Today as it is snowing I decided to use yoga and core exercises as today’s fitness regime. There is nothing quite like listening to your body creak and crack first thing in the morning. It certainly sets you up for the day and I can now categorically say that I have zero flexibility.
Whilst doing the yoga routine I started to think about VAT. VAT is a fairly regressive tax and affects the poorest in our communities the most. If we want people to cycle why then not take a stand and remove VAT from bicycles?
The standard government response here is that we are part of the EU and therefore we can not do that, as other EU countries will still be charging VAT on bikes. This may be true but if we ignore for a second we are leaving the EU, most EU countries spend a lot more on cycling infrastructure than the UK. I have no problem paying tax if it is used correctly.
By building cycling infrastructure we would be creating more jobs, not just for the builders and architects but also for roll shops, newsagents and all the other places that these new found workers would spend their cash, this could be the start of a simple Keynesian system, economics is not all about leveraging your newest financial deal. This would be a good use of the 20% VAT and as infrastructure increased we should also see a start in more people cycling, this would bring in more VAT, reduce illness, exhaust fumes and congestion. This all sounds simple and in many ways that is because it is, in the future this would become a norm, rather than the exception it is now.
However, say we want more people riding before we spend the money on infrastructure. This brings us back to the VAT free idea. We can accept that it may be politically impossible to wipe out VAT on bicycles but Malta only charges 5% VAT on bicycles, every bike in the U.K. Could then have a 15% price reduction. Some may argue about the Cycle to Work scheme saving you from VAT but after an EU ruling you do pay VAT on that purchase so it would help lower C2W prices as well. This again could lead to more staff being needed for bike shops and again a Keynesian increase in spending. We could then find that by lowering a tax rate, we may increase tax intake through a higher number of bikes sold and more income tax being collected.
It is also worth noting that the UK has a lot more zero rated goods for VAT purposes than any other EU state so as such the EU argument against zero rating also does not stand up, once you look into it. Included in that band is cycle helmets, admittedly a protection good, but you could argue a bicycle is a protection against illness and will help reduce strain in the NHS.
All of these ideas could be used to help combat the deficit that we all hear about. Cycling in itself also has a cost benefit ratio of 1:13, so for every pound spent on cycling the return is £13. This kind of return is a great way to help bring down a national deficit. Less vehicles on the road, then we would have less wear and tear on them. Less people going to hospital as we are fitter, then more beds available and more free GP appointment slots. Less congestion, we would then be saving the lives of those people who die from exhaust fume related illnesses every year. These policies are simple and easy to work out, if we had politicians who actually wanted to do long term good rather than get their photo in the news every week for short term policy ideas.