It was only a matter of time. Today the government announced that the planned 2p per litre increase in fuel duty will not happen until March 2009 at the earliest. He was keen to stress that the decision was taken to help people at a time when household budgets are being stretched by rampant inflation in fuel and food prices. This tells us a lot about Mr Brown and his attitude towards the little people.
This whole saga started with a deception. True though it is that an increase of 2p per litre in duty was planned, to announce it as an increased cost to the customer of 2p per litre is a big fat lie. Duty is one of three elements making up the price we pay at the pump. The other two are the cost of the fuel itself and VAT (value added tax). The price of the fuel is determined by normal market forces and has risen rapidly recently as demand has exceeded supply. Duty is a fixed sum per litre regardless of the price of getting the fuel to the pump. VAT is a levy of 17.5% charged on both the fuel price and the duty. Therefore, any increase in fuel prices is multiplied by 17.5% at the pump because the government makes a windfall gain. Equally, any increase in duty results in a further 17.5p in the pound being charged by way of VAT. They have different names but duty and VAT both result in money going from our pockets to the Treasury. A 2p rise in duty is a 2.35p rise in tax. Talking of a 2p rise in duty is, therefore, a deception. What was proposed was a rise in tax on petrol of 2.35p per litre.
Next we can look at how the government viewed this proposed rise in tax. As well as continuing the deception by only ever referring to it as a rise of 2p per litre, the anticipated revenue was built into their shaky calculations of tax revenues for the financial year. When calls were made for the increase to be scrapped Mr Brown and Mr Darling bleated about the need to increase duty in order to balance their books. They said that spending plans were predicated on the revenue from the rise in duty being received. Not once did they acknowledge that the increased VAT from soaring fuel prices more than cancelled out any loss of revenue from scrapping a 2p rise in duty. When you also add-in the additional VAT payable as a result of rising food prices, the significance of fuel duty on the overall tax-take becomes even smaller (yes, I know many foodstuffs are not subject to VAT but many are, and all are when turned into a VAT-able meal at a restaurant). Perhaps they felt they had to say this because the government's accounts have gone completely haywire and they need all the tax they can get to pay for their bloated spending plans. But that does not explain why they felt it necessary to concentrate so much time and energy on a tiny element of the overall tax structure.
And today, when they finally had to back down in the face of overwhelming public pressure, they had the gall to say they were doing us all a favour. This was not a lie because it reflects precisely how they view the situation. As dedicated socialists they presume that the State has the right to all property. An income tax rate of 40% is, in their eyes, a gift of the remaining 60% to the lucky people because their starting point is that the State is entitled to 100%. So it is with fuel duty. The 2p rise in duty was never, for them, an increase in what the State takes, it was a proposed reduction in what the people were allowed to have. Protests about increased duty were met with the attitude "you are lucky to have been allowed to keep that 2p per litre thus far, why are you being so ungrateful now that we propose to make a small inroad into our generosity towards you?" A further psychological effect was in operation. Because Mr Brown looks on the proposed increase as a move by the State to retain its own property, he had to fight for it in the same way we would fight for our television if someone is seen walking out of our house with it.
This attitude, and only this attitude, explains why Mr Brown sees a postponement in the increase as a favour. It has guided so much of what he has done over the last 11 years, yet it is upside-down. There should never be surprise that approaching anything from completely the wrong angle leads to an expensive mess.
This whole saga started with a deception. True though it is that an increase of 2p per litre in duty was planned, to announce it as an increased cost to the customer of 2p per litre is a big fat lie. Duty is one of three elements making up the price we pay at the pump. The other two are the cost of the fuel itself and VAT (value added tax). The price of the fuel is determined by normal market forces and has risen rapidly recently as demand has exceeded supply. Duty is a fixed sum per litre regardless of the price of getting the fuel to the pump. VAT is a levy of 17.5% charged on both the fuel price and the duty. Therefore, any increase in fuel prices is multiplied by 17.5% at the pump because the government makes a windfall gain. Equally, any increase in duty results in a further 17.5p in the pound being charged by way of VAT. They have different names but duty and VAT both result in money going from our pockets to the Treasury. A 2p rise in duty is a 2.35p rise in tax. Talking of a 2p rise in duty is, therefore, a deception. What was proposed was a rise in tax on petrol of 2.35p per litre.
Next we can look at how the government viewed this proposed rise in tax. As well as continuing the deception by only ever referring to it as a rise of 2p per litre, the anticipated revenue was built into their shaky calculations of tax revenues for the financial year. When calls were made for the increase to be scrapped Mr Brown and Mr Darling bleated about the need to increase duty in order to balance their books. They said that spending plans were predicated on the revenue from the rise in duty being received. Not once did they acknowledge that the increased VAT from soaring fuel prices more than cancelled out any loss of revenue from scrapping a 2p rise in duty. When you also add-in the additional VAT payable as a result of rising food prices, the significance of fuel duty on the overall tax-take becomes even smaller (yes, I know many foodstuffs are not subject to VAT but many are, and all are when turned into a VAT-able meal at a restaurant). Perhaps they felt they had to say this because the government's accounts have gone completely haywire and they need all the tax they can get to pay for their bloated spending plans. But that does not explain why they felt it necessary to concentrate so much time and energy on a tiny element of the overall tax structure.
And today, when they finally had to back down in the face of overwhelming public pressure, they had the gall to say they were doing us all a favour. This was not a lie because it reflects precisely how they view the situation. As dedicated socialists they presume that the State has the right to all property. An income tax rate of 40% is, in their eyes, a gift of the remaining 60% to the lucky people because their starting point is that the State is entitled to 100%. So it is with fuel duty. The 2p rise in duty was never, for them, an increase in what the State takes, it was a proposed reduction in what the people were allowed to have. Protests about increased duty were met with the attitude "you are lucky to have been allowed to keep that 2p per litre thus far, why are you being so ungrateful now that we propose to make a small inroad into our generosity towards you?" A further psychological effect was in operation. Because Mr Brown looks on the proposed increase as a move by the State to retain its own property, he had to fight for it in the same way we would fight for our television if someone is seen walking out of our house with it.
This attitude, and only this attitude, explains why Mr Brown sees a postponement in the increase as a favour. It has guided so much of what he has done over the last 11 years, yet it is upside-down. There should never be surprise that approaching anything from completely the wrong angle leads to an expensive mess.
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