- VAT cut: Ministers need to stop dithering and act now
- Suspending Chris Pincher should never have taken this long
- Concern Over Cardiff Council Plans to Tackle Begging
- Southwark Liberal Democrats Demand More Ambition in Plans to Tackle Air Pollution
VAT cut: Ministers need to stop dithering and act now
Responding to reports the government is considering cutting VAT, Liberal Democrat Treasury Spokesperson Christine Jardine said:
Families across the UK are facing a cost-of-living emergency. Ministers need to stop dithering and act now.
Liberal Democrats have been calling for an emergency VAT cut for months. It was a key part of our successful by-election campaign in Tiverton and Honiton. Families need it, businesses need it, and voters clearly support it. So why haven’t Boris Johnson and Rishi Sunak done it already?
The sad truth is that we have a Government has no plan and a Prime Minister too busy fighting with his own party to help the British people.
Suspending Chris Pincher should never have taken this long
Responding to the news Chris Pincher has had the Conservative whip suspended, Liberal Democrat Chief Whip Wendy Chamberlain MP said:
It should never have taken Boris Johnson this long to act and withdraw the whip.
Once again it seems Johnson has had to be forced into doing the right thing
There can be no more cover ups or excuses. If this investigation confirms these serious allegations, Chris Pincher will surely have to resign.
The Liberal Democrat Voice team have recently started to receive more press releases from Council Groups around the country, perhaps a sign of greater confidence and ambition, and we’ll try to publish some of them going forward…
Concern Over Cardiff Council Plans to Tackle Begging
The Welsh Liberal Democrats have expressed concerns over Cardiff Council and South Wales Police plans to introduce a new begging protocol which would include the threat and use of fines to tackle begging and street homelessness in the city.
The concerns follow an announcement during Council yesterday that Cardiff Council will work with South Wales Police to implement a new begging protocol based on the Operation Luscombe model.
Operation Luscombe was introduced first by the City of London Police in 2018. The system operates on an escalation model where those found begging or rough sleeping are initially invited to attend an intervention hub which is held every week, but if they do not attend this can then be escalated to a community Protection Warning (Amber), followed by a community Protection Notice (Red) (which may include fines) and are then arrestable if the red ticket is breached (Blue).
The Welsh Liberal Democrats have stated that fining people experiencing homeless and engaging in begging has been shown to have a detrimental effect and should be ruled out.
Leader of the Cardiff Lib Dem Group Cllr Rhys Taylor said:
I am extremely concerned about the plans by Cardiff Labour to use the threat of fines and use of fines to tackle begging and street homelessness in the city.
Evidence shows issuing fines to those rough sleeping is often detrimental to ending homelessness and can cause harm to vulnerable people.
There is also evidence that it skews towards non-British citizens. 39% of those from the original London pilot were non-British citizens.
The Liberal Democrats successfully led the campaign for the Vagrancy Act of 1824, which criminalized rough sleeping and begging in England and Wales, to be repealed earlier this year. The last thing we want to see is punishment for being homeless being reintroduced through the back door. There needs to be clear safeguards to keep people safe.
Southwark Liberal Democrats Demand More Ambition in Plans to Tackle Air Pollution
Liberal Democrat councillors have demanded more ambition in Southwark Council’s plans to tackle air pollution in the borough.
Responding to Southwark’s Air Quality Action Plan consultation, the Southwark Liberal Democrats highlighted a lack of meaningful targets and specific policies.
Commenting, Cllr Graham Neale, Southwark Liberal Democrat vice-chair of the Environment and Community Engagement Scrutiny Commission, said:
Air pollution can have disastrous effects on the health of our residents and contributes to global emissions. Improving air quality is of paramount importance and that’s why we’re disappointed to see an action plan that lacks meaningful targets and specific policy aims. Yet again, the lack of ambition from Labour has let down our residents.
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14 Comments
Homelessness will only disappear if people have a place to LIVE.
Nice to see Christine championing regressive taxation…
In none of the LibDem pitches on reducing VAT have we seen any details other than to talk about reducing the 20% VAT rate – which has zero impact on domestic energy which incurs a 5% VAT charge.
I look at my regular expenditure and am hard pushed to see where a reduction of VAT from 20% to 17.5% will have a significant impact, on a similar scale to the price increases in domestic energy and petrol/diesel.
Looking at industry, given how VAT operates, I also fail to see how a change in the 20% rate will have much real impact on VAT registered businesses. About the only real beneficiaries are the manufacturers of electric vehicles; but then I suggest if in the current climate you are seriously considering the purchase of a new car, which carries a significant premium over the ICE equivalent and over secondhand, you are really suffering from a cost-of-living emergency.
oops, last point should be:
>you are NOT really suffering from a cost-of-living emergency.
It’s worth remembering that the proposed cut in VAT was suggested along with the windfall tax to go with the rebates on energy bills, and we’ve had a cut in fuel prices (albeit one that’s been hard to spot) with further proposals for a cut in fuel duty in rural areas where costs are higher and people have fewer choices.
However, I don’t think it’s correct to say that a cut in VAT is regressive. People on lower incomes spend a higher proportion of their income on VAT than the richest in society, and whilst things deemed ‘essential’ shouldn’t have VAT, there are a lot of things with VAT that people on lower incomes buy. Do we really think that poorer people aren’t allowed nice things, like chocolate biscuits or a hot takeaway, in a cost of living crisis?
It’s the kind of policy that helps keep some small businesses open as their costs rise and their customers question whether they can justify the purchase.
