...a blog by Richard Flowers

Thursday, March 17, 2016

Day 5554: Zombie Economics Rising


Featured on Liberal Democrat Voice

In Gideon's Reheated Black-Hole Budget nothing actually adds up. It's almost like he's not got the Lib Dems there to do the maths for him!

Tax on sugar, that was his (sugar-free) Easter Bunny – money he immediately spent again, so does nothing to bridge the gap between taxing and spending, and a balanced budget slips further beyond his reach.

The growth forecasts are down, the borrowing forecasts are up… and then, like an underpants gnome, with one bound* he leaps to surplus by 2020.

But how?

The economy is slowing, the deficit is growing… so let's cut taxes.
  • Tax cuts for big corporates – welcome, "Google", to tax haven Britain;
  • tax cuts for the oil & gas industry – the effective end of the carbon subsidy, and so much for greenest government ever;
  • tax cuts for landlords – paid for by local councils who will have to find the £6 billion quid he'd promised to hand back to them and now just evaporated;
  • and tax cuts for those hedge fund dealers and stock market speculators with a return of the Capital Gains Tax rate to the giveaway levels that saw bankers pay less tax than their cleaners under old New Labour.
I do understand that if you are, shall we say, at the DRIER end of the economic paddling pool, tax cuts are the cure for all ills. But if you admit things are going pear-shaped and you want to stimulate the economy, for goodness sake, do as the Coalition did and target them on the people who will SPEND!

So even though Gideon is putting up the personal allowance too, like the good ol' days, UNLIKE the Liberal Democrats' policy he's raising not tightening the threshold of the 40% band, so that the lion's share of the benefit goes to the higher rate taxpayers.

It's unaffordable when there's still a deficit; it's unconscionable when you're snatching £30 a week from the hands of the disabled; and it's unmistakable for anything other than a blatant sweetener ahead of the EU referendum (and subsequent Tory leadership bloodbath). Has a BRIBE ever been so naked?

Seven billion quid on a middle-class give-away. And, as the saying goes, that's not all.

George's idea of "doing something for the young folks": if you're young and rich and can afford to put £4000 into an ISA, he will make you even richer. Who can afford that? He might as well call it the "Trust Fund ISA" and be done with it. Hard luck if you're a struggling young person, though, or disabled, or expecting your Universal Credit. Or have had your maintenance grant turned into a loan.

This is a budget for young people the way the BLACK DEATH was an "opportunity" for serfs in the Middle Ages – one they were UNLIKELY to SURVIVE!

It's almost like Master Gideon is on a mission to undo all of the progressive tax changes under the Coalition that led to a more equal Britain.

Even that sugar tax, so beloved of Jamie Oliver, disproportionately hits the poor.

And the giveaways to chums continued into the capital budget too.

Billions to be spent on infrastructure… so long as it's Crossrail 2. Or is it the Elizabeth II line now? And to places that vote Tory. He even admitted as much: "When the south west votes blue we listen." Has a BRIBE ever been so naked? Again?!

Promises to fix the flood defences for Yorkshire and Cumbria amount to un-cancelling things he previously cancelled. And then re-announcing the un-cancellation as new money.

And as Labour's Andy Burnham tweeted: the Northern Powerhouse turns out to be an extra lane on the M62. Hooray! Something else for Labour to abstain on, then.

It's EIGHT years since the crash and the terrible depression (aka Mr Frown). And that's about as long as economic cycles last. Or to put it another way, that's about as long as the Chancellor's luck can hold. Gideon's warnings of "storm clouds on the horizon" show that he knows it. He's getting his excuses in early. But if as seems likely we go into another downturn in the next couple of years, if it turns out that these WERE the "good years", it's going to be apparent how very NOT FIXED the roof was when the sun was shining. How the long-term economic plan was neither long-term nor economic. Nor a plan.

In the play Timon of Athens, Mr Timon is bountiful with his generosity to all his friends until his cash runs out, and then discovers that none of them will help him. That's you, Gideon, that is.

The albatrosses are coming home to roost. They're like chickens, only bigger and nastier and they bury you in guano.

Though at least it will be sugar free.

*It appears that the surplus in 2020 is down to changes to Corporation Tax that bring forward receipts; in short, he gets two years tax in one. Obviously that's a one-off gain – so a one-off surplus. Another of Gideon's tricks.


Clearly Voodoo Economics is the new black as, over in Americaland, John Kasich seeks to paint himself the new Ronald Reagan. Governor Kasich is of course a fruity wingnut, but STILL not as outright berserk as Senator Cruz or as completely unhinged as Mr Drumpf. Unfortunately, he needs to win 109% of the remaining delegates in order to secure the Replutocrats' nomination. Unless it goes to the first contested convention (outside of the West Wing) in living memory…