The Horsell's Mouth Politics, pedantry and personal interests

Your exchequer needs you...

Looking at all the papers this morning, it seems that they are pretty unanimous in their distaste for the Pre Budget Report announced yesterday. Even the BBC led with a Conservative-slanted headline (the old “denies” trick frames the allegation neatly without defamatory undertones).

Labour has had a long time to think about this PBR. It has brought Alistair Campbell back onside to help Gordon overcome his daemons against DC and it was its own idea to have a PBR in the first place, presumably because simply having a full budget in the spring would have been disastrously downbeat so close to a “presumed” election.

Let’s look at some of the things we got -

• Moving the tax ceiling for NI increases to £20,000 when the average wage is £22,000
• Borrowing from 2011′s budget to fund an increase in pensions and benefits
• An expedient tax on bankers that while morally justified will achieve little
• Moving more people into the 40% tax rate
• Freezing on Inheritance tax threshold when a raising was promised
• A reduction in Bingo duty to favour Labour’s core vote in the north
• VAT increase to go ahead

Budgets have always been political so I’m not going to complain about that – Ken Clarke reduced income tax in the run-up to the 1997 election. All’s fair in politics and all that. But what this is goes beyond that – Labour’s umpteenth NI fiddle is a tax that is going to make employing people less attractive.

Their borrowing from 2011 to fund pensions and benefits is going to have to be clawed back after the election by whoever wins it. It’s a shameless, reckless action that goes against everything the past 2 years has taught us – just as world leaders meet in Copenhagen in an attempt to stop us borrowing global resources from the future, so Alistair Darling is borrowing money he doesn’t have from a point in time where he doesn’t have it either.

There’s a fair bit in there about bankers and rich people who earn more than £150,000 etc and I’m sure the Conservatives will be arguing that this is taxation against aspiration just as I thought they should in my previous post but one. I don’t oppose progressive taxation in principle but in practise it’s just posturing.

Barely anyone will pay any more tax than they do now and a good many will leave the country altogether, thereby reducing the tax take.

Many socialists insist that the country would be better without them. That is a petulant view that fails to understand this recession is not just the bankers’ fault; it is pretty much everyone’s fault. If you have borrowed on the value of your house, if you took advantage of cheap credit or if you drove demand on a product so its price increased and people had to borrow to purchase it, you played a part in the recession. I know I did.

The point is that blaming it all on the bankers is a government smokescreen to cover up its own failure properly regulating what was going on. Bankers are to blame, yes, but they are not by any means the only ones.

Nor in this budget is there any evidence that Alistair Darling has a clue where he will cut services in order to pay off our debt. My feeling is that he has given up on that one and is just going to leave it to the Conservatives to sort out. But it’s more important than that.

Our economy won’t be able to grow, our services won’t improve and we won’t see government action while this massive, crushing debt is hanging over us. From £1,000 per taxpayer in 2003-4, it’s now £6,000 per taxpayer today. The shackling effect of debt will spell the end of our economic pre-eminence unless we tackle it as soon as we can.

Thousands of families from all backgrounds have been forced into this during the past two years. Shocked into action and thoughts of savings, they have realised that in order to build reserves and invest properly (rather than through PFI-like schemes), they have to pay off their debts before they save. So they’ve cut their costs to do that.

The government’s idea is to keep spending in order that their income might increase and that money be used to pay off debt. But all the time that debt is increasing and any new income goes straight on trying to keep yourself straight and level.

Yes, there will be short-term pain for long-term gain from DC. But Labour’s Carry On Spending narrative is no comedy – it is a dangerous tactic that could lead to irreparable harm.