Reality check for MP's?
On top of the recent tax steal that Gordon Brown tried to push through, with his 10p tax take on the poor, the big retrospective VED tax increase on vehicle, the sudden rise in fuel and foods cost; the government and its fiscal policy are in some difficulty. For the foreseeable near future, the need to increase tax to pay for the governments spending policies and to redress the light lax hand on the regulations that controls the economy which has given rise to the current credit crises, will all need some careful manipulation. With this unfolding of the so called government of “prudence”, it is time that MP’s of the labour party and any new incomer had a reality check for what has come to pass.
The credit crunch is having a dramatic effect on the general publics spending pattern upon which the government has relied on so much in order to keep the economy boosted over the past ten years. But with the squeeze now being felt on disposable incomes the spending tap has been turned off and it is having a spectacular effect on the fiscal assumption that the treasury made under the dictatorial control of G Brown and latterly contentiously by A. Darling, who is having to reclaim the “prudence” tag.
It does seem to many people that the government has lost all sense of contact with the populace and has treated them with some fiscal contempt. While there is no doubt that taxes have risen over the past decade to pay for public expenditure, it has been by hidden means like pushing debt into the future via PFI projects, indirect tax such as taxes on insurance, air tickets, increased local authority rates, general duty taxation and not by direct income tax. Yet it has over the past twenty five years at the same time allowed the tax burden to fall more heavily on the poor and become lighter on the rich with city excesses of pay for the ‘captain of industry’ and bonus out stripping general pay rises. It has also propagated the illusion over the past decade that the growth in the economy was sustainable and ingrained in productive activity, unfortunately ignoring the rapid expansion in the use of banks lax loaning largess feeding borrowing and consumer debt. It is this explosion of loans and borrowing to spend that more than anything else has supported the UK boom period, done without the knowledge of where the sustainable asset generation was to come from. Many people being no wiser went for the strategy of living for today and borrowing on tomorrow, which assumed conditions will be the same as yesterday and OK.
It is now abundantly clear that the government has missed managed the economy. It has been far too lenient with the rich, far too lax with banks; too insular with “the city” spent too much tax money, not taxed enough and not controlled borrowings.
With the general presumption and expectation fostered by past successive governments, that tax take can be driven lower, there is insufficient scope to continue to afford the spending regime so far undertaken nor is there enough reserve to bale out the markets debt. Government spending plans will be slashed; taxes and international borrowing will have to increase. It will be politically suicidal for the government to increase direct taxation leading up to an election year of 2009; however it has to ‘do something’ and to some extent the stupid idea of raising revenue with the proposed rise of the retrospective VED on top of other fuel and food price increases will not be a smart move.
Although the damage being caused by the “credit crises” is building up to a recession that might slow increase cost down, the pressure on some element of the world economy is for inflation to feed into the consumer markets and drive cost up.
With the ‘cost of living’ increasing the government will wants to control the potential raise in inflation and it is in the process of attempting to drive down people’s expectation in wage demands. This current inflationary pressure has not been caused by wage demands, this has been the usual excuse but by the governments (EU/USA) own inept credit expansion blindness, damaging energy and environmental policies in supporting bio fuel feed stock developments that has consequently diverted normal food crop production to bio fuel; so allowing the market to hype the cost of food and oil. The government has also not focused on the energy utilities to invest in delivery and stock systems allowing them instead to play the market with a JIT attitude to energy demands and not insist on them providing an extended energy buffer. This has resulted in the substantial sudden rise in consumer energy cost which has also not been helped with stealth carbon taxes on these products and the subsequent current jump in fuel cost feeding through all other consumables.
In transport terms, just with fuel cost increasing by 33% this pushes the cost of travelling by car up to the extent that it is having an effect on car use itself but more importantly on the use of disposable income. Consumers are making a deliberate choice forced on them to use the car more economically (which is serendipitous coincidentally what government transport policy is about) but the pain of having to do so is making general product consumerism disappear. At the same time consumers are asking serious question of the government on how and why this sudden reversal of fortune has come about, with this in mind they are in no mood to accept government platitudes on wage restrain or tax demands from whatever source.
