Add all the above to the tinkering with the Child allowance, the reductions in tax credits and 1.67 million unemployed and you do not have much of a recipe for growth. The chancellor will argue that he made the budget unashamedly geared towards business. I wonder, however, when the simple rule of supply and demand will demonstrate that any business without demand is going to fail.

Billy Bragg made a reasonable point on the UK programme Question Time, regarding recessions. He said that the only way to get growth was for the consumer to have the money to spend. With consumer spending comes a growth in demand and therefore a greater success in business.

What the chancellor, George Osborne, has done is given all the money to the people who don’t need it and taken more money from the people who need is most – the consumer. Why he believes this is good economics is quite frankly beyond my powers of reason. Perhaps he fears that too much money in the system now will overheat the economy and create inflation. Note however that the late 2011 inflation spike was due only to rises in VAT and utility bills (consumer involvement unnecessary).

The 2012 budget will do no more than contain everyone into the biggest rut you can imagine. Nothing will move because everyone will be out to consolidate what they have. The banks are unabashed in the way that they fail to lend to business because their main priority is to recapitalize all the money they lost with taxpayer’s money. The greed for profit will ensure that consumable goods are charged at the highest possible price. The poorest will batten down the hatches and spend only what they have to, which in some cases will be less than what they need to. More children and old people will live in poverty, wishing that just one of the £10,000 windfalls given to the very rich was theirs for a year.

The ideology of the Conservative party is ensconced deeply within the 2012 budget. To those people who are unaffected negatively by it, I am sure that the package makes perfect sense. But I am beginning to realize that the ideology of any party does not appear to have the one shred of understanding it needs to make any economic system right for everyone. That one shred, the most important perspective that is compulsory to making the whole economy work properly, is objectivity.

And that is what a smoker, especially at the poor end of society, does not have when he / she is a smoker. The addiction to nicotine clouds not only the judgement but also the common sense about how ridiculously expensive smoking has become and maybe it would be a fantastic idea to stop it. So instead they will find yet another reason to justify the expense of their habit and buy less food or clothing or heating. Maybe they won’t pay the rent on time or pay all of the council tax. The lack of objectivity creates its own reality in which the real world does not subscribe. The smoker cannot relate to a world that does not include cigarettes. So, like political parties toward their ideals, they live in a world of containment where smoking is the central theme around which all else revolves.

Shane Ward is the author of 'Stop Smoking: Diary Of A Quitter' , available at Synergebooks, Barnes & Noble, Amazon and other stores.

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