Wednesday, June 23, 2010
Essentially a Tory Budget
On the overall strategy of cutting the eficit now and deeply, he says this:
"As the Nobel laureate Paul Krugman and others have argued, there is no rationale for cutting deficits so fast and so deep when the global economy is still barely out of the hole into which it plunged thanks to the banking crisis of 2008. It's economics-for-dummies that cutting spending and raising taxes reduces demand – someone who's just been laid off can't buy much – and could choke off recovery before it has begun."
Osborne presented well enough but what if this tyro finance minister has got it completely wrong? The criticism is that the government did not need to cut so deep and so fast; the real reason is the ideological one of shrinking the state. The same doctrine, in fact which led Thatcher to apply her medicine so ruthlessly and damagingly in the 1980s. It's one hell of a gamble Cleggy has taken, hitching his wagon to these fellow public school boys(sorry, can't help it if I so dislike them).
Freedland also deconstructs the boast that the budget is 'fair'.
1. Raising VAT to 20% may not worry anyone as rich as most in Cameron's Cabinet but it will certainly bear down on those on the minimum wage.
2. 75% of the attack on the deficit will come via cuts in departmental budgets- an average reduction of 25%, apart from the NHS, with some protection for defence and education. This will hit those dependent on public services like transport, housing, benefits like housing benefit. People without the funds to pay their rents will be forced to move out into cheaper accommodation, begging trhe question about fairness yet again.
3. Freezing Council tax sounds like a favour but in practice councils will have to cut the services on which so many poor and elderly people depend.
4. Capital Gains Tax, which has enabled so many fortunes to be made in the private equity field, has been restricted to an increase from 18% to 28% and not the 40% originally intended. What is 'fair' about succumbning to the blandishments of the bankers and others in the City who did so much to land us in this predicament in the first place?
5. And a £2bn levy on the banks is a drop in the ocean to this bloated industry.
6. Finally, I have seen a number of estimates suggesting the rich will suffer most losing maybe over £1000 a year, while the poor will lose only £300. But if you lose your job as a reuslt of the cuts, as hundreds of thousands will, you will find you have nothing to reduce in the first place, and the taxpayer will have to shell out benefits to compensate you.
This is essentially a Tory budget; no wonder Lib dem MPs are so pig sick. They'll be even more so when their members start to leve in droves along with their elctoral support.
A fairly sensible budget. I would like to have seen Health and International Aid get the same treatment. But it is a return to reality after year's of living in financial dreamland. For what it's worth, I don't see the budget as ideologically driven. The markets point one way, and Labour were dishonest to pretend they wouldn't have done this(in the extremely unlikely event that they would have won the election). It's just a happy coincidence that this wasteful corruption can be put to an end.
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