Robin Hood, Or What Is “Fair”?

So we had a new Budget with the Chancellor, Gideon, heralding things that won’t happen for another year in the hope that we will assume he means April 2012 when he refers to “next April” when in fact it’s April 2013.

But apart from that, the Government continue to bang on about everyone paying their fair share in taxes, unless you’re Simon Hughes MP, in which case it’s a “fare share“…

This latest statement by Simon Hughes MP is headlined “Budget makes sure the richest pay their fare share – Simon Hughes MP” but then goes on to fanfare that:

“…hundreds of thousands of South Londoners on low and middle incomes given a tax cut, paid for by raising the burden of tax on the wealthy.”

“Liberal Democrats have made sure that this government has done what Labour never did – make sure the richest pay their fair share … despite a cut in the top income tax rate to 45p next year the richest will pay five times the amount in taxes they do today.”

Oh I see! So that’s fair is it?

And where does this magical “five times the amount” come from? I haven’t seen that calculation shown anywhere, or is it just another case of “lies, damned lies and statistics”?

What’s wrong with a proportional tax system whereby everyone pays the same tax in percentage terms? Does a “rich” person use more of what the Government provides from taxes by way of health and welfare than a lower paid person? I’d wager not; probably the opposite with private healthcare being a likely perk. Education? Surely the “rich” are more likely to pay for Quentin and Letitia to go be educated privately too. Local services are paid through Council Tax which increases with property size so the better off are already paying more for local services that way.

If you are going to look at taxation based upon affordability, why not own up and call it that?

For the record, I’m not rich by any means and by a quirk of the tax system which appears bewilderingly complex and confusing, HMRC has already decided that I somehow paid less tax through PAYE then I should have last year – HMRC helpfully provided my tax code which calculated the “incorrect” deductions – and taking that and the tax rules into account, for 2012/2013 I will have a negative code, i.e. I will pay tax on more than I actually earn.

Which is “fair”, if you happen to be a Liberal Democrat politician, obviously. Or a Conservative. Tricky to tell them apart…

Budget Car Scrapping Scheme Rip-Off

So Alastair Darling has announced a new plan to offer a £2,000 discount if you trade in a ten year old car and buy a new one. Woohoo!

Now then, let’s have a little think about this. I drive a 1999 Ford Mondeo ST200 which would qualify in a few months’ time. I bought this second-hand at less than a year old and got a whopping discount off the new price. So woohoo! Let’s go and buy the new equivalent Mondeo.

Except there’s not really an equivalent, but there is a 2.5L 220PS version though not as nice looking.

In 2010, I will pay £205 to tax the ST200. On the basis of the Ford’s emissions figures, I would pay £245 a year on the new one but in the first year, I’d pay £550!

So let’s do the sums: the Government discount of £2,000 is probably £1,000 more than mine’s worth. So I’m up £1,000. Then I would pay £350 more for tax in the first year, so I’m only up £650 now. And that’s around a 2.3% discount in real terms. No doubt the dealers won’t want to add their own discounts on top of this if they can help it and of course buying new and turning the wheels would lead to a huge reduction in value that would dwarf that discount.

And of course every year I’d be worse off because the VED is higher on the new one than the old one.

If I go for more of a performance car then the numbers simply don’t stack up especially as the first year’s VED would go as high as £950!

No doubt the banks wouldn’t want to lend me the money anyway…