...a blog by Richard Flowers

Friday, March 25, 2011

Day 3734: Robbing Peter to Pay Paul


Master Gideon's second budget was really quite unexciting. What changes there were were moderate and predictable.

A bit off fuel; a bit more tax on the oil giants. A bit off company tax; a bit more bank levy. Another step towards the £10,000 personal allowance.

Then Mr Potato Ed stood up and read out the speech he'd written a month ago.

"Same Old Tories ," he said, "you're just robbing Peter to pay Paul."

He doesn't seem to understand: ALL government spending "robs" (taxes) somebody to "pay" (spend on) somebody else.

Perhaps Mr Bully Balls has been "explaining" it.

If you WANT to take less tax from one person, or more realistically one GROUP of people, then you have just TWO choices: either you SPEND LESS or you have to take the tax from SOMEONE ELSE.

(Yes, you can BORROW it, but that's only taking it from a "someone else" who just happens to be in the FUTURE, i.e. when they are the someone who will have to pay back your borrowing.)

Last year, in the emergency budget and then in detail in the spending review, we decided how much we would cut spending this year, and so how much we would raise in taxes (and how much borrowing we would need too).

We haven't changed those numbers.

And that's GOOD because last year's budget was quite painful enough already! Cutting spending even more would be AWFUL. But equally, cutting spending less would only PROLONG the AGONY – if you're GOING to take a trip through HELL, swerving from side to side is only going to make it take LONGER!

So Master Gideon's budget was what we call "fiscally neutral" which just means it raises the same AMOUNT of tax but in different WAYS. Or in Mr Ed's language: "choosing to rob different people".

For example, with the cost of fuel rocketing, the Government could hardly fail to curb the fuel tax escalator, and that's what Gideon did. But forgive me if my heart fails to bleed for the oil companies whose super-massive profits will be taxed a bit more to raise the same amount of money from them instead.

What we're doing is moving the tax burden from families who are finding it hard to make ends meet because of the price of petrol going through the roof onto the oil companies who are seeing their profit margins soar because of, er, the price of petrol going through the roof.

When Hard Labour do this, it is called "redistribution"; when the Coalition do it, apparently, it is called "robbery".

Someone clearly slipped Mr Ed a bit of paper at the end of his peroration, pointing out that his reply to the budget speech had not actually mentioned any of the points IN the budget speech, so he tacked on a bit about the 1p cut in fuel to say "ah ha, but you put up the VAT which added 3p to the cost of petrol! Ha!" So, what, Mr Ed would have preferred us to KEEP the fuel escalator price increase and put petrol up MORE? What's that you say? Hard Labour would have reversed the VAT increase? If you were PAYING ATTENTION you would have heard Master Gideon say he'd LOOKED at that and it would have been ILLEGAL.

And of course it would have been three times as EXPENSIVE. That is, we should have had to raise three times as much tax from somebody else to make up the difference. Or cut spending by ANOTHER six billion pounds on top of all the cuts that have been forced upon us already.

(And that's why Gideon didn't reduce the duty by THREE pence and cancel out the VAT increase – it would have had to come from somewhere!)

NEITHER of these options are in the Hard Labour way of budgeting: they would DUCK the difficult choice and just BORROW the difference.

Which of course is robbing Peter's CHILDREN to pay Paul.

And remember, the WHOLE POINT of this Age of Austerity is so that we STOP DOING THAT!

That's why we've raised more in taxes – VAT, National Insurance, bank levy and others – and why from next month we really start with these awful spending cuts. It's not for a laugh or for ideology or through sheer bloody-minded ignorance of the state of the economy; it's so that we will start to close the gap between what the government gets in and what it pays out.

This, fundamentally, is the difference between the Coalition's position and the one that Hard Labour are espousing (as much as they'll admit to ANY position): WE say that we have to get the country's finances under control in order to achieve economic growth; Mr Balls says that you've got to achieve some growth before you can hope to get the country's finances under control.

This is why he reacts with such GLEE to every new BAD statistic that comes out. He likes to say that the economy was in recovery until the Coalition yanked out the IV drip of continued borrowing.

Don't get me wrong; I'm not saying that the figures are NOT bad; in fact I think they are appalling – inflation is up (again!) to 4.4%; unemployment is up (again!) to a seventeen year high, and, worse, an ALL TIME high for youth unemployment; and in some ways worst of all, Government borrowing, the POINT of the whole thing, after a good month in January is up (again!) in February.

But I do not think that these are our fault. Economies just don't turn around that quickly. We were left with an economy badly damaged from the banking crash that, far from recovering, was in fact screaming out of control just as Labour were ejected from the driving seat. Keynes may be RIGHT that you can kick-start an economy out of recession by investing in public works, but Labour have spent YEARS borrowing money to fund the ILLUSION of economic activity – public sector jobs and construction projects – so much that it's now a busted flush. Like the Wizard of Oz you HAVE to keep beavering away behind the curtain JUST to keep up the illusion, because when you stop, well, THIS happens!

So I think that these figures are a RESULT of a decade of Labour's mismanagement, covered up by borrowing and now revealed as we stop shovelling money into the black hole they've left.

