By Alex Ross / @Alex_Ross1983
Remember when the cut in VAT was announced? Remember the furore surrounding it? The sheer anger it generated from newspapers claiming it was a waste of money, too hard to administrate, ineffective and leading us on the road to ruin? Although the criticism was pretty widespread from across the political spectrum, it tended to separate between the left, who criticised it but supported the concept of a fiscal stimulus, and the right, who believed the entire stimulus was a dangerous waste of money.
How bizarre then, that the Telegraph, a paper that viciously opposed the VAT cut, is now running a campaign to delay VAT returning to it’s previous level of 17.5%.
The sad thing is that it doesn’t even hold a logical position on the matter. Providing quotes from people like Sirs Stuart Rose and Philip Green – people who opposed the cut in the first place – claiming it will be an ‘administrative nightmare’ to raise the VAT on 1st January, a bank holiday, at least has a certain amount of sense to it. A campaign to delay its introduction by a month to give businesses time to adjust and make the most of January sales, even if you opposed the cut in the first place, would still have some consistency.
But to also run interviews with people claiming it will ruin the green shoots of recovery flies in the face of everything they’ve been printing since the VAT cut was first announced, namely that reducing VAT will do nothing to aid recovery and instead ruin public finances.
The Telegraph has published countless articles from editorials to commentators, all rubbishing the VAT cut. Now it uses the governments own figures – figures it either ignored or chose not to believe originally – to show how people benefit up to £476 a year from the VAT cut.
Did it really take them a year to realise this? Or did it not fit their previous narrative of opposing the VAT cut, whereas it now fits their new narrative of opposing the cut ending?
Of course a cynic might suggest the real reason for the Telegraph taking the position it has, and one that would have complete consistency, is that they try whenever they can to oppose the Labour government. So when they cut VAT, they oppose it, and when it’s due to rise again, they oppose that too.
It’s funny that for all the public and the media who comment on civil liberties and make glib, tedious references to 1984 and George Orwell, it’s instances like this in the media that remind me more of the ‘doublethink’ in 1984, where the government – at war with Eurasia, suddenly tells people that actually they are at war with Eastasia and have been all along.
Here we have the Telegraph, who for so long criticised the VAT cut, now claiming it has been saving us all money and aiding economic recovery all along.
What this shows us, aside from the general unaccountability of the media in anything like the same way in which the government are held to account, is the danger and in many cases pointlessness of trying to woo the media when it comes to policies.
We can’t be naive and think this is something solely to affect our own government, or that the media don’t have a role to play in highlighting issues to the public and holding the government to account, but I’ve lost count of the number of times the government has been pressured to announce a policy on something – after intense media and public criticism – only for the media narrative to immediately switch and start publishing articles and interviews from the opposing side, which they’d withheld previously as it didn’t fit the narrative.
In this case, the government did the right thing in reducing VAT in the face of opposition, but we can all name incidents where it seems clear the government has acted to quell media ‘outrage’ rather than act in the best interests of the country.
Since the financial and expenses crises, many people have rightly taken the opportunity to rethink how we operate our politics in this country. But for the change to truly happen we need to have a less contrary and more open and honest media. Look, for instance, at the clamour on the right for public spending cuts and for the reigning in of national debt, followed by the instant outrage when David Cameron actually listed some things, such as road tolls, that might help achieve that.
We all need to assess how we approach politics and what we expect of it, otherwise governments of all colours will inevitably pay too much attention to the whims of the media and brief but intense public outrages than to the proper running of government.
Telegraph supporting the VAT cut/opposing it being raised to previous level:
VAT cut saves us money
VAT could confuse small businesses
VAT cut stimulated the economy
Lower rate is keeping people in work
Telegraph opposing the VAT cut:
VAT cut ‘brilliant wheeze’
VAT cutting no ice, ‘just ask retailers’
VAT cut is ‘spitting in the wind’ – Frank Field
VAT cut ‘piffling’
VAT cut ‘nightmare’
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With regards opposition to the VAT cut, it's not about why you'd oppose it (Easton), it's about the Telegraph opposing it and now using figures it ignored earlier to support it.
Yes, they can 'change their mind', but in the mean time the damage has been done against the government, and will a future government want to do a similar thing even if it ultimately works but they get no credit for it due to an ideological hysterical media?
