VAT are you saying?

Alistair the house elf

This Government and the banks have a lot in common. They have both enjoyed many years of negligible economic turbulence and  zero competition.

The good times may have continued if either had noticed that Wall Street had invented the real weapons of mass destruction – the financial ones. The banks had sliced, chopped, diced and mixed bad mortgages and fashioned them into contaminative instruments of death with a built-in time fuse.

The bankers’ handiwork has created a vast financial Black Hole which has already consumed many financial institutions and is beginning to consume whole economies. So  what to do? It’s obvious – decrease VAT by 2.5%.

Decrease VAT? The Government has shown once again that it is a bit short on creative ideas. It often uses short-term tactics to deal with strategic matters. On this occasion, it is in the vain hope that when the global economy returns to sunshine and wealth , the Government  will will be able to claim that it  had controlled events. Gordon “Canute” Brown and his house elf  Darling will have done it!

(In reality it will have simply been a readjustment in the new global Stability-Chaos-Stability cycle). 

But think about this: The global economic crisis is happening because of “external forces which are out of our control”. If that is the case and we truly have no control over super-macroeconomic events, gestures such as VAT-tweaks will have negligible impact. Even Mervyn King appears to be distancing himself from this initiative.

Gordon Brown is indeed a one-trick pony who believes that the only way forward is to persuade the consumer to consume. However, he will not pull the economy out of the quicksand by persuading us to buy 42″ television sets and new cars. When the going gets tough, the tough buy food and clothing.

By pulling the white rabbit of higher taxation out of the Budget hat for those earning more than £100K, he has appealed to the “not-so-rich” (are we allowed to say “poor”) with a touch of the old “Politics of Envy”.  We can almost hear Denis Healey  “squeezing the rich until the pips squeak” .  Let’s call it Gordon’s “hommage” to Old Labour.

In the next few years, the pips will squeak but the fact that there will be a saving of £12.50 on a £500 TV set will not dampen the squeaks.

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