Of course, Mr Balls, contrariwise, says that the figures are caused by US, by the Coalition's plans to bring borrowing under control i.e. caused by the cuts that, er, haven't happened yet, just as December's poor sales were caused by the VAT rise in, er, January.

Of course, Mr Ball's ALSO says that there was NO structural deficit during Hard Labour's time in office. Well, since they clearly DID run a deficit every year, he must be saying that his government presided over an EIGHT YEAR LONG RECESSION. And THEN hit the banking crash!

So if SOMEONE from the Hard Labour front bench tells you that if they had still been in power there would NOT have been a contraction in the fourth quarter last year… you can be sure that it's BALLS.


You may well think that I've concentrated too much on Mr Potato Ed's REPLY to the budget, but really, Master Gideon just wasn't that INTERESTING.

With not a lot of money left, there were lots of LITTLE schemes – enterprise zones, apprenticeships, support for first time buyers, some stuff with railways – but nothing startlingly major. After all, there are only so many ways he can say: "No changes; economy still rubbish; nothing to see here."


Lib Dem manifesto, front cover, pledge to increase the basic allowance to £10,000 by the end of this Parliament; today's Budget, another big step to delivering.

Tory manifesto, big speech by Master Gideon, pledge to cut Inheritance Tax; today's Budget, umm, tax cut limited to charitable giving.

I think that's what we call a LIBERAL DEMOCRAT-Led Coalition.


Bernard said...

"Tory manifesto, big speech by Master Gideon, pledge to cut Inheritance Tax; today's Budget, umm, tax cut limited to charitable giving.

I think that's what we call a LIBERAL DEMOCRAT-Led Coalition."

I love these Lib Dems policies:

-tripling student fees
-a planned cap on immigration
-cuts to front line services
-a top-down reorganisation of the NHS with bonus privatisation
-reductions in corporation tax and the abolition of the 50% upper rate
-competition laws relaxed for our best friend Murdoch

But it's all Labour's fault, right?

Millennium Dome said...

Hello Bernard, thanks for that. Glad you're amused, but…

"I love these Lib Dems policies:"

"-tripling student fees"

Liberal Democrat policy is to abolish tuition fees, do pay attention.

In the face of Labour and Conservative support for increased fees, we negotiated a much more progressive system than the one that Labour introduced

"-a planned cap on immigration"

Mitigated by intervention from Vince Cable

"-cuts to front line services"

More money for schools, more money for the NHS

Funny how it's mostly Labour councils who are cutting frontline services (while paying fat salaries to chief executives); Liberal Democrat councils are among the most efficient.

"-a top-down reorganisation of the NHS with bonus privatisation"

Which we voted to oppose less than a fortnight ago; you really aren't paying attention

"-reductions in corporation tax…"

Which are GOOD for growth: letting businesses grow makes for more jobs; incentivising companies to move to the UK (or move BACK to the UK) means more jobs.

Are you interested in creating real jobs?

And it's paid for by a bank levy that raises more every year than Labour's "bonus tax" raised in total

"…and the abolition of the 50% upper rate"

Which happened when?

You seem to have forgotten that Labour Chancellor Alistair Darling said it would be temporary.

"-competition laws relaxed for our best friend Murdoch"

Imposed a tighter deal on him than the European Court would have demanded; forced him to sell of Sky News. Is it perfect? No. Is it tougher than the completely free hand Labour let him have? I do think so.

"But it's all Labour's fault, right?"

No, you couldn't even get that one right.

Labour are to blame for running a budget deficit during the boom; for aiding and abetting the bankers with their more-Tory-than-the-Tories light-touch regulation (when the Lib Dems were warning them about the levels of debt); for making the tax system insanely complicated, for lumbering us with billions of pounds worth of PFI commitments; for making a whole load of promises in early 2010 when they already knew that there was – as Liam Byrne said – no money left to pay for them; and for blowing billions on databases and ID cards and above all an illegal war in Iraq.


The World economy suffered a global collapse because the bubble in over-priced securities (backed by mortgage loans that were not worth what was claimed, supported by cheap credit coming mainly from the emerging economy in China) burst.

British banks were implicated to the hilt in that, encouraged and supported by the Labour Chancellor and then Prime Minister: Gordon Brown.

Who said he'd abolished boom and bust? Gordon Brown.

Is it "all" Labour's fault? No, but that does not absolve the Labour Party – and people like you, Bernard, who seek to make excuses for them – from their (large) share of the blame.

And even if it did, it would not alter the economic situation that we face now. Where Labour had a golden legacy of the boom years and pissed it all away, the Coalition are left picking up the tab.

Bernard said...

The point is that most of your responses can be summed as:

"These aren't our policies - but we're making the best of a bad situation."

If we're lucky, someone in the Lib Dems will stand up to Andrew Lansley and the economy will bounce back in the second half of the year.

If we're unlucky, Operation Human Shield will continue in full swing and it will be a few hundred more years of First Past The Post.

Unknown said...

By the way, my name is Bernard, too, (I was in LDYS with your Uncle Alex), and I think that you're a jolly interesting and convincing elephant.