The Budget
Some good news; some bad news; and some very wild hopes on which to pin a future strategy.
Not that Labour seem to have a future as the party of Government.
The good news was the more sensible approach to progressive taxation with a 50% tax rate for the highest earners, as argued for here on many occasions. This involved scrapping a manifesto promise not to raise tax rates, justified by these 'exceptional' circumstances.
The bad news was the effect of the economic mismanagement on the public finances, which means huge effects on future spending, future taxes and the prolonged impact of the recession. The numbers are somewhat difficult to comprehend, but the impacts are going to be clear. Painfully clear.
Inflation will fall to -3% in September. That is to say, prices will fall by 3% in the year to September 2009.
Pensions and benefits are uprated based on the inflation rate to October. Oops. But Alasdair gave you warning about the bad news today. Wages settlements in the public sector will reflect the general economic circumstances, which means no pay rises this year and barely anything next year.
Unless, of course, an election is on the horizon when the survival instinct might kick in.
The wild hope is the expected rapid return to economic growth, with the 3,5% fall expected to miraculously reverse to a 1.25% growth in 2011 and become 3.5% growth in 2012. If that doesn't happen then the public finances are going to be under immense strain and the forecast income and expenditure plans are totally up shit creek.
But as the Tories are going to win the next election, why not give them a poison chalice whilst claiming that NuLab had such wonderful plans that would have saved the world if only you hadn't voted them out.
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Turning to Scotland, and the Scottish reaction to the Budget, I see a mixture of economic illiteracy and political opportunism mixing in a message that is potentially very attractive to the electorate.
As the economy grew over the past few years, then money should have been put aside. Just as you or I would pay off our mortgage or save some cash, rather than spending all our pay rises.
When the economy went bad, these reserves could have seen us through the bad times. Make the mortgage interest only. Draw down some of the savings, and survive the bad period.
That is called, counter-cyclical economic policies.
You almost feel sorry for Alasdair Darling having to make it clear that during the good times Gordon Brown spent all the spare money on boozy weekends in Benidorm, fancy designer clothes, a series of high-spec cars that he wrote-off in a ditch on the way home from the pub, and he's getting evicted because he didn't leave enough cash to pay the mortgage. Almost sorry, but not quite as he was a cheerleader for the economicmiracle illusion.
Bastards. Stupid bastards. Let them rot in obscurity after the election.
BUT, proposing we spend our way out of this when we have no money to spend is utterly irresponsible. But, politically attractive when you are never going to have to implement such a policy. If you are going broke, you don't try to max out your credit cards and take out new loans in an effort to remedy your financial position. You might tell others you are going to in an act of bravado, but given the mess we are currently in it is a position from which there a few right exits, and lots of wrong ones. That that is the probably the wrongest.
Not that Labour seem to have a future as the party of Government.
The good news was the more sensible approach to progressive taxation with a 50% tax rate for the highest earners, as argued for here on many occasions. This involved scrapping a manifesto promise not to raise tax rates, justified by these 'exceptional' circumstances.
The bad news was the effect of the economic mismanagement on the public finances, which means huge effects on future spending, future taxes and the prolonged impact of the recession. The numbers are somewhat difficult to comprehend, but the impacts are going to be clear. Painfully clear.
Inflation will fall to -3% in September. That is to say, prices will fall by 3% in the year to September 2009.
Pensions and benefits are uprated based on the inflation rate to October. Oops. But Alasdair gave you warning about the bad news today. Wages settlements in the public sector will reflect the general economic circumstances, which means no pay rises this year and barely anything next year.
Unless, of course, an election is on the horizon when the survival instinct might kick in.
The wild hope is the expected rapid return to economic growth, with the 3,5% fall expected to miraculously reverse to a 1.25% growth in 2011 and become 3.5% growth in 2012. If that doesn't happen then the public finances are going to be under immense strain and the forecast income and expenditure plans are totally up shit creek.
But as the Tories are going to win the next election, why not give them a poison chalice whilst claiming that NuLab had such wonderful plans that would have saved the world if only you hadn't voted them out.
---
Turning to Scotland, and the Scottish reaction to the Budget, I see a mixture of economic illiteracy and political opportunism mixing in a message that is potentially very attractive to the electorate.
As the economy grew over the past few years, then money should have been put aside. Just as you or I would pay off our mortgage or save some cash, rather than spending all our pay rises.
When the economy went bad, these reserves could have seen us through the bad times. Make the mortgage interest only. Draw down some of the savings, and survive the bad period.
That is called, counter-cyclical economic policies.
You almost feel sorry for Alasdair Darling having to make it clear that during the good times Gordon Brown spent all the spare money on boozy weekends in Benidorm, fancy designer clothes, a series of high-spec cars that he wrote-off in a ditch on the way home from the pub, and he's getting evicted because he didn't leave enough cash to pay the mortgage. Almost sorry, but not quite as he was a cheerleader for the economic
Bastards. Stupid bastards. Let them rot in obscurity after the election.
BUT, proposing we spend our way out of this when we have no money to spend is utterly irresponsible. But, politically attractive when you are never going to have to implement such a policy. If you are going broke, you don't try to max out your credit cards and take out new loans in an effort to remedy your financial position. You might tell others you are going to in an act of bravado, but given the mess we are currently in it is a position from which there a few right exits, and lots of wrong ones. That that is the probably the wrongest.
2 comments:
Angus
Bearing in mind that after yesterday's suicide note from Mr Darling, the rest of us are thinking of throwing oursleves into the Minch, please can we have the 'brown envelope' story in full, pdq. Some of us are fairly peeing ourselves in anticipation of these jaw dropping revelations. I'm even thinking of holding an 'at home' whilst gathering folk around the computer.
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