The Pip's won't squeak any more!

By Carol Barrie on Oct 21, 08 07:09 PM in Tax

As Gavin Cordon's article in today's Birmingham Post made clear; Gordon Brown is still intent on the country spending its way out of the looming recession, despite a massive rise in public sector debt.

This is clearly money that is going to have to be found in addition to the funds to bail out the Banks and Building Societies. The cost of all this is clocking up at an appalling rate. Initially, 'Darling' may be able to borrow even more to meet a significant part of the cost; but as every householder knows, borrowing eventually has to be repaid.

The $64,000 question is... How?

The answer is, by all of us!

Government has no money, other than the funds which they raise from the taxation

I suppose there is a feint hope that 'Darling' might make a fortune on the disposal of the bank preference shares, that he has taken in return for bailing the banks out. But with their recent business track record, which financial backer is going to be rushing forward to put money into buying these shares.

This is why I am betting on tax increases as the way in which the piper will finally have to be paid.

Of course, no politician as unpopular as Gordon Brown is at the moment, and facing a general election in 2010, is going to want big hikes in taxation between now and then. But eventually the effects of the spending will come home to roost.

The effective basic rate of tax in the UK is currently 31% (income tax at 20% and NI at 11%). So who is going to pay the additional tax to repay the borrowing? The major concern of many is that, as in the past, it will be middle-England that will pay! The lower paid cannot afford to contribute any more and there are no longer sufficient wealthy individuals to meet the cost; even if they do "tax them until the pips squeak" as threatened by a former Labour Chancellor.

The Pips won't squeak any more they will just pick up a cheap flight to a friendlier tax climate!

All those interested in knowing who is going to finally pay the piper, would be well advised to insist over the coming months that all Political parties set out their detailed agenda on future taxation. Promises not to increase income tax will be met with justifiable cynicism in light of the stealth taxes introduced over the past 10 years.