Friday, March 26, 2010

Black holes and baby universes...

Black holes and baby universes...

A long time ago, I commented on the traditional New Labour battle plan – declare that any proposed Tory tax cuts would result in a ‘black hole’ in the public finances, and that this proved that they were irresponsible and that nurses would starve in the streets etc.  Ridiculous of course – as I said at the time £6bn is a rounding error in modern British finances, not a black hole.  The situation has, as they say, developed not necessarily to the advantage of Britain’s public finances.  We’re in the red to the tune of £160 odd billion a year.  Now that’s what I call a black hole.

Back in those heady far-off days when the annual borrowing requirement was a mere bagatelle at £40bn a year I thought, perhaps a bit optimistically, that this line of attack had finally been put to bed.  How, after all, can one shout about figures being out by £5bn or so, when your own sums are out by nearly 10 times that?  Let alone when they are out by more than 30 times that amount?

Easily, apparently.  Andrew Grice in today’s Independent (Moscow edition) makes precisely this argument in relation to Tory plans to reverse the recent rise in National Insurance.

The move could be the centrepiece of the Tory manifesto. But it would deprive an incoming Cameron government of about £7bn a year of revenue and, to have a credible platform, the party would have to spell out how that would be found.

We’re facing spending retrenchments on a scale not seen since the 1920s and Geddes Axe.  Darling is admitting to cuts on a greater scale than Margaret Thatcher’s (which is not all that hard, given that public spending rose nearly every year she was in power).  While this does mean that the Tories are going to struggle to cut taxes very much over the next Parliament, and may indeed raise them in the short term, it also means that getting all hysterical over unfunded cuts of £7bn is rather missing the wood for the trees.

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