...a blog by Richard Flowers

Wednesday, June 23, 2010

Day 3460: George… Don't do that!


Yes, it's Master Gideon's first Budgie. Or, oh fluff! It's Master Gideon's first Budgie.

What did we think of the SPEECH? Well, the VAT rise (equivalent to a more honest 3½p on the basic rate) was no less painful for being predictable, and the squeeze on benefits makes even MY button-eyes water. And that's BEFORE cutting spending by a QUARTER.

And whose FAULT it is? Stand up Mr… oh wait he's not in the Chamber!

Yes, Hard Labour loser, Mr Frown, the man who only missed his Golden Rule target by HALF A TRILLION POUNDS didn't even turn up!

Am I happy with the Budget?


You'd have to be MAD to be "happy" about a Budget that raises taxes, especially a regressive tax like VAT, and cuts spending at the same time.

Am I happy that we are cutting spending NOW, this year, when only a few weeks ago we were cautioning against that?


We had to make concessions in the Coalition Agreement and this was the big one, the one the Conservatives would not give up.

It is TRUE that we ALWAYS made it totally clear that fixing the deficit was a priority that overrode all other concerns but that we wanted to do so PRAGMATICALLY not IDEOLOGICALLY, and that the timing of cuts would be when it was right to do so.

And it is TRUE that on the "pragmatically test" the economy is doing VERY VERY slightly better and might be able to take it.

And also it is TRUE that the situation in the Markets – precipitated by the Euro crisis in Greece in particular – has become very much more urgent, meaning we need to show we are taking action to control our borrowing.

But we should honestly say that we HAVE changed our position on this. We have been persuaded that the Conservatories have a greater mandate to insist on their honestly held belief that cutting sooner is better. We have accepted that the BALANCE of RISK is that the danger of the markets running against us and driving up interest rates and driving down the pound is GREATER than the danger of a double-dip recession.

Remember: Macroeconomics isn't ROCKET SCIENCE – it's MUCH, MUCH MORE COMPLICATED than that!

(Seriously: we can get rockets into space almost every time, but no one knows how to get the economy to go consistently right. It's like steering a SUPER-TANKER by throwing FISH at the front end – sometimes it goes well, sometimes it goes badly and no one ever agrees on why. For that matter some people won't even agree on what "well" and "badly" mean!)

ALL Parties, Hard Labour included, said that there would be cuts, serious and deep cuts. It is HYPOCRITICAL of Hard Labour now to be throwing up SHOCKED MITTENS that anyone might actually DO the cuts.

Am I happy that Liberal Democrats are supporting a rise in VAT?


Of course not. We warned of the Conservatory Tax Bombshell. We said "whenever the Conservatories have to raise taxes, they always choose VAT". Only last week I was protesting that an income tax rise would not just be FAIRER but would be REVERSIBLE – i.e. people could not just see the PAIN they had to pay to fix what Hard Labour did, they could share the RELIEF when the pain was over.

VAT is a regressive tax, whatever way you look at it.

Yes, it's true that FOOD is given a ZERO rate of VAT and that the cost of housing isn't VAT-ed either (rent is exempt and mortgage interest is "outside the scope" which means it's SO exempt that it's not even looked at when they think about things to exempt)

But, based on the Office of National Statistics "basket of goods" used for calculating inflation, food and housing together are only a FIFTH of household expenses.

Transport, clothes, furniture and other household stuff, "recreation and culture" (that's DVDs or the cinema to you and me – though also books which are let off), eating out, holidays… these are all VAT-able and will all go up in price.

(And we can probably expect them to go up in price by MORE than just the VAT rise because of inflation and to "round up" the price – you know, the way that £9.99 goes up to £10.99 not the £10.20 that the VAT rise necessitates).

As the Viz Top Tips say: "avoid the VAT rise – stop buying stuff!"

It's a jolly sight easier to "not buy stuff" if you are a rich family cutting out non-essentials than if you are poor family who couldn't afford non-essentials in the first place!

VAT is a BAD tax and we were against it.

But some battles you just lose.

