...a blog by Richard Flowers

Wednesday, March 24, 2010

Day 3370: Was it Fiscal Drag? No, He was Wearing a Suit and Tie!


It's been described as "the Phoney Budget" or "the Pointless Budget" or most mundanely merely "the FIRST Budget of 2010". But in all fairness it wasn't MUCH of a Budget at all, was it?

So Chancellor Sooty pulled a sickly-looking rabbit from the Stamp Duty hat; SLAPPED cider-drinkers with a hike in Sin Tax; TINKERED with a scheme here and a relief there; and then CLAIMED he had nothing to say on VAT, National Insurance, Income, Capital Gains or Inheritance Taxes.

Except SNEAKILY, all allowances and threasholds are frozen, effectively using inflation to snaffle taxes from everyone in work, thus hitting the lowest earners hardest.

It's what is called "FISCAL DRAG" or to use the professional jargon "stiffing you with a stealth tax".

Liberal Democrat Ms Julia Good-as-Goldsworthy spotted this before Chancellor Sooty sat down. Sadly, Mr Balloon did not. It's the 10p tax debacle all over again!

How it works: suppose you are left with £500 a month after taxes. You spend £300 renting your home, £150 on food, £40 on travelling to work and you're left with a tenner!

But then along comes inflation! Let's say it's 2%

So you now have £306 for rent, £153 for food, £40.80 on travel. Now your costs are £599.80, and your tenner has been reduced to 20p!

But don't worry! Your boss at work sees what's going on and gives you a 2% pay rise too: that's an extra £10, so you're back where you started.

EXCEPT… because the tax allowance hasn't changed, ALL of your pay rise gets taxed at basic rate (20%) so Chancellor Sooty gets £2 out of your payrise, and you are left with £8.20 at the end of the month.

Somehow you are 20% WORSE OFF!

But NO! I have forgotten the NATIONAL INSURANCE - which is IRONIC, because that is what Sooty WANTS us to do!

National Insurance is another tax of 11% (rising to 12% in 2011), so your REAL tax rate is 31% NOT 20%.

And THAT means that you are really left with just £7.10! Almost a THIRD less than you started with!

Did Chancellor Sooty, the Badger with the Briefcase, mention any of this in his statement? Funnily enough, he did not. As usual with Hard Labour, you had to look in the Red Book to find the truth.

This is, of course, the EXACT OPPOSITE of Liberal Democrat tax policy to RAISE the Personal Allowance, LIFTING people out of tax altogether and cutting taxes for EVERYONE.

No wonder Captain Clegg replied to the Budget saying:
"Britain needed a Budget that gave us honesty in spending and fairness in tax; we have got neither."
Not that anyone heard him, as the country's main television channel flopped back into Red/Blue DUOPOLY mode.

"1350 Lib Dem leader Nick Clegg is on his feet," said the BBC live text coverage, "but many MPs are leaving the House." And so was the BBC, cutting away to the studio where Nick "Mate of Dave" and Stephanie Flounders were competing to read out their notes. Sigh.

What about Mr Bunny, the Stamp Duty Rabbit? Will he be any help for First Time Buyers? No, because the problem is shortage of supply; and this is just fuelling demand. That money will just end up in the pockets of developers who build rabbit hutches, and will drive up house prices again. Anyone who asks "what could be wrong with a little house price inflation" can go and live though the last two years all over again.

And then Sooty tries to have Mr Bunny shoot one of the Liberal Democrats' foxes by "paying" for his tax cut by raising Stamp Duty on homes over one million pounds. I say "paying" but – again concealed in the Red Book – the figures say that the cut costs £290 million and the rise raises £90 million. Oops.

And no, Chancellor Sooty, that's NOT a Mansion Tax; that's a one-off payment for the transfer, NOT a tax on keeping wealth bundled up unproductively in a whopping great property.

All of which was just flim-flam and fireworks to disguise the fact that he's doing NOTHING MUCH, certainly not addressing the fundamental questions of why the Government is spending too much and too stupidly and why at the end of a decade of Hard Labour Government the poorest still bear the heaviest burden.

If they CARED they'd have DONE SOMETHING in the last THIRTEEN YEARS.

But speaking of flim-flam, Mr Balloon didn't have a lot to say in reply. Or rather, he did, as his GAG-MEISTERS had clearly been workshopping the sound-bites for him over the last weeks and months.
"They want to tax your car, your phone, your business, your jobs. "
...he said in a speech written for him in 1996 by Mr Rockin' Robin Cook.

But here's betting that THIS one makes the headlines
"This prime minister will never get a medal for courage, although it has to be said that most of his cabinet get mentioned in Dispatches."
Ooh, "Dispatches" – do you, as they say, see what he did there? Tee very hee.

But he didn't have any ANSWERS, just more RHETORIC.

His BIG accusation: "like every other Labour government throughout history they've bankrupted the country".

This is a meme that the Conservatories have been pushing REALLY HEAVILY for MONTHS now. And fair enough: Mr Callaghan was brought down by the "Winter of Discontent" and Mr Wilson oversaw devaluation, "the pound in your pocket", and economic turmoil. And Mr Attlee, saddled with bullying demands from Americaland to pay for the whole cost of World War Part II was forced to extend rationing!

So, let's face it, Old Labour had all the economic competence of a SMASHED BADGER who'd been trained in adding-up by Master Gideon Oboe!

But what about CONSERVATORY Governments?

Well, Mr Major Minor in the 1990s crashed out of the ERM in Black Friday and finished with Fatty Clarke tripling the national debt

Queen Maggie in the 1980s succeeded in spawning three successive recessions and the Poll Tax.

Mr Grocer Heath in the 1970's brought the country to a screaming standstill with the Three Day Week.

Mr Super-Mac MacMillan created the STOP-GO economy, struggled with the balance of payments crisis, lost control of unemployment and had to tell us "we'd never had it so good".

In fact, the last time the Treasury was in credit, was when Mr Lloyd George was in charge!

The Conservatories, either alone or in coalition, ran the United Kingdom almost continuously for MOST of the Twentieth Century, interrupted only briefly for Labour Governments. If they were ANY GOOD at fixing the economy, THEY WOULD HAVE DONE SO BY NOW.

Quite simply, the Conservatories ALWAYS leave the country in a mess which would inevitably cause the next Government to crash and burn, even if Mr King SOLOMON was Prime Monster with Mr King MIDAS was Chancellor.

EVERY Government – Hard Labour OR Conservatory – leaves the Country BANKRUPT. That's WHY they leave the Country! They get VOTED OUT!

And quite right too. This is a DEMOCRACY. When the Government runs out of ideas and energy, when they lose their economic competence, when they start being more interested in their own pensions than the interests of their constituents, THAT is when it is time for the people to put them out of our misery.

Of course, what's SUPPOSED to happen is that Her Majesty's Opposition use the time IN opposition to come up with NEW ideas… which is where it all breaks down this year.

Which is why it is not really any wonder that more than 30% of people want the Liberal Democrats' Mr Dr Vince "the Power" Cable as Chancellor.

Only the Liberal Democrats have been HONEST about the need for cuts – and WHERE those cuts will fall – and only the Liberal Democrats have the PRINCIPLES and the POLICIES to make the tax system FAIRER. Only the Liberal Democrats have any IDEAS what to do now!

This was the Budget where the Chancellor TINKERED while Rome burned.

But if you don't like this one, don't be upset. There'll be another one along in a minute.


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