Wednesday, 22 April 2009

Budget comment

Budget comment

Good news for labour’s class warriors

The main headlines from today’s budget are all about the rise in the top level of income tax to 50%. This is what Labour wanted and is something they pledged not to do when as New Labour they came to power in 1997, and double the increase they spoke about a few short months ago in November at the time of the pre-budget report. Given their approach to the business of politics, the breaking of promises is unlikely to worry a party led by Gordon Brown. Income tax increases will do very little to increase the Government’s overall tax take, at a time of a massive black hole in its finances. It is generally accepted that higher taxes drive the bigger earners away to other more welcoming countries and reduce people’s incentives to earn more. So it was all about appeasing their traditional wing, keeping the class warriors happy and setting a political trap for us. Darling and Brown’s aim is to drag us into a debate about tax rates rather than exposing the complete and utter financial mess the country is now in and this is something we will avoid.

Also why was the U tube announcement by Brown on MP’s expenses made the evening before the budget? Was it a distraction from the main event because the Government doesn’t want the attention on the serious economic issues facing the country?

There has been no real attempt to deal with the stark problem facing us. Borrowing this year will be £175 billion, massively up from the £125 billion anticipated those few months ago and as a consequence of the Chancellor’s over ambitious forecasts. His forecasting hasn’t improved and today continued to be wildly ambitious. Growth is now a negative 3.5% yet is expected to be a positive 3.5% by 2011. Such a turnaround is unheard of, will lead to continued massive borrowing on the assumption that there will still be people around willing to lend to the UK Government.

Again in this budget there is no real attempt to deal with the problem of the huge difference between Government spending and income. There is the sop of unspecified efficiency savings, which are a sort of cuts by stealth and without stating where they will fall. There are supposed to be £50 billion worth of these, which beg the question that if they’re there, why haven’t they been uncovered before and taken advantage of during the past 12 years of Labour rule? Those who work in our public services tell us all the time about the massive waste and inefficiency that exists, but that it is inherent in a system that relies on control from the top with targets, directives and initiatives changing all the time with constant reporting back to the centre. At some stage the huge growth in public spending that has taken place over the past twelve years will need to be confronted. Labour Governments almost always run out of money and again it will fall to the Conservatives to get Britain out of the mess.

Elsewhere there is tinkering and not very effective tinkering at that. As an example, the vehicle scrappage scheme, copied from the Germans and disliked by many Germans as many sound vehicles are being scrapped, will benefit the Germans amongst others as people benefit from a discount provided by the UK Government on cars manufactured in other countries including Germany. Iain Dale asks why stop with cars, why not include all sorts other products? Surely it makes sense to at least target such a scheme to things produced in the UK?

There is no mention of VAT because any change would mean having to apologise for getting it wrong when the rate was reduced from 17.5% to 15% and, as we know, this is a Government led by a man who will only say “sorry” through gritted teeth. The reduction has done nothing to stop the recession and we might as well revert to the original rate now before it needs to go higher in a year or two’s time.

The next few years will be painful. We are in the deepest recession since the Second World War, with the biggest budget deficit and the fastest rate in growth of unemployment. The situation is serious and deep rooted. We face problems that will take courage to resolve. It’s clear that Labour don’t have the determination and conviction to deal with them. We have and we will.