We managed to get the Conservatories to increase Capital Gains Tax – not to 40%, but an increase, and I'm open to persuasion that the Treasury models showed that any greater increase would have brought in less tax.

We managed to get the Conservatories to increase personal allowances – not yet to £10,000, but as a first downpayment it's a start…

(…and yet already Hard Labour and their quislings are raising the ZOMBIE argument from its grave that a TAX REFORM doesn't help those who DON'T PAY TAX. Well dur! It's not SUPPOSED to! We want to make the TAX system fairer for those who DO pay tax; we want people at the bottom end not to have to pay tax at all. But people who DON'T pay tax we want to help by targeting spending, on education, on child tax credits, so that THAT reaches the people who need it…)

We managed to get the Conservatories to DROP plans to cut Inheritance Tax (the millionaire's tax cut) and to drop married couple's allowance (the ten quid bribe).

But I guess we just could not persuade them to raise Income Tax.

It's really the ONLY viable alternative to a VAT rise – no other tax raises as much money. And somehow Income Tax has become much, much more TOTEMIC. You KNOW what Hard Labour would say: oooOOOooo, WE never had to raise Income Tax in thirteen years, and NOW look what they've done!

(This of course is a LIE: Hard Labour DID raise Income Tax in the DISGUISED form of raising National Insurance. Same money, same effect on the taxpayer, different name. Of course the Tories couldn't raise THAT either, after all their "Jobs Tax" name-calling!)

I suppose you COULD raise taxes on business, but you know… RECESSION. Cutting corporation taxes will hopefully be a help in getting investment back into jobs, though as Mr Mark Reckons says, it could have been better aimed at SMALL businesses who are the backbone of Britain's economy.

Am I happy that benefits are targeted for eleven billion pounds of cuts?


There's got to be some kind of SICK IRONY in breaking the link to the RPI (includes housing) cost of living for most benefits at the same time as we restore the link to earnings for pensions.

And I think announcing cap on Housing Benefit is gesture politics to placate the Daily Hate Mail. But I do not BELIEVE that the Hate Mail's stories of "illegal immigrants in million pound mansions" are anything more than anecdotes that are way way WAY outside the normal experience of benefit claimants.

And introducing medical tests for Disability Benefit seems a bit SUPERFLUOUS when there are ALREADY medical tests for Disability Benefit. Saving money by scaring people off is just BAD.

Is there FRAUD in the Benefit System? Yes there is. But far more overpayments are caused by ERROR because the system is so COMPLICATED. It would be a million times better to just make benefits SIMPLER and EASIER to get, and tell the tabloid press to GET STUFFED because we just ACCEPT that there will be a certain amount of money lost. Because no matter WHAT you do, a certain amount of money will be lost to people who are CLEVER because there will ALWAYS be people who are more clever than the people who operate the benefit system for the simple reason that the Government does NOT employ geniuses to run the benefit system. Or apparently even DESIGN the benefit system.

And anyway far more money is lost in VAT FRAUD than in benefit fraud, but that is lost to nasty scary gangsters who live in faraway places and are quite difficult to catch. Unlike Aunty Maude with her dodgy back.

But we HAVE protected pensions, the biggest part of the social security spend, and better than that, we HAVE restored that link with earnings, something Hard Labour promised by never found the time to deliver in thirteen years in power. And we HAVE done more for families with children.

So AM I happy with this budget?

No, again, no.

But "happy" wasn't on the table. Not after the worst recession in eighty years. Not after Britain had a longer and deeper recession than all the rest of the World. Not after thirteen years of Hard Labour. If you'd wanted "happy" you shouldn't have let Hard Labour spend MORE than they earned by at least 2% of GDP in EVERY year since the 2001 General Election.

Because THIS is the key graph of Mr Frown living beyond his means, as Chancer and then as Prime Monster:

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You see the green line for receipts going up and down? THAT'S the "economic cycle": good years and bad years. Government spending should be averaging out on a line half way between the top and the bottom of those peaks and troughs so that over the "cycle" the government earns all that it spends, borrows a bit, pays it back.
Anything more than that and you are mounting up debts that you're not going to be able to repay. That's what they call a "STRUCTURAL" deficit, it's the borrowing when you should be repaying.

