The Budget bombshells revealed
Fraser Nelson 12:14am
An interesting spat is just breaking out over cuts. The Conservatives have a leak from the working of the Budget showing detailed projections in government revenue to 2013-14 covered by all the main Sundays. This suggests income tax rising from £140bn this year to £191bn in four years' time. The Tories say this is not explained by economic growth and that the gap - £15bn - is equivalent to 3p in the basic rate of income tax. Liam Byrne is pushing back, saying Osborne is trying to "mislead the British people" (as if the government would try to do such a thing) and that the increase was accounted for “the economy returning to growth, no more, no less”.
At first, I was a suspicious of the Tory analysis: income tax does tend to rise faster than the economy recovers in a typical post-recession, just as it falls more sharply in the downturn. But then I saw the leaked figures - and right enough, there is a large, whiskered rat. Income tax revenues are forecast to rise much faster than National Insurance contributions. There is no explanation for this. Corporation tax receipts are forecast to rise up from £29bn now to £43bn in 2013-14. Without a tax rise? Really?
Byrne is talking out of his hat when he says this is just tax revenues bouncing back naturally because HM Treasury's figures will include the made-up sum it pretends it will raise due to the 50p tax rise. I gather that Labour is trying to kill the story by saying the data is old. Not so. The totals were known, but the breakdown was concealed - perhaps because we'd see what dodgy assumptions they had used. These figures are new and fascinating.
My verdict: that The Treasury has no clue where this extra tax revenue is going to come from, and that the Tories are justified in trying to illustrate the size of this black hole by making the standard mechanism (of using PBR08 ready reckoners) to express it in terms of 3p on the basic rate of tax. The Spectator recently made an FOI request for the workings which purport to explain why the 50p tax would raise money (we're still trying to persuade Osborne that it's a ruse). Staggeringly, the Treasury claimed not to have any working. As if. The Instutite for Fiscal Studies made a successful request recently (pdf, p20) for the 45p tax - so I suspect the Treasury is lying.
Bottom line: the government has been making up the figures in Budget 2009, and is trying to cover its tracks. It will have been aiming to deceive not just the Tories, but the bond market about the real state of UK public finances and downplay the likely size of the deficit. Budget 2009 should have started with the words "once upon a time". It is now unravelling spectacularly.
PS. I should add that, as all these projections are for after the election, matters not a jot what Labour "would" do - by then, they'll be engaged in an internecine civil war on the opposition benches. Perhaps why HM Treasury is not taking these projections too seriously - the civil servants will know its a pre-election ruse. More seriously, if Osborne has identified a £15bn unexplained gap, it's one he will have to fill with spending cuts or tax rises.
Previous
Ray
September 20th, 2009 7:26am Report this commentFraser, you're priceless. Every day your graphs and analyses are being more wildly circulated in blogs and e-mails to those of our fri4ends and colleagues who even now have yet to fully wake up to what is going on.
When the sheer breath-taking scale of the cynical and shameful deceit this Government has perpetuated is eventually exposed and transcribed into history books, your name will be to New Labour what those of Woodward and Bernstein eventually became to the Nixon presidency.
Chuck Unsworth
September 20th, 2009 8:06am Report this commentThe Coservatives should now demand access to the books. It's clear that Treasury is unable/unwilling to provide information which the public is entitled to and which the public has paid for. It's patent that these figures are highly dubious.
The Treasury is either incompetent or complicit.
Jim
September 20th, 2009 8:07am Report this commentAll quite ghastly. By the way, I don't know if any of you have noticed, but the BNP's analysis of our current economic woes is getting sharper.
Coming from a Libertarian perspective, as I do, I have ranted on these pages as well as ConHome, that the government should reject taking on the bankers debts. I have seen no other party pick up on this point, as Ron Paul has in America.
However, today the BNP have an article up on 'Labour amateurs destroy economy' and they make exactly this point. The BNP is learning about economics quite quickly now. I wonder what will happen when the pound collapses and these debts come due?
I'd never vote conservative as they are big state, pro-immigration, pro-banker. If the general public starts to wake up and ask themselves the question 'why should we pay the bankers bills?', then that leaves them a choice between the Libertarians and the BNP. If they are worried about immigration, that leaves them the BNP. As all of the parties are big state, except the Libertarians this point may not be important.
Given the sudden talk of 20%, or 30% cuts, when 40% is more likely, it does look like our doom is at hand. The pound will crash before the election I believe, probably this month, perhaps next month because of the stimulus.
Next year promises to be interesting, I think I'll stay in Thailand for now. Good luck everyone.
Pete-s
September 20th, 2009 8:36am Report this commentI don't mind stating the obvious. Brown lied to everyone for many months about the cuts. A very stupid move by a stupid person, as whatever he says in the future, the reply can reasonably be: 'are you lying again'.
Silent Hunter
September 20th, 2009 8:44am Report this commentNothing underhand that this Labour Government now does surprises me anymore.
We are, as a nation, now run by spivs and criminals.
If I could afford to, I would emigrate with my family.
