What a cheek! Osborne asks if he didn’t increase VAT, what alternative is there to raising the £13bn for cutting the budget deficit - the usual Tory canard of TINA (there is no alternative). What nonsense – there are plenty of alternatives, all of them preferable to hiking VAT which will hit the poorest hardest and will stifle demand at a critical point in a fragile recovery for business. Here are just a few examples.
The 50% bank payroll tax on discretionary bonuses over £25,000 was introduced for one year only, and raised £3.5bn. It could be continued for the next 5 years at least, and if raised to 75% (which would be extremely popular with the public) would raise over £5bn a year.
According to the Institute of Development Studies at Sussex, a tax on foreign exchange trades (better known as the Tobin ‘Robin Hood’ tax on financial transactions) even at the very low rate of 0.005% would yield £7.7bn a year in Britain alone.
The National Audit Office estimates that £42bn tax due is lost each year, £15bn of it from fraud, evasion or criminal attack. It is a plausible target to expect HMRC to capture at least half of this £15bn a year, especially if the Government were not deliberately cutting the number of tax inspectors from 70,000 now to 56,000 in 4 years’ time when the work of each inspector gains on average £60,000 extra revenue beyond the cost of their salary.
According to the Government itself, abolishing the national insurance upper earnings limit (which would affect only those earning over £750 a week) would raise £11bn a year (Hansard, House of Lords, 12 July 2010, col.107).
In addition, apart from the levy on bonuses, research by the Institute of Public Policy Research found that the banks could afford to pay an extra £20bn, which the public would certainly regard as a fair and proper recompense for the banks’ recklessness and greed, and more than enough to eliminate the need for the VAT rise. Significantly, the banks, Britain’s richest institution, don’t pay VAT – only the rest of the population.