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Cyprus and a cautionary tale

Wednesday, 3rd July 2013

Let’s start with a bit of history

February 1971 saw decimalisation of the pound – altogether a good move and one of the first steps to align us with membership of the European Club. Then on April Fools day in 1973 came the introduction of VAT – an invention of a Frenchman and yet another important step to harmonise the UK with Europe. Initially it was a very simple tax with a flat standard rate and a few important items that were zero rated. VAT was easy to collect as the burden rested with businesses.

Then dear oh dear the stupid politicians started to meddle with it – notably Denis Healey, Norman Lamont and Gordon Brown. The administration of VAT is now so utterly complex that the poor old business person has little chance of getting it right and consequently pays the price of draconian penalties imposed by the zealots from HMRC (now run by the incompetent Lyn Homer, formerly of the disastrously performing UK Border Agency). 

This is an utterly fine example of a really simple, easy to collect tax totally ruined and over complicated by the meddling class of Politicians (who incidentally have never run a business in their lives). Oh well it was all in a good cause of the Grand European Plan.

That Plan doesn’t look so clever now. Last year we had the Spanish, Greek and Italian Euro crises. This year we have Cyprus but this one is a little bit different. Confiscation of depositors’ savings has happened before – notably in Germany before the war and this was one of the events that led to the rise of Hitler. Spain, Greece and Italy have not had any confiscations applied to their “bail outs”.

Why? Could it possibly be that because they are in mainland Europe, the civil unrest that would inevitably follow would result in a similar rise to power of far right wing politicians?

Cyprus has a significant difference – it is an island and the possibility of any civil unrest there spreading contagion to the mainland could be remote and would be more easily contained.

The UK is also an island, so just think about what might happen here if we had signed up to the Euro and then for some disastrous calamity to have happened (Ed Balls becoming Chancellor perhaps?) that required a Merkel bail out?. It just doesn’t bear thinking about. 

Sweet dreams!