As an example of the cost implication for an individual, assume that the average person does just 5000 miles a year with a consumption of 30 mpg to get too work, the cost to a working person is currently about £833. If the average Joe’s wage is £24K, that works out to 3% of their income being utilised. Now take the new VED; a normal family car that is hit with a doubling of car tax from say £210 to £420 equates to another 1% of income or in some case a week’s wage. Throw in increases in gas, electric, food, rates, and any stealth tax, one may be looking at a sudden loss of income that amounts to at least >4%. Is it little wonder that the mass of ordinary working people are going to feel financial pain when the pressure is to make them pay for the mistakes of economy miss management by restricting wage demands below an inflation rate? It may seem just now those that caused the initial problem, having made a financial killing, walk away pain free.
All MP are being paid something more that an average wage and have had access to expenses that more than cushion them from the sudden shock of squeezed financial resources. They may therefore have overlooked that the majority of people on or below an average wage do not have spare resources to absorb that sudden rise in the cost of living. Naturally these low paid people will be expecting and demanding wages to rise to help offset these increased cost, much to the government distaste. The prevailing impression is that MP’s have taken their eyes of the ball; they have allowed themselves to be cocooned in the political financial bolster that they themselves enjoy. They have been absorbed in the Iraq debate, the tenuous ‘war on terror’, the infighting over Blair and Brown, and with political party self interest, have not been astute enough to question the shape or direction of the British economy that relied on consumer borrowings, lack of savings, city and bank exploitation and the wildly divergent incomes between the rich and debatable poor. This disengagement of knowing what is going on with their constituent has been shown up in their lack of scrutiny over the tax relief pension rip off, the 5p pension rise, the 10p tax, carbon tax, carbon credits give away, energy stealth taxes, a useless FSA, the run on Northern Rock (now a public bank), capital market bale outs and the deliberate unaffordable credit expansion all to be topped of with more taxes like the proposed increases in VED.
There can be no doubt that the government is in a no win situation and may press on with revenue raising schemes to hide its past mistakes. It may even consider raising VAT, seeing the existing financial chaos as a good way of justifying the rise but it will cost it. The new aids to help the housing market with the mortgage and stamp duty relief for first time buyers are pointless pitifully schemes. Equally of little use is the call for a wind fall tax on utilities that have made great unearned profits from the higher fuel cost. Far better to give them a choice, as they all operate as effective monopolies they should be controlled more by strategic policy applications which demands that they invest the excessive unearned profits or have it sequestrated. Energy like water is too important to be left entirely in the insatiable hands of private concerns, so greater control is required perhaps limiting their dividend payout and bonuses from profits to the average of the past normal trading two year.
With utilities the excess gained from price fluctuation should be put aside for immediate new energy conservation, storage and new capacity facilities ring fenced and audited for use within a time scale or then face sequestration. It is not in monopolies interest to provide cheaper products or fuel; consider OPEC, they want to maintain a sudden higher golden egg price of $100+ a barrel for oil without killing the goose and have no interest in helping the west avoid a depression. Market forces rules OK, is stupid.
It is unlikely that many Labour MP’s have the ability to now reconnect with their constituents to any useful measure. Nor are they going to be able to hold the cabinet to task or want to be seen to be fracturing the party government leading up to an election year when their own seats will depend on a show of suspicious unity. So the sheep will bleat away to the election abattoir.
Salvation is possible but it will need a committed vision. If they can just pull their noses out of the trough long enough to see and hear what is going on in ordinary areas and come out with radical pressure to shape a proper labour party, not the pale blue new labour that has wasted 10 years of good fortune; there may be a future for them. It is not difficult to pick on the issue that could form the basis of radical new policies, having the vision and drive is the thing.
