Digging down
Fraser Nelson 1:58pm
The IFS post budget briefing is becoming as anticipated by the media as the budget itself, and I'm sitting at the back with the crowds. The IFS spotted the 5 million losers from the abolition of the 10p tax band which Brown claims to have only noticed afterwards. So what do they see this time? My notes...
1. The Treasury forecasts that a chunk of the City that once generated four percent of GDP is never coming back. That accounts for £22bn of the projected deficit, the splurge is just £9.3bn. To me this acknowledges that debt-financed boom was just that, not stability as Brown assumed.
2. The £5bn efficiency cut in 2010-11 is actually a departmental spending cut, ergo real and bankable.
3. In total, the IFS sees £35bn of cuts from future spending plans. Carl Emmerson pointed out this was the figure Brown accused The Tories of planning in the 2005 election. In Brown’s own words, £35bn represents "Cuts so large, they can only be found by cutting deep into public services including schools, hospitals and the police."
4. Tax cuts announced yesterday are the largest since 1988 budget, Emmerson says. Not much competition, alas.
5. The IFS claim Darling has adopted Tory fiscal rules in his 'temporary operating rule', ie loose ambition to reduce debt/GDP ratio and balance budget over cycle. Both are meaningless, if you ask me.
6. Debt at 57% of GDP, forecast for 2012, would be the highest since their chart begins in 1973. The 8% deficit trough would be the deepest since the IFS’s records began in 1946. You could probably go back even further if you have the data, which they don't seem to.
7. HMT figures presume folk won't bring forward spending before the VAT rate goes back up again. Or that it will suck spending forward when we need folk to spend in 2010. Also worth pointing out the lack of dynamic forecasting model: HMT assumes VAT cut won't affect spending behaviour. In which case, why make the cut?
8. The IFS says the taxes on rich are "Equivalent to creating two short income ranges where marginal income tax is 60%" - the graph suggests these groups are around £100k and £145k. The IFS reckons folk can dodge this trap by making charitable donations, but what a palaver.
This headline 60%f figure will, however, be used to symbolize Brown’s tax the rich attitude, just as no one really paid Healey's 97% tax but its existence was symbolically important.
Previous
jones
November 25th, 2008 2:38pm Report this commentAre they seriously saying noone will pay the top rates?
I disagree. I think you must be quoting them wrong?
David Bouvier
November 25th, 2008 3:48pm Report this commentAll the Brown/Darling messing around with allowances (causing rates to go 41.5, 61.5, 41.5, 61.5, 41.5, 46.5 f' cryin' out loud) results in a system similar to but a bit worse than putting income tax up to 45% for people on £100-150k
I guess £100k is a bit too close to aspirational for lots of voters whereas he reckons £150k sounds unattainable to most.
Fraser Nelson
November 25th, 2008 3:51pm Report this commentJones, they are saying its possible to navigate one's way out of paying this 60% rate, bu adjusting your income to be just above or below the threshold. They are not saying that no one will pay it, just (I think) that no one needs to.
Will Jones
November 25th, 2008 4:02pm Report this commentFraser – do you now accept the national debt figure without PFI and pensions? Because it seems to me that much more should be made of this disingenuous sleight of hand. Healthy democracy requires public financial transparency, which this clearly is not. Why do commentators not make more of this?
TGF UKIP
November 25th, 2008 4:51pm Report this commentFraser, tomorrow at PMQs if the Tories have any sense, they'll take a page out the Labour Whips book and choreagraph loud cheers and laughter when Gordon gets up to start and thereafter loud laughter at his every response to any economy question.
The BBC last night and most of the papers today will have been bad news to Labour MPs and marginal seat occupiers in particular. Time to keep the sods subdued.
No doubt, though, some fool Tory will ask some fool question and give them back the initiative.
C Powell
November 25th, 2008 5:32pm Report this commentDavid Bouvier: excellent post. The tax rates are absurd and the abolition of the personal allowance for those on £100k and over is spiteful gesture politics at its worst.
Will Jones: we should add in the amount spent on the banks.
oldtimer
November 25th, 2008 5:49pm Report this commentThe choice of the VAT rate reduction is stupid in the
context of the present credit constipation crisis. The situation needs a
monetary laxative not a VAT rate cut, something the Conservatives have proposed.
The VAT change is worse than useless because not only will
it not work, it wastes another £12bn of scarce tax income.
Just about everyone I saw interviewed on BBC/Sky last night said it would make no difference to them. Even Paxman could not get any of his Newsnight guests to think of what they would now spend because of it. It was, of course, a bit daft to ask Yvette Cooper this question
because, probably, she is already well kitted out by the
taxpayer via the notorious John Lewis list.
I conclude that Brown, Darling, Cooper and co have no idea how businesses work and how cash and cash flow is king.
PS I tried to post this on an earlier thread, but your system did not accept it.
Neil
November 25th, 2008 8:00pm Report this commentFraser,
I work as a tax consultant and have been running fiscal models today. By reflecting the policy adjustments in real terms the watershed gross salary is £18,915 - anything above that and your withholding (tax and NI) increases on 08/09 in real terms. Note the Tories are saying £19k today so that tallies
The big revenue raiser is not the rate increases, nor the personal allowance abatement but the above indexation increase of the Upper Earnings Limit for National Insurance. This is what will hit Middle England.
Christian Gowers
November 26th, 2008 12:41am Report this commentFraser, why are you accepting that Debt/GDP is a useful measurement of anything, it isn't.
For Debt/GDP to remain constant debt must rise during booms and fall during busts, and we know that the opposite happens. All Dept/GDP is is a way for chancellors to justify spending in the good years.
Secondly, I can see exactly where he is going with the 60% bands, at the next budget he will formally acknowledge them as such, scrapping this personal allowance nonsense, and then he will gradually (or sharply) increase them. Within a few years he will decide to "consolidate" the tax bands by scrapping the 60% bands and making the 45% band into a 50% one.
He's too predictable is Gordon
Back to top