Redistributionist budget? Yeah right.

Redistributionist budget? Yeah right.

The angle of the mainstream media on the Budget is 'big borrowing, big risk, the death of low taxes for the rich'. Only the first two are true.

I'm not going to comment on the borrowing aspect of all this, because it's fairly obvious that yes, it's alot, and yes, it's a big risk (though not so much as the press is going on about, it's basically the same as France works with).

But I have found the talk of 'redistributionist taxation' somewhat confusing as a conclusion from the following figures:

£5 billion to come from cuts to state services
£5bn to come from National Insurance rise of 0.5%
£2.8bn from a higher tax bracket.

It's the last of these which has prompted much whining by the media about how Thatcher's pro-rich taxes are buried for good. As Dave Osler points out in his blog, this view is rubbish:

Dave O wrote:
Let’s get some sense of perspective. Even a few years back, the Lib Dems were sufficiently bold to call for a 50p in the pound take on the rather lower threshold of £100,000 a year. How quickly the political right forgets that even during the hey-day of High Thatcherism, the top rate of income tax during the period was 63%; Even given that he is a former Trot, Alistair Darling is but a hopeless wuss by comparison to 'Red Geoff' Howe.

But beyond that, look at the other two figures. National Insurance is what's known as a regressive tax, it primarily hurts the working class as there's more of them and it's a higher proportion of their (working) income being taken away. It barely touches the rich. Most of that £5bn comes from the combined capital of the workers. The other £5bn, per year, is specifically about squeezing public sector workers - expecting more work for less pay from millions of working people across the country. What we are in fact saying here is that the rich are being asked to pay less than a quarter of the cost of Labour's big spending plans, with rest of it coming from the proles.

How is this 'redistributionist', precisely?

Libcom forum link

Posted By

Rob Ray
Nov 24 2008 19:04



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Nov 25 2008 17:09

Plus another increase in indirect tax through alcohol and cigarette duty (again hitting working class people disproportionately) which will net the government another £1.6 billion a year.

Rob Ray
Nov 26 2008 16:39

Adding another bit to this about the VAT cut, a very concise explanation from oisleep over on meanwhileatthebar:

they say the cost of the VAT cut is going to be about 15bn, so if you look at who will benefit the most compared to other ways of distributing that money i think it is very regressive.

Say if it was just handing out in cash, amongst the roughly 40 million odd adults in the UK, that would mean everybody getting a benefit of £375

Instead if someone is to get £375 of benefit from VAT cuts they would need to spend £15,000 a year on VAT stuff (375 divided by 2.5%). On top of this expenditure say on average rent/mortgage/food/other non-vat expenses are say roughly £1,000 a month, that means their annual outlays are £27,000 a year, this equates to a pre tax salary of about £38,000 - so roughly speaking if you earn less than £38k your worse off this way than just a straight handout, but if you earn more (and spend it) you're better off