January 4th 2011 signalled a shift in the sand and a defining moment for the UK Government.
Sales Tax, what we here in the UK term Value Added Tax, rose on most goods from 17.5% to 20%. This tax is held up as the central policy instrument underpinning the UK government’s drive to deliver a smaller State and, forgive the play on words, a state of austerity. Mainstream media is markedly on the side of doomsday scenarios and a depiction of consumers as worried, unimaginative masses. Yet we are individuals and we can respond. And we can respond by being creatively austere. Can austerity be cool? Here’s how.
To fully understand the impact of this rise, we need to think with recent history in mind and think of creative strategies to respond and reshape the way we shop. If we don’t, the pain of an extra charge on what we buy is more keenly felt because we are not offering an alternative and are simply accepting our fate.
Sales Tax was lowered to 15% in the UK from December 1 2008 to December 31 2009 as an immediate response to the financial crisis back in 2008. To the unassuming eye, this makes perfect economic sense – stimulate demand within the economy and encourage people to keep the faith at a time of economic volatility.
The alternatives? With Sales Tax discussions, conventional economists fret over stimulating consumption within the economy; yet to cut rates or raise taxes will have a whole host of implications that oftentimes aren’t fully filtered through the economy until 18 months time.
The problem with keeping Sales Tax at a low rate comes by raising expectations that prices should remain consistently low. In the longer term this creates a culture of consumers that hoard/are expectant of low cost goods and buy out of a sense of functional purpose (i.e. I buy digital/technical goods at low cost and therefore regularly buy new headphones or phones irrespective of other factors). Think a scene out of Roman times a la Spartacus: Gods of the Arena over on the Starz network (which if you haven’t yet seen it, is pure saccharine coated gonzo fun and an excellent TV show!).
Incidentally, many of the goods we consume/define as staple digital and technical goods – LCD TVs, new cars, etc. – are becoming increasingly attractive to consumers across urbanised China and India. The process of hoarding is great in pure short-termist economic terms of shifting units and maintaining business lines, but it does very little for consumers. If anything, consumers are left behaving as they have done. Inertia creeps. And it creeps forward at a much slower pace than is desirable because as we keep buying the same things without adjusting our patterns of consumption, ‘staple’ goods become more expensive.
We need to see and think of modern ‘staple’ goods as inherently personal and opt-in goods rather than the items and goods we find in our immediate geography. We can dislocate ourselves from our built environment and the items bought by those we live around. Instead of hoarding, we can buy virally where possible and sidestep the need to own physical goods where digital alternatives are available. The flows of globalisation allow us to irrigate this fertile line of thinking in our own image. What we see in the reflection is made more sustainable when we are able to act with a degree of rationalised decision making rather than passive acceptance of the circumstances we happen to find ourselves in.
What I want to suggest is that, in the end, it is better to be actively thinking less in terms of the price at purchase of a good and more in terms of the thought process encapsulated by the idea ‘I am’ adding value to this good. So rather than collecting and amassing tangible possessions, we put our minds to work and purchase content and goods that adds value to our lives both by skill-setting us and by opening our lives to new possibilities. To be more than an idea, this needs sketching out.
Such a mindset takes time to develop, but is a sure-fire method of creatively sidestepping the problem of rising Sales Taxes because we derive longer-term enjoyment from fewer, more enriching things that we are actively choosing. Here’s how to take those first furtive steps.