As for me only commenting on the Telegraph, to be honest it didn't even occur to me that they were the expenses paper, frankly it has nothing to do with it. For the record I think the redacted expenses forms the MPs released was ridiculous and I know as many on the left are as disgusted as those on the right. I still find it a tad irritating what the Telegraph calls 'good old fashioned journalism' is essentially paying for someone to leak things, but at the end of the day the MPs brought it 100% on themselves.
The article is more intended to highlight a problem in the wider media through the example given, in this case from the Telegraph. I'm not going to go through every paper looking for similar instances, we all know they do it.
With regards other newspapers, if you want to give me some examples I'll gladly look at it. I'm presuming people are ignoring the final section where I say this is something the media need to address as a whole.
Concerning the VAT cut savings figures, I have to admit I thought it was around half the figure the Telegraph use, around £250 per family. The point isn't about whether or not it's realistic, but about the Telegraph using it without question to support something they've been opposing and ridiculing for months.
I'm not quite sure why someone tries to challenge me to read other papers. As a Labour supporter it's quite obvious I don't make a habit of reading the Telegraph! For the record I read all the papers online if I find something, usually linked to from a blog or PoliticsHome etc.
In 1996 I don't believe it was Labour policy to renationalise the railways. It certainly wasn't in the 1997 manifesto. I believe there were heated debates about it, but they didn't make it proper policy.
It's not about whether or not the Telegraph 'supports' Labour, but whether it is honest with itself. By opposing then supporting the VAT cut, while giving the government no credit, it does a disservice to journalism and political discourse.
As for Alan Giles blushing to make an accusation - don't be so coy, and it would probably be better to blush for being so grossly wrong. If you actually stop and think for a moment, you'd question why any Labour supporter in the country would rush to the defence of Hazel Blears. Believe it or not, it's possible to support a party and disapprove of things they do, and again, the disgust from other party members I've spoken to about the expenses issue equals that of anyone on the right or in the public.
A final word for those still opposing the VAT cut, it's worth looking at the IFS, who say the governments estimates on the positive effects of the VAT cut are actually overly-pessimistic:
http://www.ifs.org.uk/publications/4418
Remember that next time you quote the IFS as gospel if it says something against the government...
Computer system have to be amended, catalogues updated and business don't make any extra money UNLESS consumers buy more of the product.
Surely that was the point of the Telegraph position and most other peoples. They haven't changed their mind, they didn't want VAT changed.
As for consumers saving £476 - absolute rubbish!! You'd have to spend around £20k a year on Vat'd goods to save it and how many average people earn that?
If we are talking inane, surely your article is that?
The time taken up with staff and managers to implement any change in the VAT rate outweighs any benefit of a VAT cut to the general population. The losses incurred through bringing in accounts staff for overtime to switch everything round, IT staff to make sure the computers are doing what they should and that is before you venture towards the web.
Websites have to be altered to account for the VAT reduction and although this may seem like a very simple operation if your shopping carts are standard, but if they are customised in anyway, the change can be a complete nightmare and involve the recoding of entire sections of code. It could be argued that the code should have accounted for these changes when it was developed, but it is easy to overlook even the most simple problems when coding a large ecommerce system. The priority is to ensure that the transaction side runs smoothly, and the VAT rate isn't a priority to some businesses when they venture onto the web.
Catalogues is a biggy though, imagine if you have a thousand products all individually priced and they have the amount excluding and including VAT. There is a large mail order business to business company that would have had to alter all their catalogues, and considering I haven't had an updated catalogue since the VAT cut points to the fact that it was rather more difficult than just changing a number on a computer.
Whether the VAT cut has been a success or not, it doesn't change the fact that it was a monumentily stupid thing to do. Far better to alter something that didn't batter businesses in a downturn but then Alistair Darling isn't a business man so why would he take that into consideration? Neither is Gordon Brown, so it isn't surprising that he didn't realise either. Maybe if they'd had Alan Sugar onboard at the time he could have advised them, but I doubt his strengths lie in the accounts side of a business either.
The Telegraph is a commercial enterprise and they are in the business of 'creating' news, so why the big surprise that they change their views more often than the majority of us change our socks? They are entitled to do so because they are the media, they need to sell as many newspapers as possible to make a profit and if that means conflicting stories, they will do that. They are not required to be socially responsible, well, not in the respect of a VAT cut story anyway, so again, why the surprise.
