How will the VAT cut be funded?

When the cut in VAT on fuel is applied everyone's electricity bills will go down. Possibly this means that the newly set cap will cost less?

MaizieD has explained this many times. The government can create whatever money it wants to.

Watch Richard Murphy explain:

www.taxresearch.org.uk/Blog/2024/04/29/tax-does-not-pay-for-government-spending/#gsc.tab=0

Spending always comes before taxation.

If people have more money in their pockets by saving on their energy bill or bus fares they are likely to go and spend that extra money on another things, to engage in activities that stimulate the economy and increase tax yield.

Cheaper bus fares is a good example. What will your daughter spend that £28 on? It’s money she must already have as she has been paying these fares so now she will have it to spend on something else.

Cheaper fares will encourage more people to use the buses … to go to work, to go out to be entertained and so on. It’s why the older person's bus pass is such a good idea. Instead of staying home, it gets older people out and about where they spend money.

Darren Jones had already explained last year that the money for the ID scheme would come from existing budgets. He said the OBR were wrong to say the scheme was unfunded. I like DJ but he’s just miffed that he’s lost his job.

AB has only been in the job for a couple of days! His new to post cabinet minsters just coming to terms with their briefs. I sense huge impatience in the air- but I guess that was always going to be the case.

I wouldn't expect all funding streams to be spelt out in fine detail at this stage. Some posters are happy not knowing where funding is coming from, some happy to wait for a more detailed budget statement and some that are going to be impatient with the new LP leader and announcements anyway.

AB is seasoned and experienced and will no doubt steer his course and his cabinet's course, in a planned way and in a realistic, step by step timescale.

25Avalon

The current bus fare cap is £3 so savings are £1 for each journey.

Exactly. So for the two jobs DD works, that means she will save £18, plus bus fare for DGD. You can imagine, if she needs to do two jobs, neither of them are well paid, so it’s a big saving.

OMG am I not allowed a choice of what I care about, just because I’d like to know where some funding is coming from?

My query was about the source of the money from the scrapping of the already scrapped (in January) ID scheme which was unfunded.

e.g. I haven’t got the money to buy a new car, so I’ll scrap the idea of the new car that I don’t have money for and use the money that I didn’t have for the car to buy something else.

I can’t recall which poster said that the government can simply produce more money it needs because it’s not a household budget.

The current bus fare cap is £3 so savings are £1 for each journey.

Can I ask where the boundary is drawn between the things you care about knowing where the funding is coming from and those you don't? As the thread starter who was keen to know how the VAT cut will be funded it seems odd that you don't care about the bus fare cuts.

I speak as someone in support of both, incidentally.

Reduction of bus fares cap back to £2 is a great idea and I don’t care how it’s funded.
It means DD will save around £18. Plus £10pw for 1 DGD.

Tuliptree

I think it was the use of the word experts. What there are here are some well- informed posters, I doubt any of them would describe themselves as experts.. I’m not sure the SO was needed either. What was wrong with saying ‘I don’t understand how the VAT cut is being funded. Can anyone explain please?’ That has a very different tone,

The capitalisation of SO and the framing of what follows is what pushes it toward sarcasm. Add that to the facts that, although some people on GN are knowledgeable in specific areas and some research areas of interest, I have never seen anyone present themselves as an expert, and you have the reasoning behind my comment.

I love the thought of a small elephant in the room .

I share your view, Tuliptree. I would have much preferred it if there hadn't been the constant sniping at Starmer and he had been given a chance to see things through, but he wasn't, and if we are to have a chance at undoing some of the damage wrought over the 14 years of Tory rule there had to be a change, and IMO Burnham is a good choice.

Tearing him down before he's had a chance to do anything isn't going to help. At best it's petty, and at worst it will do the same to him as was done to Starmer, and the likes of Putin will be laughing at the way the UK is destroying itself.

Casdon

Despite all the rhetoric, migration is a much smaller elephant in the room than it was. It is all going in the right direction quite rapidly. Here’s the latest migration tracker.

www.bbc.co.uk/news/articles/c70989jrdweo

Thanks for the link - the problem these days is that some people simply don’t want to believe the truth because it doesn’t fit with what they want to be true.

Despite all the rhetoric, migration is a much smaller elephant in the room than it was. It is all going in the right direction quite rapidly. Here’s the latest migration tracker.

www.bbc.co.uk/news/articles/c70989jrdweo

No mention of the elephant in the room, immigration, so far.
I read mentioned of rises in fuel tax in the Autumn so that would raise some funds. I think the first budget after the summer recess rather than second guessing should set it all out in detail.

