Opinion: A Cornish perspective on the Budget and VAT

As MP for the West Cornwall and Isles of Scilly constituency of St Ives, I am fortunate to represent one of the most spectacular and attractive parts of the UK. However, it is also the poorest region in the country. So Budget proposals are critical to many of my constituents who exist with the reality of low incomes and relatively high living costs.

On a positive note, the Budget put forward by the Coalition Government has much to commend it and for the Liberal Democrats, in particular, to be proud of.

It contains policies the party campaigned for, including: an increase in the personal tax allowance, taking many people out of tax altogether; a guaranteed rise in the state pension and pension credits; a closing of the capital gains tax loophole; the introduction of a banking levy; and a protected pay rise for the lowest paid public sector workers. All good stuff.

The Budget has to be seen in the round and some elements of it require further debate – particularly the Budget’s impact upon poorest in society, on the the future of small business – the backbone of the Cornish economy – and on charities. To this end I tabled an amendment requesting an impact assessment on the proposed VAT rise.

My stance is not tantamount to an earthquake along the fault line of the Coalition Government. It is different from the one party rule we have experienced in the past. It is a coalition of two distinct parties with distinct policies and values. Those items, like budget measures which clearly cannot be debated between the parties prior to announcement, can, and should be subject to an open debate prior to implementation.

The Chancellor promised the Emergency Budget would protect the vulnerable, so it is right to test whether a VAT rise will mean that the poorest in the country will pay a higher proportion of their income meeting the tax rise than wealthier people. On top of the cuts in public services, which are likely to have a greater impact on the poorest, the VAT rise could compound the situation.

We had always understood that both parties in the Coalition would prepare a budget which recognised that those who dropped the country into the financial crisis it is in should do most to shoulder the burden of getting us out of it.

The Finance Bill, containing the Budget, will now need to progress – starting this week – through four stages of Parliamentary scrutiny. I will continue to press the Government on behalf of vulnerable families, small businesses and charities in my Cornish constituency. Although some may wish to characterise this as a rebellion, the important job of holding the Government to account is what responsible Parliamentarians should be doing. Watch this space.

Andrew George is MP for St Ives

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18 Comments

  • Andrea Gill 8th Jul '10 - 9:33am

    If only Labour could be supportive and join you in wanting to have the full effects assessed, rather than just attacking the budget for the sake of it. 🙁

  • Andrew Suffield 8th Jul '10 - 11:29am

    Aaargh! Progress is not a verb!

    to progress

    (Note the distinct pronunciation)

  • Kehaar wrote:

    “It’s also the only constituency in which the majority of industrial/manual workers don’t vote Labour.”

    That will be news to the engineers and mechanics at Westland Helicopters, the quarry workers in the Mendips, the railway workers in Eastleigh, the dockers at Newhaven, etc.

  • It saddens me that changes announced in the budget targetted vital support structures for disabled people.

    I think that DLA should have an initial assesment as it is the duty of the state to all its citizens to ensure that money is well spent but after that the procedure of frequent medicals is actually going to cost the government a small fortune.

    If someone is diagnosed with an incurable disability it makes no sense to subject them to the fear that they could lose their benefit entitlement. If you have no limbs they cant grow back overnight.

    When a claim for DLA is recieved look at that claim and then decide is it likely that this disability will get better over time – if the answer is no then leave the disabled person to get on with life and have the benefits they deserve.

    That is the only truly civilised way of dealing with the issue

  • Mark Sherratt 8th Jul '10 - 12:43pm

    I suspect, and believe studies have proven, that the poorer in society will be ‘hit hardest’ by the VAT rise. However in a sense these studies are mis-guided, they all to often compare the increased amount of VAT that will become due with the persons total income. Given that the lowest earners do the least amount of saving, donating to charity, and other non-purchasing activities it is obvious that they will have a larger proportion of their income affected by the VAT changes. However I believe a fairer way of measuring the impact of the VAT change is to compare typical expenditure on goods while discounting the actual individuals income.

