Tax – what is it for and what does it do? [VIDEO]
Tax. What IS it for and what DOES it do?
A lot of people get this wrong – including, it seems, Money Saving Expert Martin Lewis.
So here’s a quick overview of what it is really about and why some people in the media (and I’m not blaming Mr Lewis for this) get it wrong.
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A short video giving a simplified explanation. But it may be better to think of it like a mortgage. Your ‘Loan to Value’ gets you a better rate and the same applies with bonds and foreign borrowing. I agree, the amount of debt carried by any country is unimportant (within limits) until it affects how much it costs to service that debt.
But it is entirely ideological to cut spending to lower inflation. Only when you can affect the levers of inflation can you affect it. Recently we saw a MASSIVE hike in food and fuel prices due to the war in Ukraine and the sanctions on Russian fuel and oil. There is nothing that can be done about those prices by raising interest rates. Instead this means that on top of those increases affecting every purchase a household makes (with knock on effect) we now increase mortgages and therefore rent too. This then pushes inflation yet further with increases in wage demands and lowers demand for goods causing unemployment and widespread business failure.
Only if you consider mass unemployment your goal – as it leads to low wages for those who can actually get a job, could it be considered successful.
For those on the right in particular (including, it seems, the Labour Party) this is the ideological goal. Push income down (in real terms), cause unemployment, lead to low wages and poor conditions. Meanwhile cutting benefits to the bone. NB benefits cuts are usually VERY stealthy. They’ll give an over inflation raise, it seems, while in reality it will be a 25% cut. eg Universal Credit goes UP but those on the additional disability payment from ESA will see this disappear as they move to UC. A cut of, I believe, £300 pcm. Of course they will say that they will ‘preserve the rate’ for those ‘no longer entitled’ which is the same as a year to year cut but the FULL cut comes into play immediately there is a ‘change of circumstances’ Even a change of address counts and even if your health WORSENS it counts.
I spent years working for the Civil Service in taxation and also some benefits. There are never any mistakes, the government of the day is always well informed of the consequences of their actions and it is therefore deliberate. This is why the UN has accused the UK of causing deaths in how they treat the disabled via the benefits system..