Thursday, April 23, 2009

A fundamentally unserious budget

A fundamentally unserious budget

Well, that went down well then.  Darling had two choices in yesterday’s budget.  He could have started down the long road of balancing the books, cutting public spending in significant ways and raising taxes to increase revenue.  Or he could have continued to fudge along as we were, increasing spending, and relying on monumental borrowing to tide us over.  No real surprise that he chose the latter option.

There was nothing in this budget – beyond the raw borrowing figures, which were jaw-dropping – to suggest that the Government have the faintest idea of how to get us out of this mess.  Indeed, there is plenty to suggest that they have no interest in getting us out of the recession, just in hanging on until the election and then handing the whole stinking mess over to the Tories.  Look, for instance, at the proposed reductions in spending.  None of it is scheduled to begin until 2011 – after the election, when all these nasty cuts can safely be blamed on the Conservatives.  Up until the election, public sector spending will actually continue to grow by 5.5% p.a. – the fastest rate since the early 1990s.

There is not even a cursory attempt to get serious in this Budget – the entire process is designed to tide Labour over until they can be put out of their misery.  Everything then will be Cameron’s problem and, hopefully, Cameron’s fault too.

The 50p income tax rate was introduced solely as a political heffalump trap for Cameron to blunder into.  If the Tories come out strongly against raising the top rate of income tax to the third highest in the West (which of course on pure economics terms they should) it will be used by Labour as a dividing line: we care about the many hard-working families; the Tories just want to cut taxes for the very rich through inheritance tax and income tax.  Unfortunately for the Labour Party, it’s such a blindingly obvious trap that the Tories barely even needed to shimmy to avoid it. 

There is, in fact, an easy way for the Tories to run this campaign: “The public finances are ruined.  The budget forecasts Darling made were fantasies.  There will be an emergency budget as soon as we can ascertain just how bad things are.  We favour a transparent, simple and low tax regime, so we can try to regain the economic competitiveness that Labour has destroyed.”  Simple, and avoids offering specific hostages to fortune.  Provided that the Tories set out the tune of their economic plans, which will basically be spending cuts immediately, with tax cuts to follow as they can be afforded, the exact words can be fudged for now.

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