See The Big Conversation. 11th August.
As banks continue to pull back on credit within the housing market and general credit made tighter, there will be a marked slow down in the economy. This is nothing new, it has been reported else where and is assumed to be a problem that will “work its way through the system” to create a new stabilised economy. This may be true, what is not being said is that this new lower level of economic activity will be excluding considerable more people and impacting the consumer spending that will be available for industrial commercial sectors. Due to the lack of personal liquidity, a reinforcing downward spiral is potentially probable.
The government would want the UK voters to now believe that the current financial difficulties are a world problem, ‘we are all suffering’ from the sudden rise in oil, the credit sub prime collapse, the bank lending restrictions and the increase cost of basic like foods and energy. This argument of special pleading is rubbish, the cost increases are true and it is no comfort for the population to hear that the problem is a world problem, which it is not. Analysis with hind sight will show that for some time the politicians have been asleep on the job, they have not asked question of or taken notice of the muted siren calls of the past two decades that the economics of the “market place” have gone off the rails. There has been a morally criminal disregard of the excesses that have been prevalent in driving the economy into the current situation. A situation that now is to be paid for by the least able i.e. the many on average wages.
The sole responsibility for the current financial problems should be laid squarely onto the heads of the MP’s in government, its sycophantic weak policies for ‘the market’ and banks. Having the taxpayer to pay for the failure of economic prudence that now requires so much state funding to cover the miscreant financial manipulation and deception, and place at risk all of ordinary savers funds as banks reach cash shortfalls, reeks with the stench of systemic corruption.
In time the economy may stabilise but it will be at a much lower level personally for some and the UK economy as a whole and this at a time when the greatest uncontrollable threat has the power to destabilise the whole basis of the UK’s ‘fundamentals’. With the lack of own produced energy, decimated manufacturing and little scope for economic expansion in the UK, it is declining into a second rate country. As in the past it is on the point of being virtual bust, it will get into hock and will again go begging to the IMF! If the MP’s cannot understand the contempt that the public have for them in not representing their constituent, if they cannot feel embarrassed with the gravy train nor stop being acquiescent in injudicious government or too weak to get a grip on good financial controls or new socialist policy direction; then its time for them to all to go.
© Renot 2008
310081436
The credit crunch is having a dramatic effect on the general publics spending pattern upon which the government has relied on so much in order to keep the economy boosted over the past ten years. But with the squeeze now being felt on disposable incomes the spending tap has been turned off and it is having a spectacular effect on the fiscal assumption that the treasury made under the dictatorial control of G Brown and latterly contentiously by A. Darling, who is having to reclaim the “prudence” tag.
It does seem to many people that the government has lost all sense of contact with the populace and has treated them with some fiscal contempt. While there is no doubt that taxes have risen over the past decade to pay for public expenditure, it has been by hidden means like pushing debt into the future via PFI projects, indirect tax such as taxes on insurance, air tickets, increased local authority rates, general duty taxation and not by direct income tax. Yet it has over the past twenty five years at the same time allowed the tax burden to fall more heavily on the poor and become lighter on the rich with city excesses of pay for the ‘captain of industry’ and bonus out stripping general pay rises. It has also propagated the illusion over the past decade that the growth in the economy was sustainable and ingrained in productive activity, unfortunately ignoring the rapid expansion in the use of banks lax loaning largess feeding borrowing and consumer debt. It is this explosion of loans and borrowing to spend that more than anything else has supported the UK boom period, done without the knowledge of where the sustainable asset generation was to come from. Many people being no wiser went for the strategy of living for today and borrowing on tomorrow, which assumed conditions will be the same as yesterday and OK.
It is now abundantly clear that the government has missed managed the economy. It has been far too lenient with the rich, far too lax with banks; too insular with “the city” spent too much tax money, not taxed enough and not controlled borrowings.
