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Everyone’s Taxes In The UK Are Going To Have To Go Up Full Stop!

By Andy Shaw | January 26, 2010

Originally posted 22nd June 2009

An Unsustainable Trend in Debt

Basically, we have spent too much and we will be spending far, far more to get out of the current crisis. At some point this will need to be paid for and the only way to pay for it will be simply to create more revenue. So they can try scooping up air into the room and force up GDP which of course creates more revenue but in times like these the easiest and probably most palatable way they will create this required new revenue, given that whichever party is elected gets a full 5 years to get it right before we have another say very shortly, will of course be to increase tax. It is just a matter of time now until tax revenues have to start going up. If you think they won’t be raising taxes, then I hope you are good at handling disappointments.

What’s happening now in the UK is our savings rate is going up for the first time in years and that is in a way just preparing the great British tax payer for an outgoing that is soon to come. The question is when and how. You have to remember they are aiming at the majority who will pay, they cannot cover everyone and there will always be the poorest who get away with it, or the people who go bankrupt. Then there are the richest who know the way round problems like these, or the people who educate themselves round them. The government are aiming at the masses as that is where the real money is. The fringes will find legal ways round things.

I saw something funny in the US the other day when they started talking about VAT again. In America this has always been spoken about in the context of bringing in VAT and removing income tax – in my opinion a very good idea and always has been. However, they are now talking about it as an addition to income tax. So I wouldn’t be surprised if this is not at least attempted to be brought in within the next two years. This may be the way Obama chooses to avoid breaking an election promise of not raising taxes…well it’s a grey area and with his charm he may get away with this big lie.

In the UK it is going to have to be done in one of a few, various ways. Gordon Brown has been a master with the stealth tax as he managed to fool the majority all of the time – quite a neat trick for someone who I don’t happen to think is that clever…perhaps I’m wrong. Even though Labour could be trying to run the next election on the ‘We are pulling the country out of the recession’ plan, I severely doubt there is any chance that they will win. If they do, then I don’t know how they will be able to spin the fact that taxes on the middle class and eventually the poor will simply have to pay for this new Britain.

The more likely scenario is that the Conservatives win and tell the country the way it is and that we/you are going to just have to accept that you had it good for a while and now you are going to have to pay for it. Actually, I look forward to watching how the spin doctors spin that. I have sort of had an image in my mind of David Cameron speaking to the nation and saying something like, ‘We cannot believe the depths that the Labour government has plunged the country into and that we are going to have to go through some pain to get out of this, otherwise we may be facing a situation similar to Japan.’ If I was a spin doctor then I’d probably choose a different analogy for the general public as they won’t get the Japan thing unless this is well sold to them first.

Anyway, I expect to see income tax to the middle class rise to 28 – 30% (maybe 33%) and then a higher rate of 50% applied to everyone in the current 40% tax bracket. Maybe more, maybe a lot more. Plus more stealth taxes as well, as that may be the way for the Conservatives to make it a lot more palatable. What I think this will actually end up meaning as a whole to the public in general is about a 10 – 12% income cut. Plus, of course, any reduction in wages to survive this. Some of course, will be much worse off and some will be hardly affected as with any broad brush approach.

What this means is that when it comes to how much you will actually receive after tax, by way of contrast you are actually having a great time now! You’ll soon be looking back on this time thinking how good you had it – Now that’s a scary thought!

The good news, if there is any, will be that when you are all paying more tax the country’s currency will do well for a while at least, so those who can still afford to go abroad will benefit. Basically GDP needs to start to grow again and grow well. That will be a neat trick when you consider that the full effects have yet to be felt. But the government and the media are becoming quite adept at promoting figures (they always have been good at pointing out the bad, now it’s just that the good news sells better than the bad news) that show a gain but which mean nothing at all as they have fallen 30, 40, 50% and then moved up month on month by 1%. Talk about misrepresentation!

The UK property market seems to be benefiting from all this media statistics confusion though and also the UK economy generally speaking when looking from the outside. The economists went from viewing the UK as the worst Western economy several months ago to recently being heralded as the one who will least be affected. What????!!*%^&%$$!!!

I tell you, the scale of the bulls**t right now is truly remarkable. I could make up a set of statistics right now that would go by without question yet be 100% lies. No one seems to care about what is actually going on. The whole media and the powers that be seem to me to be in two groups 1) headless chickens or worse 2) focusing on their own and at times quite dark agenda so that they can push things through under the radar which is currently filled with millions of objects flying in different directions all at once.

All of this will mean that it will be a very different terrain moving forward, which at the moment at least seems to favour the UK property market, solely because of the UK property investors greatest ally…the under supply problem. So the rule now is buy only in areas of very high demand, a deal may be a deal in a low demand area but you need strong and growing income to sail in these seas.

Best wishes

Andy

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