What would be a surprise is if you opened page 3 of a red top and found them discussing the VAT cut. That would disappoint a number of readers I suspect.
If the VAT cut is a success, then by definition it's not a stupid thing to do is it?
If changing the VAT code is so difficult why not just not pass on the cut, save the money and help keep the business afloat? If the amount is so minuscule as to not affect people's spending then similarly you could get away with not passing it on.
Finally, half the point about the Telegraph, as I stated, wasn't just that they opposed the return to 17.5% on the grounds of the time/cost in doing so - which I said would have a logical consistency - but the fact that they suddenly start quoting figures supporting the premise of the cut in saving people money, when before they'd either ignored them or rubbished them.
I've already said I thought the £450+ figure was too high, but then I didn't quote it, the Telegraph did.
Unless I'm missing something, businesses are legally obliged to charge VAT at the rate set, otherwise we'd have some businesses charging 20% and others on 15%. You don't just choose your own VAT level.
Describe to me how the VAT cut has been a success? Within my own household for instance. I haven't bought any new electrical goods in the past 12 months, no furniture other than a cot for the baby and a changing station. And the chances of me buying another vehicle or a new vehicle are slim to none. So how much have I saved precisely? I know it'll be a long way from the figure the Telegraph mentions.
Its all very well to sit here on a political website and announce the VAT cut has been a success in your view, but that is so far from reality in the business world that I have experience of. Any idea how much VAT has not been paid to Customs due to businesses being wound up? Ironically by Customs, but anyway, its not a small amount of money. Which brings up the number of businesses closing every other day, creating unemployment and debt mountains, so how did the VAT cut help that?
It was a really daft idea, tinkering with something that has cost businesses thousands and thousands to implement and will cost them again in a few months if it switches back again, and for what? A couple of quid saving for the average family? The same could have been achieved by freezing council tax for 12 months or knocking some money off fuel duty, then all businesses and individuals would have benefited. At least with those ideas it wouldn't have cost a fortune for business to implement, it wouldn't have wasted hours of the small business persons time that they can't get paid for or get a member of staff to do. But then according to you it's a big success, so why worry about the knock on effects for a tiny gain? What does it matter if we put more stress on businesses in a recession? While they are struggling to keep the business going, what better than a few late nights fiddling with figures?
And again, whether the Telegraph think its a bad idea on Monday and a good idea on Friday is irrelevant, its an opinion. It may be a commercially motivated opinion, but thats all it is and can be ignored if people stop believing everything they read in the newspapers.
I'm not brilliant at the math, but my calculation would be:
Tiny financial gain to the average person + major headache and cost to businesses + ignoring much simpler solutions = epic fail.
The customer pays the same price and the company gets the saving.
Knock a penny or two off fuel duty and everything becomes cheaper theoretically.
Another failed article on labourlist. The reason for being against VAT changes is partly because businesses have to update their prices, which is a well recognised hassle for businesses to do.
How is that worked out? I reckon its saved me a tenner. Have I got this right? Your figures suggest that the average person spends almost 32K on VATable goods na year. Even your average trougher would find that difficult.
It appears to me that HM Treasury adopted an 'aggregate' approach, viz :
Total VAT collected (fiscal 2007/08) : £90 billion
That's at 17.5 per cent. A reduction to 15 per cent means 1/7 of this will stay in people's pockets, bank accounts etc : say, £13 billion.
There are 26.5 million 'dwellings' in the country and £13 billion divided by 26.5 million dwellings = £490 per dwelling.
Now, that's an 'average' and doesn't mean that every dwelling will pay £490 less VAT, given the distribution of income in this country. Some will be a lot better off, some only marginally so.
However, in the aggregate, nearly £13 billion will stay in people's pockets/bank accounts and although the cut itself may not induce an immediate increase in consumption, in the aggregate it will be beneficial (i) reduced inflation and (ii) more money in people's pockets.
The wonders of 'big numbers' .....
I was only trying to bl**dy help. You said, ".... to show how people benefit up to £476 a year from the VAT cut. How is that worked out?" and I worked it out for you, as I saw it.
If the best you can do is to come back with a smart-ass comment, I won't bother in future. I didn't decide on the VAT reduction - it was Alastair Darling's decision and responsibility and I suggest that you let him know about your feelings.
Thank you for your comment and my apology for not getting back earlier.
