Sleepwalking to disaster – Budget 2011….
Perhaps the most impressive achievement by George Osborne today was keeping a straight face; claiming to present a ‘budget for growth’ while at the same time opening his statement by reporting on the revision down of growth figures by the Office for Budget Responsibility. Otherwise, the subliminal message was ‘this Chancellor isn’t for turning’. The focus on private sector led growth hasn’t worked thus far so, what seriously suggests if you continue along the same path it will somehow magically start working?
In that vein we should dismiss Luke Boizer’s well-put but, I would argue, fundamentally flawed case for Labour supporting Osborne’s Corporation Tax cut. Of course, we should want job creation etc, etc, but the assumption that cutting this tax will lead to the land of milk and honey is one that is based on faith, not facts. If the private sector were busy creating jobs (which it isn’t) then one wonders why the OBR is predicting a staggering unemployment rate of 8.2% this year. The jobs that do get created seem to be of an unstable nature ie, part-time or temporary, so we are led to the conclusion that rather than contribute to our economy what these companies will actually do is trouser most of the cut to increase their profit margins. I call as my final witness on this matter the Emerald Isles which tried such an approach to no avail.
Similarly, the ‘enterprise zones’ might best be described as a gigantic waste of time and taxpayers money:
The world’s foremost urban economist, Harvard’s Ed Glaeser, has already come out in opposition to these enterprise zones because, he argues, they create few jobs, at high cost
Once again, ideology and a belief in the private sector which is quasi-religious trumps economic rationality. Osborne’s resemblance to Nero, fiddling with his figures while the economy burns, is apparent in many places but one of the most glaring is the ‘sensational’ cut in fuel duty which really does insult people’s intelligence. Continued instability in the Middle East and, of course, inflation is likely to ‘fuel’ high oil prices for a significant time to come and thus negate the point of this measure.
It is this governments unquestioning faith in the private sector that will undo it. If the definition of insanity is to repeat the same behaviour over and over and expect different results; Osborne and the government are clearly clinically insane. Issues that caused the crash in the first place – such as the economies servitude to the finance sector similarly go unaddressed. Even when a levy is extracted from the banks, the money is taken from them, and then deposited straight back via the mechanism of the first time buyer scheme. It’s amazing just how unscathed the banks have been by the disaster they caused and this government can’t even bring itself to politely tell the banks that we own that we won’t be handing them more cash via gimmicks like the one above and that they have to do something for us instead – like reducing their lending margins.
No doubt Liberal Democrats will be ecstatic at the income tax threshold raising again but this policy does nothing to negate the clobbering given to those on lower incomes by rampant inflation, 20% VAT, wages that are frozen or falling and last, but by no means least, the cut backs in vital services these people depend upon. In short, it’s a pointless measure pursued as a Holy Grail by a pointless and soon to be electorally battered political party. If they were serious about tackling inequality they would be better advised to start raising wages as opposed to tax thresholds.
One to watch is the proposal to merge income tax and National Insurance which will be presented as a means of ‘simplifying’ things for business. It is actually nothing of the kind, instead its part of the broad package of measures pursued by the government to utterly demolish the public sector, welfare state, National Health Service and all and should be judged in that context. Labour should oppose.
Replying to Osborne, I get the impression Ed Miliband was quite brilliant at least in teasing out the negatives. However, a note of caution should be struck. Eventually, we are going to need some positives to replace those negatives. This is where the left, and Labour, need to work out a coherent alternative vision based on a serious restructuring and democratisation of the economy. Under this government, Britain is sleepwalking to disaster…its wake-up call will come on the streets of London this Saturday.