Look what Mr Frown did in his FIRST term, 1997 to 2001: receipts rise, spending falls; receipts fall, spending rises. That was FINE. That was the way to manage the economy PRUDENTLY.

Look what Mr Frown did in his SECOND term, 2001 to 2005: receipts rise, spending rises even further. That's a recipe for DISASTER.

Look what Mr Frown and then Sooty did in their THIRD term, 2005 to 2010: receipts collapse, spending goes through the roof. That's a CATACLYSM.

Hard Labour seem to think that "recovery" would have bailed them out of the trouble they've gotten us all into. But just look at the projection: the receipts recover according to the usual pattern of the economic cycle (in fact rather generously, there doesn't appear to be a downturn of receipts towards the end of the five-year period that the cycle seems to predict) but see how long it takes to bring down the massive overspending.

THAT'S why we have years and years and YEARS of painful careful management to come.

Hard Labour seem to think that now they are in Opposition all they have to do is point the finger and say: they're cutting jobs (that never existed); they're cutting training (that only hid the unemployed); they're cutting hospitals (that were imaginary, that we never funded, that we just MADE UP!).

Or as Harriet the Harminator hooted in her response: it's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not fair, it's not FAIR!

The whinge of the biggest baby in Westminster.

And as for Mr Alistair Dalek (formerly Mr Frown's glove puppet Sooty) expressing DOUBT in the Government's growth figures… gasp… gasp… gasp… words just fail me!

It's just not good enough! What would THEY have cut? What were the cuts they SAID they were going to make? Why don't they have any kind of plan at all?

Don't give me this "it's all about shrinking the state" guff. If you REALLY think that the size of the State is "about right", then go ahead, make a case for the EIGHTY BILLION pounds in tax rises you need to pay for it all.

VAT up to 25%? 30%? 35%! It's still not enough!

Raise the basic rate of tax to 40% - DOUBLE IT! – you might just cover it.

That is the sort of scale of tax take you're talking about if you want to keep up this level of spending.

But don't pretend you can keep on spending money like your Sweden while raising taxes like your Texas. And don't lie to people that you can keep on borrowing forever. Mr Frown may have spent a decade with his fingers in his ears going "Lalalala I see no debt" and all the while mortgaging the future of his two young sons.

The WORST kind of lie is the promise to do something and then never doing it. Hard Labour came in by making a lot of promises that they broke. It's hardly surprising they went out making a whole lot more promise they knew they could never keep, and that the next government would have to break.

So yes, the Coalition will have to disappoint you about those free school meals that HARD LABOUR NEVER DELIVERED. They're not GOING to be delivered because LABOUR LIED.

So does that mean I oppose this Budget?



Reluctantly. Grudgingly. With a heavy heart and drooping trunk, I have to support the Coalition budget.

For the sake of stability. For the sake of still HAVING an economy in five years' time. For the sake of getting SOME little bits of Liberal GOODNESS rather than 100% of nothing at all.

Because the alternative is Conservatory Budget untrammelled by Liberal Democrat fairness, based on tax cuts for the rich with no relief for the poor and nothing but contempt the public sector.

Or a Hard Labour budget that is based on AIR and FANTASY and would delivers us to the IMF (I can't even joke that it'd be Mr Phelps' Impossible Mission Force, because things would get so bad it'd have to be the International Monetary Fund to be the only ones who could save us).

As for what did I think of Master Gideon's SPEECH…

Well, here is the young Baronet at the Despatch Box, seemingly flanked by Captain Clegg and Mr Danny Champion of the World.

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I say "seemingly" because in fact you cannot see where Mr Balloon is hiding. Yes, the Chancer of the Exchequer is sat right in the Prime Monster's lap. Or possibly, Mr Balloon has his hand right up Master Oboe's… VAT policy.

I THINK that expression may be what they mean by "fiscal tightening"…


1 comment:

Ian Ridley said...

The 2.5% VAT rise is supposed to raise £13 billion. I thought each 1% on the basic rate of income tax raises £2 billion. So to raise the same £13 billion you would have to raise the basic rate of income tax by 6.5%