I'm ok, I think, on Shakespeare - I have the Oxford Dictionary of Quotations in the bookshelf next to my PC. I nearly caused a riot when we were having a couple of drinks after a Voter ID last year when, with two retired English teachers present, I happened to remark that I thought engineers were more relevant than Shakespeare in 2008.
As far as lyrics are concerned : I'm a rock'n'roll enthusiast from the very beginning and I can still recall hearing Elvis belting out "You ain't nuthin' but a Hound Dog" the first time of hearing on Radio Luxembourg in 1956. It was a life-changing moment for me - and millions of others.
Best wishes,
PB
Thing is, when you take out non-vatable spending like food and mortgages it's pretty clear the average person isn't saving £476.
I make it between £100-£150, not to be sniffed at certainly but any goodwill Labour might get from the cut will probably be lost in a row about dodgy figures.
A reduction in VAT from 17.5% to 15%.
£476 saving.
So £476/2.5% = £19040.
So you would have to spent £19040 on goods and services that attracted 17.5% previously.
X spends £22,400 when VAT is at 17.5%.
If VAT is reduced to 15%, X spends £21,923 on the same goods.
(22,400 / 117.5) * 115
So to save £477 you would need to have planned to spend £22,400 not £19,040.
Can the sage that is Peter Barnard suggest who's right?
Try this approach with 'easy numbers' :
You have to separate pre-VAT from the VAT, so that if I buy something that has a price of £20,000 before the application of VAT, I'll pay £3,500 VAT (pre-reduction) and a total of £23,500.
Now, with the reduction to 15 per cent, I'll still pay the £20,000 before the application of VAT, but only £23,000 in total, thus saving £500.
Now, in order to arrive at a saving of £476, I have to factor everything by 476 divided by 500 = x 0.952, so that the £20,000 becomes £19,040, 15 per cent VAT becomes £2,856, for a total spend of £21,896.
You can arrive at the £19,040 simply by dividing £476 by 0.025, as Mike Thomas did. However, it appears that he forgot to add back the 15 per cent VAT to arrive at 'total spend.'
Not a sage, really - GCE maths (1959 vintage) is sufficient. I can't speak for the current level of GCSE maths, although I did some GCSE invigilating this year and, from an admittedly rusty memory, the maths seemed a hell of a lot easier than 50 years ago ....
p.s. I am mad.
Apologies if I'm flogging a dead horse but if someone was going to save £476 out of this cut then wouldn't the figures be as follows.
(£22,400 / 117.5) * 100 = £19,064 (rounded up to the nearest £1)
£19,064 + 15% = £21,924.
Difference between £22,400 and £21,924 = £476.
I see where the confusion is now but I'd maintain I'm right that people don't consider the price before VAT and so to save £476, consumers would be spending £21,924.
Correct - consumers only see the VAT inclusive price, which is why VAT is the biggest 'stealth tax' around at £90 billion a year. I was, I hope, careful to state 'total spend.'
You only notice VAT when you receive an invoice from a lawyer or bean-counter, or similar, and it kind of makes you cough a bit.
Going back to the substance of the matter it doesn't seem like the best way to spend £13 billion when it saves Roman Abramovich £7000 on a new Rolls Royce and the average family only a few hundred quid if that.
You could well be correct wuth your second sentence ....
Regards,
PB
You purchase goods only once; at 15%. Anything you paid VAT on at 17.5% you cannot retrospectively apply 15% which is what you are trying to do.
If I buy a car today for £21,923 with VAT at 15%, that same car would cost £22,400 if VAT went back to 17.5%.
Your "the governments own figures"... "show how people benefit up to £476 a year from the VAT cut" = one of the most double speak, shifty use of figures I've seen for a while.
* The Guardian
* The Daily Mail
* The Daily Express
* the Morning Star
* The Daily Mirror
* The Sun is not a newspaper
I read the online editions of the broadsheets. The Guardian is just as bad as the Telegraph. Most of the stuff is biased. The more you read the better your insight.
Certainly better than the pitiful innuendo and smear-laden attempt by the Guardian on Coulson.
If you want impartiality - stay away from newspapers; that or read one from the right, one from the left and make your own mind up.
Fair cop on the expenses scandal and Guardian's attempt to get Coulson though. But I do think that the quality of the journalism on the Telegraph's news reporting is much worse than all the other papers I've mentioned above.
