The Bankers’ Budget

Nobody would expect a fair budget from George Osborne. The Chancellor was never going to give a budget that benefitted the many over the few, or one that put the realities of everyday life above right-wing economic dogma. Expectations suitably adjusted, we can perhaps take small comfort from the 50p tax band “only” being cut to 45p. Ed Miliband gave a sterling speech in response, and I raise a glass to the intern who wrote the jokes. Professional hacks will be casting their own analysis; what follows is my personal take on some of the details.
 
The Chancellor’s big spin on this budget is that it “rewards work”.  We already know that under-18s are to endure a cut in the minimum wage. In the UK it is possible to work a 40-hour week and still live in poverty. The way to make work pay is, surprisingly enough, to actually make work pay, by implementing a proper living wage. Today we heard no commitment on improving the pay of the low paid. It would be naive to ever expect one from a Tory Chancellor. Increasing the income tax threshold seems reasonable, but not when even the poorest are still hit by VAT, and duty on fuel, alcohol and tobacco. What Osborne gives with one hand, he takes several times over with the other.
 
Projections for economic growth and for a fall in unemployment are welcomed.I only hope they hold true. As far as I am aware the budget made no specific commitments relating to the latter. I fear that further cuts to the Department of Work and Pensions will only result in more inhumane box-ticking and the harassment of the vulnerable. The Government – as ever – has put all its faith in the hands of the wonderful private sector.
 
On the 50p rate, the detail most comprehensively leaked, news was always going to be disappointing. Having endured two years of the government chaffing on about deficit reduction, one could at least have assumed that they intended to maximise tax revenue. Basic maths will tell anyone that a 50p rate will raise more by its presence than its absence (“Laffer Curve” / wishful thinking / pseudoscience aside). Osborne himself stated that the rate raised around £1 billion. To me a lot, to him “next to nothing”. Cutting it will cost £100m. That’s a lot of disabled children who will have to go without.
 
The moral case for the 50p rate is even more clear cut – there can be no reason why someone “earning” in excess of £150,000 per year needs a penny more. Greed can be the only motive, and the one which leads to tax evasion and avoidance. It will be argued that such non-payment means that the tax rate might as well be cut. Just apply this same rational to other crimes such as burglary and murder – “You’re never going to catch every criminal, might as well legalise it!” – to see what a fallacy it is.
 
Tax evasion is “morally repugnant” according to Osborne. It is hard to shake off that dirty feeling that comes from agreeing with him – especially given those are often my own words. Tax evasion, and avoidance, are both morally reprehensible. They are as much a theft from the community as your typical off-licence robbery, in scale perhaps more so. The problem is that Osborne is the last person I would expect to do anything about it. I fear that despite pledges to the contrary, he will be all talk and no trousers. Every spending decision taken thus far by the government has convinced me that it is a government of the rich, by the rich, for the rich.
 
Miliband’s best line came when he challenged the government front bench to admit who among them personally benefit from the budget. Furthermore it is worth considering how many prominent Tory donors will also benefit. Such borderline conflict of interest makes a mockery of democracy – and will certainly not be reported in the Tory press. The headlines will trumpet crumbs from the rich men’s table, and ignore the widening inequality that will be a direct result of Osborne’s decisions.
 
Labour should commit to restoring the 50p band, and to actually getting serious on tax fraud, just as we should commit to renationalising the NHS. Anything less will be to continue to concede to the rightward drift of our national political discourse.
By Chris Nash

Growth and all that jazz

Chris Riddell's Observer comment cartoon 15.08.10

Sorry for the break in blogging, we’re trying to up the ante this year

Probably the most pressing of all news items is the recent dismal growth figures. Over a year ago when Cameron and Osborne claimed we were “Out of the woods” and “Out of the danger zone”. How very wrong they were. With the final quarter of 2011 seeing a contraction of 0.2% this then means that in the last 15 months since Osborne’s Comprehensive Spending Review (CSR) in October 2010, we’ve had a massive 0.3% of growth. Cameron then has the audacity to blame the recent growth figures on the Euro crisis. Well I’m sorry, the UK economy has been stagnating long before the crisis began to effect.

Cameron you said it yourself, “I take full responsibility for everything that happens in the economy.” then take responsibility and change course!

