Sunday 7 October 2012

Sunday, October 07, 2012 Posted by Jake 8 comments Labels: , , ,
Posted by Jake on Sunday, October 07, 2012 with 8 comments | Labels: , , ,

Her Majesty's Revenue and Customs (HMRC), responsible for tax collection in the UK, recognises certain special needs. HMRC provides tax deductions and allowances for being old and married, for being old and divorced, and for being blind. These are well targeted allowances that are deliberately not intended for younger and sighted people.

However, none of these special needs is more generously provided with tax deductions and allowances than the special need of “being rich”. Nor are any other deductions nor allowances more ruthlessly and meticulously targeted to ensure the "not being rich" can benefit from them. These allowances for "being rich" are known collectively as "tax avoidance". Accountants will rush to tell you tax avoidance is quite legal, so long as you have the glitz to persuade a bank to lend you millions of gilts for a few days, or find someone to trade offshore dividends on your behalf, or tuck away a 'sideways loss' for a rainy taxy day.  However, as the litany of rich celebrities dodging taxes to fund their special need of "being rich" continues, it is easy to forget how extremely expensive it is to be poor. The fact is, the poor pay higher prices for the same goods and services than averagely and better off people. So, for the purposes of this post, let's lay off the poor rich and focus on the poor poor.

Office of National Statistics Figures
We have pointed out in an earlier post that companies have good reason to rip off the poor. The reason is, in the words of Slick Willie Sutton the bank robber, (and perhaps a little surprisingly) "because that's where the money is". The rich have the wealth (which is why they are so against a wealth tax), but while they may live in it, sail it, eat off it, look at it, or just horde it, they rarely spend it. The actual flow of cash mainly runs through the hands of poor and ordinary people. Why is this? Because there are so many more ordinary people, and they have to spend all the cash they have to pay their bills. By the way, this is another reason why trying to grow the economy by giving more money to the rich is so grimly fatuous - the rich don't go out and spend it, they just stack it away. While giving more to the poor - improved minimum wage, lower VAT, or even (say it softly) an increase in benefits - would see the cash circulate back into the economy and generate real spending and growth.

As a direct result of these rip-offs it becomes exceedingly expensive to be poor. The charities Save the Children and Family Action produced reports in 2010 and 2011 detailing how the poor pay more for the same stuff. One of the regrets we at Ripped-Off Britons have is these reports appear in a flare of publicity and are then forgotten. So we reproduce extracts here, which we will retweet lest we forget.

It is a shocking injustice that the poorest families in the UK pay higher prices than better-off families for basic necessities like gas, electricity and banking. The costs that poor families bear in acquiring cash and credit, and in purchasing goods and services, can amount to a ‘poverty premium’ of around £1,000 – 9 per cent of the disposable income of an average-size family.

Policy-makers expend considerable amounts of time and energy exploring the most effective ways to get more money into the pockets of low-income families.Yet they spend little time considering the unequal way in which that money comes out of those families’ pockets. We know that when poor families’ incomes rise, parents spend those gains on essentials for themselves and their children. Imagine the gains in terms of basic necessities, clothes, food, social activities, savings and many other areas that an extra £1,000 a year would bring to poor families. 

In a separate report from 2010, Family Action investigated the cost of "christmas club" hampers, comparing club prices with the price of the same goods bought from Tescos. These savings clubs take what most of us would consider small amounts from their customers each week or month over the year and deliver a hamper in time for Christmas. (All prices are from Christmas 2010, when the Family Action report was written)

Politicians of all parties assiduously court the wealthy, providing favours that help them get anything; from government contracts to handshakes from well connected deal-makers, to knighthoods. The wealthy are the source of funding for the party as well as supplementary jobs as consultants and non-executive directorships for the MPs to top-up their parliamentary pay. Not to mention building relationships while successful that may provide rewarding employment after their parliamentary careers end, as they all do, in failure. Politicians are understandably wary of biting the hands they hope will feed them by raising and dealing with these issues.

However they, as well as us ripped-off Britons, should not forget the wealthy don’t patronise politicians because they smell so good. They do it for political favours, which can only really be delivered when in power. And to get into power politicians need the votes of us ripped-off Britons - 90% of whom have been stagnating for decades through Labour and Tory governments alike.

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  1. Truly shocking

  2. Nailed it - more people need to understand this.
    Money is debt.
    The rich horde that debt obligation and do nothing with it - how they can be called millionaires because they hold that much wealth.
    The poor become poorer because the instead of trading their debt about to pay for things from each other (giving each other jobs), the rich pull the money out of the system.

    We haven't fixed this basic problem - we are actually trying to maintain it...

  3. Elec/gas should be sold the same way as petrol is sold, pay up front for a fixed unit. rich and poor pay roughly the same for petrol, get rid of complicated standing charges and kilowatt hour units.

  4. I guess the underlying reason for the poor having to pay more is either risk or education. Time for the government to take take on the risk (as they did for the banks) and financial education is always a good thing.

  5. Save the money in your own account instead of the hamper company's and problem solved.

    1. When cash it tight many people like to budget *physically* - cash in jars, for each bill, money paid to clubs (and forgotten till event arrives) etc.

      There is no *reason* for this to be expensive - maybe needs better 'service suppliers' to step in...

      Now that banks aren't paying anything worth having interest wise, maybe cash in jars should be more popular... as long as you don't get burgled...

    2. Easier said than done something always comes up and the money gets spent,something breaks,someone needs some shoes etc that`s why people use these clubs cos they know they will end up dipping into it otherwise.

  6. Why are articles always about 'poor families'? Yes it's tough with kids, but single people have to pay all bills on their own - and all reductions/deals are for bulk buying. Two can live as cheaply as one is v true adage.


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