I seem to remember in 1996 Auntie T was going to renationalise the railways.
In March 2007 Uncle Gordon dismissed the Tory David Freud "welfare reform" report. Eleven months later he allowed shiny-boy Pur-nell to implement it in full.
If the Telegraph or any other newspaper - even the Chipping Sodbury Advertiser - takes a look at the economy and thinks that it might be a good idea to keep VAT reduced - then surely this is no bigger sin than Blair/Brown changing their minds about really serious policies.
The Torygraph, Dumbed-down Express and the Daily Wail are never going to support Labour or give a balanced viewpoint.
For the large part of the past 15 years the Times, FT, Grauniad & Indie have been falling over themselves to support phoney Tony and his New Labour (Tories in disguise) party. Rather less so now, and quite rightly in my view, since we have the incompetent Broon in charge.
The media are not obliged to be accountable when it comes to politics. Politicians ARE. I remember MP's blubbing about the expenses in the Media industry after they got caught out by the Telegraph. Mp's are simply not living on planet earth. They are NOT Civil Servants progessing through an eternal career, they are publically electable and therefore accountable individuals. The Telegraph are not, but pander to those who buy thier Newpaper because they are private company and can do this.
As for criticising the paper that revealed the Expenses Saga, I think you are just opening an old wound which will only hurt MP's further.
The Telegraph have always been anti-Labour and to expect anything less from them is a nonesense, I wonder on how many occasions over the last ten years various tabloids and drab rags have carried out a U-turn on stories.
We do not have to justify our policies as a result of a Newspaper article unless we are weak and have no idea what is in the public interest. When you are relying on the media for policy you are in bad straights.
I suggest you forget the Telegraph and find out what people think about Government policy, if you can convince any Ministers to do so of course, methinks they may be a bit hesitant.
Could it be, (I blush to make the accusation) that the reason NuLabour ToryLites single out the Telegraph is that without them we wouldn't have known about the antics of (to name but a few) Eliott Morley, david Chaytor, Tony mcNulty, Hazel Blears, Geoffrey Hoon, Alistair Darling and the ghastly Pur-nell?
* The Times is read by the people who run the country
* The Fanancial Times is read by the people who own the country
* The Guardian is read by the people who think they ought to run the country
* The Independent is read by people who don't know who runs the country but are sure they're doing it wrong
* The Daily Mail is read by the wives of the people who run the country
* The Daily Express is read by the people who think the country ought to be run as it used to be run
* The Daily Telegraph is read by the people who think it still is run as it used to be run
* the Morning Star is read by people who think this country ought to be run by another country
* The Daily Mirror is read by the people who think they run the country
* And the Sun's readers don't care who runs the country provided she has big tits.
A bit out of date now maybe, but variations of it have been around for years. I first heard it in a Politics Lecture at University in the early 70s. It was also used in Yes Minister.
It would be good if someone who had the time, came up with a more up to date list. But the Sun entry could stay the same :-)
We should try updating the list. The most glaring anachronism is the Daily Express. I don't read it - though I loved following Desmond's libel trial.
Who can forget these memorable greatest hits:
"I take full responsibility for what happened. That's why the person who was responsible went immediately"
"We are ready to make the decisions for people and to work with other people to make this country the great country it is at all times."
"We are not legislating now on the basis that we are bringing it in now for something that might happen in the future; we are bringing it in now for something that might happen in the future; we are bringing in a position for if it becomes unhypothetical. If, unfortunately I and many other experts are right and we do need it in the future it is in place"
Exactly the same is true, of course, in reversing the decision. But our "listening and caring" government will ignore all of this.
If you are going to tinker with taxes, VAT is the worst one to tinker with. When firms are heavily discounting; what is the point of small cut like this? Considering the cost of the VAT cut could have paid for the 10p tax rate for a couple of years; it was a stupid move.
To benefit to the tune of £476 a year you have to consume £19,000 a year of VAT payable products; which I think is a highly dubious figure. Remember this excludes mortgage payments/rent, insurances, food, fuel (domestic and transport), alcohol & cigarettes. So pretty much most autonomous expenditure; whereas keeping the 10p tax rate would help to pay for that expenditure and more.
The nature of this cut benefited the rich more than anyone else, as stimulus goes; it will go down in history as the most ineffectual and pointless ever conceived.