We’ve had the first budget by the new coalition government, called out by a small boy, nervously looking down at his sheet, behind him a Prime Minister with a face so red backbenchers thought it was daytime (it was daytime, but they didn’t know it was daytime by any other measure than David Cameron’s face, which actually isn’t a measure of time at all, allegedly) and two Liberal Democrats, whose party once called the rise in VAT (which was called today, starting in January 2011) the Tories’ ‘secret plot‘.
Though, back then, the plot referred to Tory plans to raise VAT to 19.5%. Judging by the chants of ‘here here’ today by Nick Clegg and Douglas Alexander, either we are to take it that once VAT rises to 20% it stops being a plot, or the Liberal Democrats have their hands tied in this coalition government. All such speculation has been achieved on this subject, and it doesn’t look good for the yellows.
Julian Glover of the Guardian on the day of the budget argued that it was not: “as a Thatcherite one would have done, seek[ing] to divide the nation between winners and losers. It was a one-nation one, albeit produced in desperate circumstances.” Certainly all the talk of “progressive” (that vacuous blanket term for anything not fascistic or carried out by a person over the age of 50 – Ken Clarke beware) provided the cover with which to place over our eyes, while our ears heard insistence from the Treasury that “The top income decile [consult graph 1 here for further explanation] sees the largest absolute losses, while, on average, the bottom three income deciles experience the lowest losses”.
But if the way in which Ozzy Osborne has dealt his number blow is progressives then I might as well sign myself up to that Facebook group supporting Kim Jong-il right now.
VAT always hits the lowest paid in society the hardest, though mostly what George has forgotten is proportion and scale. If figure A earns £200 a week and the government decides to take £10 more of that away, while figure B earns £2000 a week, and the government also decides to take £10, figure A feels more of a pinch in spite of the fact that both have contributed the same.
Now this is not an accurate picture of what the government are doing at the moment, but certainly the illustration holds true, that though the top income decile will see the largest amount of money taken from them on their pay packets, this is because they are earning more. This does not represent an equal distribution of the “pinch” when you consider that those on the bottom end of the income decile, though not contributing as much (as they don’t earn as much as those on the top decile) feel more of a pinch by the raise in VAT, freeze on public sector pay and freeze on benefits.
It doesn’t follow that since figure A has less on his income statement than last year, that figure A is feeling the pinch more than figure B, in fact the opposite is true. This does not represent everyone taking an equal hit. Until this is rectified, the coalition government’s budget plans are to progressive what Girls Aloud were to dignity.
