Labour really doesn’t get it

I’m here collecting and condensing a number of comments left by me over at the screechy political blog Harry’s Place in response to a cheap propaganda piece by Labour Party hack “Gordon MacMillan”. My comments were largely addressed to another commenter and HP collective member “Brownie”.

The reason for regurgitating the comments on this website is that, following a large number of substantive comments critical of “Gordon MacMillan”‘s original post and Brownie’s contributions to the discussion, the Harry’s Place thread is now being moderated. My own contributions were blocked until I left an anonymous comment concerning the moderation.

“It’s a bare-faced lie to present the VAT rise plans as some sort of unavoidable, Hobson’s choice.

“Lastly, the psychological impact of a rise in VAT is usually greater than the sums would suggest. Lots of things look more expensive, by however little. This encourages consumer prudence at the till and money is drained from the economy with all the risks that carries.” [Brownie]

Raising VAT isn’t an unavoidable, Hobson’s choice, and Brownie is quite right to compare the impact with that from increasing the National Insurance element of income tax. However, raising NIC is something the Tories tend to do in a crisis, which somewhat dilutes the argument against the VAT rise.

Brownie’s final point doesn’t hold at all, as raising VAT to 20% does no more than bring the UK up to the level of the European average.

Germany’s “MwSt” is currently set at 19% on non-essentials, and was until recently 16%. Despite the tax rise, Germany remains the strongest economy in Europe, and its VAT rise has not made much of a dent in consumer spending.

Then there are Denmark and Sweden, both of which have VAT rates of 25%,… on everything! Again, both countries have strong capitalist economies, and petite-bourgeois populations that positively adore shopping.

And to think that I supported Miliband Minor in his bid for the Labour leadership. He’s a very silly boy!

“I understand all the words but not how they are linked to any point I’m making. The point is that if our income tax rates matched the average of our major European trading partners (ironic you cite Germany, Denmark and Sweden later in your comment), getting our VAT rates to match wouldn’t even be necessary.

“Me, I’m for progressive taxation. Mostly because it’s, you know, progressive.” [Brownie]

Brownie – Speaking from experience, I can tell you that taxation on income in Denmark is in real terms only marginally higher than in the UK. My disposable income in Denmark was much the same as it would have been here. Danish taxes are higher than in Britain, but across the North Sea you get more in return in the way of valuable and for many essential services, which Brits have to pay for in other ways.

BTW, when comparing tax rates between the UK and most other EU countries, you must add UK Income Tax and NIC, and bear in mind that in most other EU territories, all income-based taxes are raised locally, and the central government portion transferred from local government to the national treasuries. In Denmark, for example, you do not pay a separate Council Tax.

What strikes me about UK taxation is how opaque the system is. Labour and the Tories are equally responsible for this. It’s about time that the UK joined the civilised world.

“Hmm, well I worked in Copenhagen nearly every week for 18 months a few years back (although still paid and taxed out of the UK) and I’m still an occasional visitor. I have to say my discussions with locals don’t bear this out. I seem to recall a lowest marginal rate of taxation at 56% at one time. You’re absolutely correct that you get more back in way of world-class public services as a result, but the point is that you can’t make any claims about Britain lagging behind our competitors in VAT rates when our rates of income tax lag even further.

“I’d certainly support your call to simplify our approach to raising and collecting taxes, but mostly to increasing them.” [Brownie]

I’m not sure what a “lowest marginal rate of taxation” is, but the figure you quote of 56% resembles the total income deduction of a highly-paid professional. That is: local and national income taxes, unemployment insurance (voluntary), union subs and a few other bits and bobs, all of which are explained in exquisite detail on employee payslips. The Danes really do believe in progressive taxation, and for them a high sales tax is part of their economic philosophy.

Now I’m not defending the Danish social-democratic-liberal economic model. There are serious criticisms to be made of it, just as there may be issues with the British Lib-Con deficit reduction strategy. But from what I can see such criticisms are not being made by politicians. Give me Paul Mason discussing inflationary pressures, or Stephanie Flanders on household expenditure and VAT, but dear Lord spare us Miliband Minor, Alan Johnson,… and Gordon MacMillan!

Oh, and as for Danes and their personal taxes, they have a habit of complaining bitterly to Brits about how hard done-by they are, but the tone is very different when discussing such matters with each other, in their own language. It’s a cultural thing.

“Hey look, I agree it’s far from straightforward to compare tax rates across the EU. But generally speaking, our tax-take in the UK lags that of our major European competitors, which is the point I wanted to make in response to Francis’ comment that raising VAT to 20% only puts us at parity with the EU average.

“See this interesting OECD graph.”

Now for the comment that was temporarily blocked by Harry’s Place…

Brownie – those OECD (not ONS) statistics are wheeled out with monotonous regularity in the blogosphere, only to be dismissed as uninteresting and uninformative by commenters, including pseudo-libertarians for whom the very idea of taxation is anathema.

The OECD figures show total tax revenue normalised to GDP, and as such include corporate and all other taxes, not just personal income tax burden. This might explain why Sweden is ranked lower than Denmark, when the income tax burden in the home of Ikea and surströmming is higher. And also why the Netherlands sits somewhere around the median, when income taxes there are uncomfortably high, even for middle-income earners.

For your information, total Danish taxes would include environment-related duties such as the ~200% registration tax on new cars.

These factors tend to skew the OECD figures so as to render them virtually useless when discussed out of context in short blog-like pieces written by bored journalists with column inches to fill and online click-through targets to meet.

I therefore find it extraordinary that you can in all seriousness accept the challenge involved in comparing different tax regimes, and then casually drop in reference to the OECD stats. This is admittedly a little more refined than your Dear Leader’s mythical “average household”, but not by much, all things considered.

This debate is for me deeply embarrassing, as I would sooner have my remaining teeth extracted with rusty pliers than defend the Tory enemy, especially when it is led by a bunch of Bullingdonian aristocrats with millions sitting in bank accounts, and therefore no personal financial concerns to speak of.

Where is the left opposition to this shower of blue-blooded shites? It is certainly not to be found on the Labour front bench in Parliament, the public utterances from which since the general election have been almost entirely vacuous. And as for Labour’s Lib-Dem bashing, this is neither big nor clever, as you may have to do a deal with them if the Tory agenda collapses (as I sincerely hope it does, and soon!).