Thursday, April 11, 2013

Return of the eyebrows

We know already that Labour thinks that the Government is cutting public spending "too far and too fast". We also know that Labour thinks that where taxes should be increased, it should be on "the rich" and especially on "the bankers", and so we can expect an increase in taxation on the "rich". So let's play a little game.

A one-term Tory Government runs out of puff and loses, narrowly, to a Labour Government that has many of the same personnel, and mostly the same ideas as it had when it lost. It comes into office at a time of very gloomy economic forecasts, including rising inflation and a sizeable budget deficit. In its first budget, the new Chancellor announces a substantial increase in public spending, funded by increased borrowing and substantially increased taxes on the wealthy.

We've been here before.

With inflation already running at 17%, Dennis Healey increased public spending by an astonishing 35% in 74-5 and a further 25% in 75-6. Most of the cost of this was met in borrowing (the deficit sprang up to £8bn and then £11bn) but there were also tax rises - the standard rate was raised to 33% and the top rate to 83%. Corporation tax was jacked up to 52% - this was also the budget where tax on investment income reached 98%.

It's all a bit depressing. If Ed Balls really wanted to be like Dennis Healey, why couldn't he skip the early, lunatic years and skip straight to 1977?


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