Osborne's desire to reduce public spending to roughly what Gordon Brown thought right a decade ago is hardly draconian. He is sensible in attacking the big, demand-led programmes such as social benefits and housing, to which previous governments, including Margaret Thatcher's, turned a blind eye. He is right too in wanting fewer jobs in the public sector to be met by more in the private. In other words, he expects private demand to replace public in the cause of growth.It's a good question. As others have pointed out there are alternatives to VAT such as a Land Value Tax.
So why, given all this, does he tax private demand? And why tax it at precisely the point where it must cost jobs in the high street and among its suppliers?
The three main things to consider about different types of taxations are:
- Is it efficient to collect.
- What incentives and disincentives does it create.
- Who will it effect