Here comes the tax...

It is no surprise that there has to be a reckoning for the vast amount of money spent during the recent financial crisis, and the Government's Pre-Budget Report indicates that this time has just arrived.
VAT is already set to rise again in January, and we are still wondering what effect this was ever supposed to have on the economy... After all, the really essential items such as food and children's clothing are not taxed anyway. The costly step of temporarily lowering VAT appears not only to have been an encouragement to buy luxuries in the depths of a recession, but a slap in the face to those who have struggled to buy essentials for whom the tax drop has had no benefit whatsoever.
National Insurance is also set to rise by 0.5%, and the temporary stamp duty 'holiday' is to cease, and bizarrely, duty on bingo is to be reduced - Great that the government is giving a little tax relief to those who spend their money on frivolous gaming...
This Government is not adverse to making sweeping popularist gestures and maybe they believe there is a bed-rock of labour support in the Castle Bingo houses or the growing online bingo sites such as Wink Bingo? Either that or they think more people should actually be encouraged to play Bingo. Is this a well-considered, well-thought-out policy thrashed out in Whitehall offices or simply a random policy picked out of a tombola - with Camelot looking on just to ensure that the taxes changes are in fact entirely random and not part of any kind of intelligent thought patterns?
Of course, the most popularist tax that this Government are using to effectively cover up the more subtle taxes, is the tax on banking bonuses. The Government propose to tax bank bonuses that exceed £25,000 by 50% - there will be very few people who will be taking issue with this measure, however I can't help but believe that these frankly less-than-straight individuals will find a sleight of hand way around the proposed tax.
There are two measures which indicate the Governments thinking when it comes to paying for it's support of the banking sector during the crisis:

1. The plan to restrict public sector wages and pensions
2. 'Middle-earners' to pay more tax

The combination of these two policies guarantee that the public sector will bear the burden of raising revenue for the Government - they are going to take money from their own employees pockets... The 1% pay cap imposed on the public sector for the next two years is certain to keep wages rises below inflation, therefore effectively lowering income considerably across the board especially when combined with the planned VAT increase.
This sounds like the perfect recipe for a year of industrial action if ever there was one - try explaining to these workers that we are actually emerging from a recession as they count their pennies for the next two years. I happily admit that they are maybe fortunate to have reasonably secure jobs, but when the chips are down and the trade unions start to move, and a general election is looming... I think Gordon may well end up scrambling for that tax tombola again...

RBS makes bad move on bonuses

As if we hadn't had already had a gut-full of what happens when the banking sector is so blinkered to the 'real' world, claims are being talked down that RBS directors are threatening to resign if they cannot pay huge bonuses to their merchant bankers.

Hmmm let's think about that for a while shall we? - these are the people who presided over a catastrophic failure of their own bank, to the extent that 70% of it is now owned by the British taxpayer.... Their failure is largely due to the mis-reading of the markets and actions of those very leaches who demand fat bonuses otherwise they are apparently going to go to other financial houses...
These directors are bawling that if they cannot pay their pariahs, they will have to step down...
OK, still thinking here... trying hard to think of a down-side to allowing the directors AND the merchant bankers to ply their slimy trade elsewhere.... trying hard to work out whether the bank will be better of or worse off without those that took the bank over the brink of collapse.... nope, can't do it - let 'em go!

It may be simplistic to say that we can completely do without an important sector of a major bank, but if they are going to try and blackmail the government and the British public, I think they will have to re-think their strategy. In essence they have to accept that along with the fact that they are still employed, comes a pay-off that means in order to remain employed, they must not be allowed to take the bank to the brink again at least until they have paid every penny back and are willing to stand or fall by their decisions like every other business that they took to the wall with them over the last eighteen months.

The UK public are not impressed by the threat of loss of so called 'talent' through lack of bonuses, not only that, but this is a Government that is willing to be punitive where it believes that public opinion is with them. Don't forget the threat of legislation to prise Sir Fred's sticky hands away from his pension... Seemingly an extremely rash threat, firmly made nonetheless.

Spin is on it's way to try and dampen the storm, it will no doubt be able to show that no such threat was forthcoming from the RBS directors - but just in case they don't get the message... really... don't try it! Do not try the patience of the British taxpayer any more, do not test the resolve of Gordon Brown. He may not be able to solve the crisis but he CAN stop the bonuses and cannot politically afford to back down on this one.