Max

We hate to say we told you so

28.11.11 Martin Rowson

Today we saw Gideon (George Osborne) unveil his first ever Autumn Statement (last year it was a Comprehensive Spending Review) which used to be Brown and then Darling’s Pre-Budget Report, although it’s still the same thing more or less.

What we saw today was a Chancellor willing to blame everyone except himself for his own failures. Gideon may claim as much as he likes that the growing crisis in the Eurozone may have put a dent in its works, but that would just be disingenuous as it’s not at that stage to truly have an impact on a non-Eurozone country such as the UK.

But in a nutshell what we had is:

  1. Growth forecasts for UK economy cut 0.9% this year and 0.7% next year (And we all know you can’t truly get the deficit down without growth)
  2. Borrowing forecasts revised up – an extra £111bn to be borrowed over five years (This was the one thing they set about to do, this was the be all and end all test of the Coalition and they are set to fail upon it)
  3. Pay cap of 1% for public sector workers once two-year pay freeze ends (Which is really going to encourage consumer confidence and spending, the true engine of economic growth)
  4. Unemployment to rise from 8.1% this year to 8.7% next year and more public sector jobs forecast to go – 710,000 over five years (Again, nothing new there)
  5. Credit easing and numerous infrastructure projects (I will welcome these, but it’s rather ironic after 18 months of austerity mantra)
  6. January rise in regulated rail fares to be capped at 6.2%, not 8.2% (While this is certainly better but as a semi-regular rail user, this needs to be below RPI, 5%, we already have the most expensive rail fares in Europe)
  7. Doubling of free childcare places for deprived two-year-olds to 260,000 in England (The one true policy I’m sure we can all get behind)
  8. 3p fuel duty rise due in January to be delayed or frozen (Which is still entirely negated with the rise in VAT in January)
  9. Bank levy to be increased (Which is all very well but not when you remember this is balanced out with the cut in Corporation Tax)

So essentially, we have growth being revised down for the fourth time in 18 months and borrowing expected to be £111 billion higher in 2015.

So when Gideon said “we are out of the danger zone.” around a year ago I didn’t think we’d get around to us saying “we told you so” so soon.

Max

An Englishman’s Home is… beyond his wildest dreams

For some reason, going back into the mists of time, the British people have an obsession with private home ownership, even though most of us should technically never be able to afford one without borrowing. In Continental Europe, people are far more satisfied to rent, either from private landlords or more ‘trustworthy’ institutions – maybe there is some correlation between these statistics and the lower levels of stress and dissatisfaction there compared to the UK.

Nevertheless, we are where we are, and there is no going back on the ‘Right to Buy’ scheme introduced by Margaret Thatcher in 1981 however much we might want to reverse it (indeed, many of us may actually agree with it, being as it was extremely popular with the low paid, who for the first time had a stake in their council homes and some sense of freedom, however delusional). What we have now is a housing crisis coming at the worst possible time, during a dire economic climate caused by sub-prime mortgages themselves.

Tensions over housing and its’ availability have an effect on many areas of life, including levels of antagonism towards immigrants, the environment, growth, inequality in our cities, personal debt, and of course the Daily Mail and Daily Express front pages. We need to deal with this timebomb if we are to stem a rise in far-right politics and avoid a lost generation of young people. However, worryingly this government is going about it completely the wrong way.

Not only has it made squatting illegal when there are more empty properties than there are homeless people in this country, but it has appallingly placed a cap on housing benefit, effectively pricing the poor out of our capital city and entire swathes of the country – those parts of the country which have job vacancies. The government is slashing the public sector and saddling young people who go to university with ever higher debt, meaning their chances of even being able to look forward to putting down a deposit are negligible.

What our housing market needs is a Keynesian-style investment in house building and construction; not only would this lower house prices for first-time buyers, but it would also ease tensions in the community and increase demand in the economy generally, leading to growth and the beginning of the end of the deficit that the ConDems love to remind us about so much. As a bonus, it would even lead to a return of Location Location Location to our TV screens. Gordon Brown’s plan before the proverbial shit hit the fan in 2007 was to build 3 million new homes – we need this sort of commitment now, coupled with a healthy proliferation of 1940s-inspired New Towns (hopefully better designed than the likes of Milton Keynes) and more social housing. Today’s announcement from Cameron and Clegg about guaranteeing 95% mortgages may look like a repetition of exactly what went wrong in the first place, but should not be dismissed entirely, as it is the taxpayer, not the banks, helping first-time buyers, and there is real potential for an increase in demand as a result.

