...a blog by Richard Flowers

Tuesday, March 18, 2008

Day 2628: Sooty's Budget: Izzy Whizzy Let's… not do anything


Today's BIG news was, obviously, the GREEN LIGHT for latest in the long-running and much-loved series of Carry On Films.

But never mind THAT, we have the long-running and NOT much-loved Whitehall Farce to talk about instead.

It's funny how Sooty's budget seems to have fallen through the news agenda like a grey cloud through a sieve. The reason that it's become OLD NEWS so fast is that everyone knew what was in it because Mr Frown presented it all LAST year, so that – if things had gone to plan – we'd now be four weeks from a General Election.

Of course, even if things HADN'T got a bit ahead of themselves last Autumn, the plan didn't ever involve going to the country against a background of imminent American recession and consequent global economic implosion.

The main impact of the budget is, you will remember, the abolition of the starting rate of tax, raising tax from the lowest earners to pay for a tax cut in the basic rate for the better off.

I'll just remind you of that again: Mr Frown robbed the poor to pay to the rich.

The extra "help" for the less well off that Sooty offered in return amounts to little more than shaking a finger at the energy companies and saying "play nice!"

Similarly, the Chancellor's idea of tackling green issues is to wheedle at the supermarkets: "pleeeeese sort out the plastic bags problem!"

"It's been a cop-out on Green issues," said Mr Clogg.

Meanwhile, Sooty's extra "fun" taxes – on cigarettes and alcohol and cars – are all SMALL BEER (or cheroots or Smart cars), designed to do no more than plug a few of the gaps in the accounts. They're certainly NOT going to be an efficient way of changing anybody's behaviour.

I suppose you know what ELASTICITY of DEMAND means? That is, when you can stretch the price quite a LOT before people start looking somewhere else for their goodies. Alcohol, tobacco and petrol are all pretty darned elastic – choosing to do without them is a lot of trouble for people so mostly they just grimace and pay up.

But even if that WASN'T the case, you still have to think about what kind of CHOICE you are giving people. And in Sooty's case, it's no choice at all. Instead of a Green Tax Switch, giving people BACK their own money so that they can then SAVE it if they make the right green choices, Sooty is just ADDING to the tax burden.

So, given that Mr Frown wrote most of the Budget a year in advance, and that the rather dicey economy leaves no room for cutting taxes or increasing spending, and the fact that all the government credit cards are already maxed out… was there really nothing that Sooty could have done?

Well, and this is a clue, Master Gideon Osborne doesn't think so.

Rather oddly, he spent most of the week proclaiming that the Conservatories would match the Labour's taxing and spending plans… and at the same time saying that all Sooty's predictions were wrong and that things were much worse than the Treasury were claiming.

Which of course OUGHT to have begged the question: if you think that the economy is in a worse state than the Chancellor says, then HOW can you afford to match his tax and spend plans? If you say there is a BLACK HOLE in his plans… doesn't that mean there is a much BIGGER one in YOURS?

The Treasury really DOES have a record of being quite GOOD at predicting how well the economy is going to grow. Where they are RUBBISH is at working out how much more tax this means they are going to collect, and that means there is a shortfall every time and THAT is why borrowing keeps jumping ahead of predictions.

And that is going to be a problem for Sooty, because one of the government's "rules" is that they are NOT to borrow more than 40% of the Country's Gross Domestic Product.

Which is why ALARM bells ought to be ringing loudly at the news that Sooty intends to be borrowing a total of 39.8% of GDP by 2010.

This isn't just SKATING on thin ice… this is taking a POGO STICK out there and jumping up and down while DARING the ice to break!

There is every likelihood that we'll find ourselves with an even BIGGER borrowing requirement, though – being the Labour – they'll probably just change the rules at the last minute and claim they've not broken them.

It would all be a lot easier if Mr Frown hadn't ALREADY borrowed so much money to fill in the gaps between his spending SPLURGE and the revenue he was receiving.

Of course, young Master Gideon was all over that one too, criticising Mr Frown for not saving in the GOOD years now that we face the LEAN ones. Obviously, this would have been more credible if he'd been saying that AT THE TIME.

They really SHOULD have taken some advice from Mr Vince.
Our Dr Vince "the Power" Cable has been warning for YEARS that borrowing – personal debt as well as the government's – was spiralling out of control and that there was great danger of the banking sector getting itself mired in trouble through runaway greed.

But if Sooty is saying he'll do nothing, and Gideon is saying there's nothing that can be done, is that REALLY the case?

Of course not.

There are plenty of ways that you can improve the tax system while still remaining broadly neutral in the amount of tax that you raise. Mr Vince has thought up lots of them!

The most obvious method is to shift the burden of tax from the less well off to the super rich, and to move the tax you raise from Income to Green Taxes. You can make the tax system FAIRER so that people at the bottom end are not paying a higher percentage of their income in taxes than the people at the very top. And making the Green Tax Switch puts the power to help the planet into people's hands and rewards them for making good choices.

You can also SIMPLIFY the tax system – close all the loopholes that let very rich people pay very little tax on their property wealth, raise allowances so people pay less tax on their income at the bottom end and do away with the insanely complicated Tax Credits that take people's money and give it back to them and then take it away AGAIN because the Revenue overestimated how much they were supposed to give back.

In fact, giving people an income tax cut can help to stimulate demand in the economy, especially if people go out spending money on new environmentally friendly replacement goods.

And that's why it is such a CRYING SHAME that the news don't want to talk about the budget anymore, just because the Tweedle-Tories have a JOINT policy of SHAN'T and CAN'T.

We need a BETTER ANSWER than "can't be done". We need a RADICAL and REFORMING budget. We need the Liberal Democrats!

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