Lizzie - I do honestly appreciate your position . I don’t think I’m alone in being positive about AB because that’s where we are whilst lamenting the loss of KS and the appalling way he ( and others) were treated by the media. Of course inflation being down ( and the unemployment figures stable earlier this week) are due to KS and RR . We see the pattern being repeated already with AB. The sneering by those with enough resources at £45 off electric bills, the sneering at £2 bus fares as small beer. The deliberate misrepresentation of the rough sleepers figures in Manchester. It’s all so achingly familiar all over again and it’s only day 3. Yes I know he chose it but he’s what we’ve got now. I listened to Mel Stride on Today this morning - that’s part of the alternative. And that’s also why I thought Darren Jones behaved badly

Wyllow3

Just wanted to say how much I liked these words,

"I've never felt that perfect should be the enemy of good."

ie, people grumble because say all targets aren't met, but a lot has been done. "Good enough" is a better marker of progress.

I agree.

If only people had been ‘generous hearted’ and patient enough to apply that adage to KS’s premiership.

I realise my view will be very unpopular on GN at the moment … but it is still my view.

I notice this morning that inflation is down more than expected - thanks to AB after two days (?) or KS after two years (?). Mm, which could it be I wonder🤔

I think it was the use of the word experts. What there are here are some well- informed posters, I doubt any of them would describe themselves as experts.. I’m not sure the SO was needed either. What was wrong with saying ‘I don’t understand how the VAT cut is being funded. Can anyone explain please?’ That has a very different tone,

DaisyAnneReturns

Thank you everyone for so many well informed answers. I'm not sure you need the OPs sneered at "experts" when we have this quality of research!

Aspirations are often quoted by politicians - even those the OP might support. I would hate to find we had a party in power which didn't have any aspirations for those worst off in society.

Interesting that you see it as a sneer DAR.
I simply meant that there are SO many experts on Gransnet and I was asking for their input on the questions I asked.
If you read the responses, you’d see I was right, so no real need for your snide remark, but I guess you enjoyed it. 😄

Can rumours ‘U-turn’? Are they not just ‘wrong’?

I would like to see the threshold increased, but as long as people keep asking how Larry the cat’s food has been costed, I guess it might not happen.

That’s the problem with rumours though - they aren’t the same as actions.

It seems likely that keeping the Income Tax Threshold cemented at £12,570 until 2031 - as dictated by Ms Reeves - will go a long way to pay for it.

Looks like dependency on foodbanks is here to stay then.

It didn't take long for that particular rumour to U-turn.

"The government is not like a household, it can create its own money, it can pay for anything it wants to."

Here we go again, NO thats Neoliberal thinking it has been proven to fail over 50 yrs.
Thankfully Burnham accepts that and has ruled out increasing borrowing as did Starmer

Doodledog, that is a great phrase, about perfect being the enemy of good.

Investors have been reassured by Burnham policies so far and sterling has retained its value, he is well aware that any large spending plans have got to be announced with the funding plan attached to it.
VAT concession is small and can easily be afforded, other changes announced are going to need serious funding there are plenty of ways to do that, taxes will rise, economies in some areas and borrowing are all available.
Let's make no mistake if you are above average income/wealth including pensioners it is going to be painful, lower down there will also be winners and losers.

Most bus fares to be capped at £2.

Still going in the right direction of travel😊

It sounds as if the bond market has been cautious but definitely not panicked by the announcements.

Many governments, including the US, UK, France, and Japan. are running sizeable fiscal deficits. With more bonds being issued worldwide, investors have plenty of choice and generally require higher yields to absorb the increased supply.

The appointment of John Healey as finance minister (rather than a more left-leaning alternative that some investors had feared) was generally viewed as reassuring. Healey is seen as relatively pragmatic and likely to maintain the existing fiscal framework, even if spending priorities shift. That helped reverse some of the initial weakness in sterling and prevented a larger sell-off in gilts.

Thank you everyone for so many well informed answers. I'm not sure you need the OPs sneered at "experts" when we have this quality of research!

Aspirations are often quoted by politicians - even those the OP might support. I would hate to find we had a party in power which didn't have any aspirations for those worst off in society.

Graphite

I have already posted elsewhere that Darren Jones had already said that the cost of the ID scheme was going to come from existing budgets. See point 18 here:

committees.parliament.uk/publications/53099/documents/297132/default/

I don’t know where that was going to be but, for example, £2.5 billion Pension Credit goes unclaimed each year. Unspent funds allocated for the benefit remain with the Treasury and are absorbed into the general government budget. This surplus is then redirected to fund other public services or offset government borrowing.

£340 million to address rough sleeping is from the government press release. It’s peanuts in terms of overall government spending.

The new funding, which represents the opening investment, will provide 1,200 homes and intensive support for at least 3,000 people.

www.gov.uk/government/news/new-pm-says-government-can-bring-back-hope-to-britain-and-launches-drive-to-end-rough-sleeping-at-the-earliest-opportunity

If people want to see this in terms of cost per person as we all pay tax in one way or another, there are 55 million adults in the UK. It would cost everyone just £6 in tax to support 3,000 people who need help.

It is literally less than the tax on two bottles of wine from the supermarket. So if we all get £45 tax off our energy bills and spend it on four £10 bottles of wine, we would be putting over £18 each back in to Treasury.

Mr Darren Jones was given The Order of The Boot.

Not that he's a bitter person. Of course.