We do have an adopted policy as the basis for fairer taxes Policy Paper 111
The foremost principles which underpin the proposals set out in the paper are:
• Fairness – We wish to achieve a tax system that is progressive in relation to income and wealth, that reduces inequality, ensures those earning the lowest wages are not disadvantaged by working, in which wealthy individuals and businesses make their fair contribution, and where those who seek to avoid paying tax are prevented from doing so.
• Prosperity – A tax system which raises sufficient revenue without disproportionately reducing incentives to individuals to work and save, keeps the cost of collection to a minimum, and presents an attractive option for business investment, supporting economic growth and creating prosperity.
• Simplicity – We want to create a tax system that is simpler, easier to understand and comply with, and more predictable; with fewer and less complicated rates and reliefs – especially for individuals and small businesses.
• Environmentalism – We strongly believe that the tax system should be used to tax environmental pollution and resource depletion, and should provide bigger incentives to sustainability, green economic growth, and the responsible use of resources.
These principles should underpin the approach to taxes (including applying them to reform of coucil tax) and the tax system used to fund support to lower income households via a Guaranteed minimum income to address cost of living issues.
@Fiona – “Do we really think that poorer people aren’t allowed nice things, like chocolate biscuits”
A packet of McVities Chocolate Digestives costs £1.25; so to give “poorer people” a 2.5p saving, the LibDems want to cut higher rate VAT across the board; enabling a richer person to save circa £1,000 on a new Telsa…
There are better ways of getting useful amounts of money to poorer people.
Plain digestives are zero-rated. Biscuits covered or partly covered in chocolate or some other products similar in taste and appearance to chocolate are standard rated. If you have to have chocolate, Jaffa Cakes are considered cakes because they have more cake characteristics than those of a biscuit:
They are baked using cake ingredients
When stale, the sponge goes hard whereas a biscuit would go soft
As a result, Jaffa Cakes are zero-rated for VAT purposes.
@Fiona “I don’t think it’s correct to say that a cut in VAT is regressive.”
In Coalition, the party defended an increase in VAT as “mildly progressive”, so on that basis (however shaky!), the party is now calling for what it presumably believes to be a mildly regressive reform!
More galling perhaps, is the claim that cutting VAT from 20% to 17.5% “would save families £600 on average”. To save £600, a family would have to be spending £28800 each year on goods that attract that rate of VAT (i.e. not rent, mortgage, council tax, heating, basic food items, etc.). Given that in 2021, the median household income was £31,400 (and the mean was £37,600), how does that “average” compare to what most families would recognise?
A higher proportion of rich people’s expenditure is charged VAT than the expenditure of poor people. it is sometimes described as regressive because it constitutes a higher proportion of poor people’s gross income (before tax and benefits). That is of course irrelevant. It will be an infinite proportion of the gross income of an unemployed person regardless of the rate.
The big question is would the financing of the cut hurt poor people by more than the cut itself. It would probably be financed either by service cuts (which usually hurt poor people most) or stealth taxes (it covers a multitude of sins but they usually hurt the poor more than the rich and have side effects) or borrowing which will eventually work back to inflation and high interest rates which both tend to hurt the poor.
I’m not saying that a cut in VAT is the perfect response, or that it’s going to end poverty, or that we don’t have better long-term ideas for progressive tax reform. But the cost of living crisis is happening now, and a blunt tool now is better than a sophisticated policy proposal in five years time. For people on lower and average incomes and everyone whose rent/mortgage is going up faster than their wages (ie most of us), shaving a little from the cost of a packet of crisps or chocolate biscuits, will help, along with other support measures.
The benefit extends to anyone whose income depends on the state of the economy. A modest VAT cut won’t change the world, but it can help to keep small businesses viable, keeping more people in work, and reducing the cost of benefits.
@Peter, the point has been made that the government is getting a lot of extra tax take due to the rise in fuel costs and general inflation. The money to fund the cut in VAT is supposed to come from there. You could argue that the extra money the government is making in tax could be targeted elsewhere, but that’s not happening either. I’d like to see a windfall tax on some of the obscene profits made during the pandemic, but as we’re still trying to find out who made obscene profits from public money, I won’t hold my breath.
@ Peter Davies,
“A higher proportion of rich people’s expenditure is charged VAT than the expenditure of poor people.”
Comments like this should be substantiated with some kind of reference. This BBC article possibly gives you some support but also explains the difficulty in answering this question.
There is no VAT on foreign holidays and international air travel which will favour the more affluent. On the other hand there is also no VAT on staple foods like bread and potatoes, nor on second hand items such as from charity shops which will favour the poor.
https://www.bbc.co.uk/news/business-12111507
One of the benefits touted for Universal Credit over older benefits is that the rates can be changed overnight. The best way to protect the poor against inflation would be to make the indexing quarterly instead of annual. With expected double digit inflation, if it is adequate immediately after an annual rise, it is clearly inadequate immediately before one.
When VAT was cut from 17.5% to 15% in 2009 many retailers did not pass on the reduction to consumers and it was reported that the recent VAT cut for hospitality firms from 20% to 5% may not be passed onto consumers Hospitality VAT cut may not be passed on to UK consumers
This is the economics of indirect taxation. it is not as simple as it seems.
@Fiona – However, I don’t think it’s correct to say that a cut in VAT is regressive. People on lower incomes spend a higher proportion of their income on VAT than the richest in society
I think Fiona, you (and others) might have missed part of the point I was making. if the higher VAT rate were to be cut to 17.5%, I could, if I so desired, purchase a Tesla and use the VAT saving to pay a significant proportion of the increase in domestic fuel; someone on a low income would not be able to do this as not only would their disposable income prevent it but the total amount of VAT they pay is insignificant compared to the increase in domestic fuel costs. We actually need the better off to pay the full rate of VAT and for the monies be redirected to those who really could benefit.