    A low earner may have to pay the extra 2.5% VAT on a number of goods and services, however since a large proportion of basic need goods are either zero rated for VAT or only charged at 5% the amount of expenditure on full-rated VAT goods and services will be minimal.

    On the other hand a high earner who is in the habit of spending more on goods and services would (as a percentage) spend less on items that are classed as basic need. As such the percentage of their -expenditure- which is taken as VAT would (I expect) be higher than that of the low earner.

    However our opponents will continue to argue that VAT is regressive, because they compare the amount of VAT paid with the persons total income, and not their total spend.

    VAT should not be seen as an objectionable tax in my opinion, as it is effectively a tax on your ability to buy, which in some ways seems far more fair than a tax on income, which never takes into account what you intend to do with that income.

    This can be illustrated with another example, a family with one working parent earning 25K per year, compared with a single person earning 25K per year. We make a lot of fuss over creating tax benefits for families etc, when careful use of VAT to tax luxuries only, would be a fairer way ensuring that those who can afford luxury goods pay a larger proportion of tax than those whose income is needed more for basics.

  • Kehaar,

    Find me a constituency where the total number of C2s, Ds and Es comes to less than half the Labour vote. I wouldn’t like to predict, but I suspect there may be none.

  • Kehaar,

    In Yeovil, Labour polled 5.2% in May. Are you telling me that a majority of industrial/manual workers in Yeovil voted Labour? Given that Westland Helicopters is the town’s biggest employer, I would have thought that industrial/manual workers would amount to more than 10.4% of the electorate. Doubtless, you will find a way of defining “industrial/manual” that will enable you to insist that you are right.

  • George Kendall 8th Jul '10 - 10:17pm

    @Andrew George
    “I will continue to press the Government on behalf of vulnerable families, small businesses and charities in my Cornish constituency”

    As you should. And I appreciate the considered, polite way you’ve gone about it.

    I know that I, as an ordinary Lib Dem member, have been struggling to work out how to voice my reservations about the budget, whilst being loyal to the party in the face of remorseless attack. Obviously, far, far harder when you are an MP.

    It is troubling that joint cabinet responsibility is preventing our leadership from presenting our separate identity.

    On the other hand, I remember the unpleasant briefings and counter-briefings between ministers in the Labour years. I’d hate the coalition to be riven by one party’s rebellion giving escalating permission for the other to rebel in the opposite direction.

    Perhaps the route you’re choosing will work. With more nuanced amendments such as the one you describe, which don’t attract much media attention.

    Good luck.

  • Paul McKeown 9th Jul '10 - 1:20pm

    Good luck, Andrew, this seems constructive.

  • David Allen 9th Jul '10 - 11:43pm

    This is a welcome initiative. I’m sure it would be wrong to describe it as a rebellion. Rather, it is an assertion of the way a good MP should naturally act in critical support of government. It is all the more essential now we are junior partners in a coalition.

  • Gerry Freedman 10th Jul '10 - 7:57am

    Having been a Tory up until the secretly hidden cuts to Housing Benefit for the unemployed who we want to get back to work, not into a workhouse do to lack of a home, because the Liberal Tory government want to cut their benefit to save 200 million a year, or to cut the Housing Benefit of Mum and Dad who live in a house that used to have kids, I urge all the Liberals in Parliament who are interested in protecting these poor people, to rebel!!! If this proposal is stopped, I promise to join the Liberal Democrats and fight as hard as I can to kill the Tories as a force in Scotland. If you dont stop it, then you will rightfully be decimated in the elections next year and up until the next election when you will be uncermonly booted out of government and the seats you have at the moment. Be warned, people are angry and its only going to get worse!

  • Terry Gilbert 14th Jul '10 - 12:21pm

    I know from the news that this amendment was defeated, but which Lib Dem MPs voted for it?

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