However it goes nowhere near far enough. If we can’t get people to fall out of love with the owner-occupier dream, then we need to build, build, build, spending more money in the short term to get us out of the mess in the long term.

3 million, I wouldn’t rule it out

Yesterday we saw a good sign in the economy that inflation had fallen from 5.2% to 5%. We welcome it but it’s still not good enough, especially when Eurozone inflation has remained at a reasonable 3%. It seems however, this is rather irrelevant with the news released today by the Office of National Statistics (ONS) where unemployment has risen to 2.62 million from July to September.

That’s right, the Prime Minister and Chancellor of the Exchequer who over a year ago claimed “we were out of the woods” now had the audacity to have one of their Ministers for Work and Pensions, Chris Grayling, claim that “What we’ve seen over the last quarter has been the real impact of the crisis in the eurozone”. That’s right, they’re blaming their old punch bag, Europe. Don’t get me wrong, the crisis in the Eurozone is severe, but it in now way at a stage to make a real impact on unemployment figures, especially in a non-Euro state.

With the number of people claiming Jobseeker’s Allowance rising to 1.6 million by 5,300. The highest number of women out of work since February 1988 at 1.09 million rising by 43,000. Youth unemployment breaking the 1 million mark at 1.02 million with a rising by 67,000 and the unemployment rate of 8.3% being the highest since 1996 and the total number of unemployed people the highest since 1994, it’s about time Cameron and Gideon took another look at their plan.

Max

The pressure mounts

With inflation around 5%, consumer confidence falling for four months on the trot, business confidence falling to a two year low, growth flat-lining in the past 9 months and growth expectations themselves being cut, you would have thought Gideon (George) Osborne would think things could not get any worse.

Well apparently they can. It seems 100 leading economists have written into the Observer to tell Gideon to adopt a plan B. Now while letters like this have been done in the past, the difference being that this time it has an alternative outline. It’s an alternative Miliband and Balls should take head to:

  1. An immediate halt to cuts, to protect jobs in the public sector. (Although I wouldn’t not cut entirely, for one, I’d cut the renewal of Trident).
  2. A new round of quantitative easing but the money wouldn’t go to the banks. Rather to finance a “Green New Deal” to create thousands of new jobs.
  3. Benefit increases to put money into the pockets of those on lower and middle incomes and give a boost to spending.
  4. A financial transaction tax to raise funds from the City to pay for investment in transport, energy and house building. (Robin Hood Tax anyone?)
  5. Introduce a truly progressive tax system so that those at the bottom don’t face the greatest burden proportionately (Or simply having the rich pay their taxes will be a start)
  6. Introduce a tax on land value to increase revenue and reduce the possibility of another debt-fuelled housing price boom.
  7. Copy South Korea and China’s model of state assistance for industry by creating a British investment bank. (Something that Lord Mandelson was beginning to champion in the last year of the Labour Government)
  8. Invest in transport and infrastructure to create jobs, but also to encourage people out of their cars and into trains or on to bicycles
  9. Judge the economy not on whether there is growth in GDP, but on a new catch-all criterion that takes into account the desire for minimal unemployment, and for work-life balance, economic and social stability, and job satisfaction.
So Gideon, even though we know you wont, please take heed of the recommendations. Simply living in the nostalgia of a failed plan of the early 1980s wont guarantee success. And Miliband and Balls, these recommendations should be the essence of your policy review, take them on board!
Max

We told you so

Going to use a bit of the Brigid Jones BULS blog formula this morning.

It turns out there’s going to be the biggest drop in middle-income families incomes since the 1970s and so pushing 600,000 more children into poverty according to the IFS. This is while Gideon (George) Osborne has announced a £840 million tax break for multinationals using tax heavens while it turns out the amount of tax money lost in the FTSE 100 by tax avoidance is estimated to be £18bn. So much for the cuts being “progressive”.

To insult to misery, it turns out public sector job losses will 50% higher than originally predicted. So much for Cameron’s pre-election claim that any Minister who came to him with front-line public sector cuts would be told to go back and have a rethink.

Max