With the general presumption and expectation fostered by past successive governments, that tax take can be driven lower, there is insufficient scope to continue to afford the spending regime so far undertaken nor is there enough reserve to bale out the markets debt. Government spending plans will be slashed; taxes and international borrowing will have to increase. It will be politically suicidal for the government to increase direct taxation leading up to an election year of 2009; however it has to ‘do something’ and to some extent the stupid idea of raising revenue with the proposed rise of the retrospective VED on top of other fuel and food price increases will not be a smart move.
Although the damage being caused by the “credit crises” is building up to a recession that might slow increase cost down, the pressure on some element of the world economy is for inflation to feed into the consumer markets and drive cost up.
With the ‘cost of living’ increasing the government will wants to control the potential raise in inflation and it is in the process of attempting to drive down people’s expectation in wage demands. This current inflationary pressure has not been caused by wage demands, this has been the usual excuse but by the governments (EU/USA) own inept credit expansion blindness, damaging energy and environmental policies in supporting bio fuel feed stock developments that has consequently diverted normal food crop production to bio fuel; so allowing the market to hype the cost of food and oil. The government has also not focused on the energy utilities to invest in delivery and stock systems allowing them instead to play the market with a JIT attitude to energy demands and not insist on them providing an extended energy buffer. This has resulted in the substantial sudden rise in consumer energy cost which has also not been helped with stealth carbon taxes on these products and the subsequent current jump in fuel cost feeding through all other consumables.
In transport terms, just with fuel cost increasing by 33% this pushes the cost of travelling by car up to the extent that it is having an effect on car use itself but more importantly on the use of disposable income. Consumers are making a deliberate choice forced on them to use the car more economically (which is serendipitous coincidentally what government transport policy is about) but the pain of having to do so is making general product consumerism disappear. At the same time consumers are asking serious question of the government on how and why this sudden reversal of fortune has come about, with this in mind they are in no mood to accept government platitudes on wage restrain or tax demands from whatever source.
As an example of the cost implication for an individual, assume that the average person does just 5000 miles a year with a consumption of 30 mpg to get too work, the cost to a working person is currently about £833. If the average Joe’s wage is £24K, that works out to 3% of their income being utilised. Now take the new VED; a normal family car that is hit with a doubling of car tax from say £210 to £420 equates to another 1% of income or in some case a week’s wage. Throw in increases in gas, electric, food, rates, and any stealth tax, one may be looking at a sudden loss of income that amounts to at least >4%. Is it little wonder that the mass of ordinary working people are going to feel financial pain when the pressure is to make them pay for the mistakes of economy miss management by restricting wage demands below an inflation rate? It may seem just now those that caused the initial problem, having made a financial killing, walk away pain free.
All MP are being paid something more that an average wage and have had access to expenses that more than cushion them from the sudden shock of squeezed financial resources. They may therefore have overlooked that the majority of people on or below an average wage do not have spare resources to absorb that sudden rise in the cost of living. Naturally these low paid people will be expecting and demanding wages to rise to help offset these increased cost, much to the government distaste. The prevailing impression is that MP’s have taken their eyes of the ball; they have allowed themselves to be cocooned in the political financial bolster that they themselves enjoy. They have been absorbed in the Iraq debate, the tenuous ‘war on terror’, the infighting over Blair and Brown, and with political party self interest, have not been astute enough to question the shape or direction of the British economy that relied on consumer borrowings, lack of savings, city and bank exploitation and the wildly divergent incomes between the rich and debatable poor. This disengagement of knowing what is going on with their constituent has been shown up in their lack of scrutiny over the tax relief pension rip off, the 5p pension rise, the 10p tax, carbon tax, carbon credits give away, energy stealth taxes, a useless FSA, the run on Northern Rock (now a public bank), capital market bale outs and the deliberate unaffordable credit expansion all to be topped of with more taxes like the proposed increases in VED.
There can be no doubt that the government is in a no win situation and may press on with revenue raising schemes to hide its past mistakes. It may even consider raising VAT, seeing the existing financial chaos as a good way of justifying the rise but it will cost it. The new aids to help the housing market with the mortgage and stamp duty relief for first time buyers are pointless pitifully schemes. Equally of little use is the call for a wind fall tax on utilities that have made great unearned profits from the higher fuel cost. Far better to give them a choice, as they all operate as effective monopolies they should be controlled more by strategic policy applications which demands that they invest the excessive unearned profits or have it sequestrated. Energy like water is too important to be left entirely in the insatiable hands of private concerns, so greater control is required perhaps limiting their dividend payout and bonuses from profits to the average of the past normal trading two year.
With utilities the excess gained from price fluctuation should be put aside for immediate new energy conservation, storage and new capacity facilities ring fenced and audited for use within a time scale or then face sequestration. It is not in monopolies interest to provide cheaper products or fuel; consider OPEC, they want to maintain a sudden higher golden egg price of $100+ a barrel for oil without killing the goose and have no interest in helping the west avoid a depression. Market forces rules OK, is stupid.
It is unlikely that many Labour MP’s have the ability to now reconnect with their constituents to any useful measure. Nor are they going to be able to hold the cabinet to task or want to be seen to be fracturing the party government leading up to an election year when their own seats will depend on a show of suspicious unity. So the sheep will bleat away to the election abattoir.
Salvation is possible but it will need a committed vision. If they can just pull their noses out of the trough long enough to see and hear what is going on in ordinary areas and come out with radical pressure to shape a proper labour party, not the pale blue new labour that has wasted 10 years of good fortune; there may be a future for them. It is not difficult to pick on the issue that could form the basis of radical new policies, having the vision and drive is the thing.
See The Big Conversation. 11th August.
As banks continue to pull back on credit within the housing market and general credit made tighter, there will be a marked slow down in the economy. This is nothing new, it has been reported else where and is assumed to be a problem that will “work its way through the system” to create a new stabilised economy. This may be true, what is not being said is that this new lower level of economic activity will be excluding considerable more people and impacting the consumer spending that will be available for industrial commercial sectors. Due to the lack of personal liquidity, a reinforcing downward spiral is potentially probable.
The government would want the UK voters to now believe that the current financial difficulties are a world problem, ‘we are all suffering’ from the sudden rise in oil, the credit sub prime collapse, the bank lending restrictions and the increase cost of basic like foods and energy. This argument of special pleading is rubbish, the cost increases are true and it is no comfort for the population to hear that the problem is a world problem, which it is not. Analysis with hind sight will show that for some time the politicians have been asleep on the job, they have not asked question of or taken notice of the muted siren calls of the past two decades that the economics of the “market place” have gone off the rails. There has been a morally criminal disregard of the excesses that have been prevalent in driving the economy into the current situation. A situation that now is to be paid for by the least able i.e. the many on average wages.
The sole responsibility for the current financial problems should be laid squarely onto the heads of the MP’s in government, its sycophantic weak policies for ‘the market’ and banks. Having the taxpayer to pay for the failure of economic prudence that now requires so much state funding to cover the miscreant financial manipulation and deception, and place at risk all of ordinary savers funds as banks reach cash shortfalls, reeks with the stench of systemic corruption.
In time the economy may stabilise but it will be at a much lower level personally for some and the UK economy as a whole and this at a time when the greatest uncontrollable threat has the power to destabilise the whole basis of the UK’s ‘fundamentals’. With the lack of own produced energy, decimated manufacturing and little scope for economic expansion in the UK, it is declining into a second rate country. As in the past it is on the point of being virtual bust, it will get into hock and will again go begging to the IMF! If the MP’s cannot understand the contempt that the public have for them in not representing their constituent, if they cannot feel embarrassed with the gravy train nor stop being acquiescent in injudicious government or too weak to get a grip on good financial controls or new socialist policy direction; then its time for them to all to go.
© Renot 2008
310081436
posted by Renot at 7:04 am
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