Unfortunately the Labour Government has destroyed my pension, removed my rights to Freedom of Speech and the right to protest, they now watch me where ever I go with their Big Brother surveillance state, they threaten me with their 3000 new laws and their nascent police state, they tax me to the point where I wonder if it's worth working at all and they then "burn" my hard earned cash on the bonfire of their vanities, like the massive welfare state, useless IT systems, repressive ID Cards, nuclear WMD's that we can never use, more Quango's than they know what to do with and the list just goes on and on.
Losing an election is just not good enough - they should all be hanging from the lamp-posts in Parliament Square the day after a popular revolution.
Moraymint
September 20th, 2009 9:32am Report this comment" ... it will have been aiming to deceive not just the Tories, but the bond market about the real state of UK public finances".
Some of us serfs out here have suspected (dare I say known) for a long time that the Blair/Brown/Balls political machine - and hence government of this nation - was founded on deceit. It seemed blindingly obvious to me from that cringing first day media circus of Blair entering Number 10.
How could it not have been when the three gangsters at the top of the foetid political pile that was/is the Labour Party were/are, each in their own way, confidence tricksters?
This whole Labour thing was founded on a scam: a brazen attempt to fool the British electorate into voting for a vacuous, telegenic politician who craved power for celebrity's sake. Just look at him poncing about the world stage today.
Behind the scenes darkly, Brown has been cooking the books for the thick end of a decade and assuming us all to be fools.
The more I listen to and observe the rumblings in our society at the moment, especially from the public sector unions, the more I think that this government's deceiving of the British people and the bond markets will eventually manifest itself as trouble on our streets.
It's just a matter of time now, and I suspect our politicos know this ... and are clueless how to prevent it ... if, indeed, social unrest can be prevented at all over the next year or two. How long before the people of Leeds get fed up living and working in their very own rubbish tip? How many more times will we see the Leeds situation repeated in some form or another up and down the land over the next couple of years?
The Blair/Brown/Balls tiumvirate has got a lot to answer for, with very much the worst yet to come in terms of the UK's socio-economic circumstances. I just hope Cameron and the Tories have a real measure of the problems ahead; still now, I remain to be convinced. The bond/financial markets may eventually precipitate drastic political action.
Irene
September 20th, 2009 9:44am Report this commentFraser:
Once again thank you for explaining it so clearly because judging from the coverage this morning it would suggest that George completely messed up.
TrevorsDen
September 20th, 2009 10:01am Report this comment"there is a large, whiskered rat." -- The BBC were happy to promote Labours line. What a surprise! (so your exposure is opportune)
Its perhaps doubtful that they are seriously planning a 3p rise right now - but the figures are just pie in the sky (or maybe 'whistling in the dark' is a better comparison). Made up figures to justify their claim that they can halve the deficit in 4 years - just with all their vague tweaking.
Indeed even as I write it seems to me all Labours economic plans are just plain whistling in the dark.
IH
September 20th, 2009 10:51am Report this commentI have just seen Osborne on Sky and I don't think he is explaining it as you have, or probably not getting the chance.
Everyone seems to be concentrating on the 3p increase in tax which was in the budget and not the specifics as you have outlined.
Fraser, can't you make an appearance somewhere and really explain it.
Moraymint
September 20th, 2009 11:44am Report this commentOn the specific issue of the Labour Party's spectacular propaganda victory over the other political parties these past 15 years and, therefore, its alarming manipulation of the minds and voting habits of the British people, this an excellent analysis from James Delingpole:
http://tinyurl.com/md4zkz
The article alarms me on two counts. The first is the extent to which the Labour Party's grip on misinformation has been, and remains as sinister and damaging as anything the Nazis or the Soviets could conjure up their heydays.
The second alarming issue is the Conservative Party's utter failure in countering the Labour Party propaganda machine for 15 years and, moreover, my sense that they'd like to be as good at propaganda as the Labour Party has been.
In other words, both of these two main political parties are as bad as each other. And guess who's going to pay for it? And guess again whether or not the likes of the British National Party will benefit in the end. How ironic would that be?
Irene
September 20th, 2009 3:40pm Report this commentWhy isn't Osborne or someone saying that the figures are old but the breakdown is new - because Labour, Sky and BBC are making Osborne look like an idiot.
michael
September 21st, 2009 9:35am Report this comment1p on nat ins, 1p on employers nat ins, 2p on employers tax in halfpenny increments.
employers cop it.... its all very predictable.
In Mr Darlings favour,(strange but true) profitability will rise sharply as job cuts kick in. Revenues should correspond.
Dave
September 21st, 2009 11:05am Report this commentFrazer, an almighty hat tipped to you sir!!!
I concur fully with what Ray has posted.
The Speccie has become required reading at mine...an EXCELLENT piece of journalism!
David
September 21st, 2009 11:47am Report this commentOnce again an excellent piece of Journalism. It is really frightening, however, that the worst projected deficits in history already assumed flows of revenue which are extremely unlikley to arrive. Even if there were substantial increases in tax the take is likely to fall as our tax rates are already discouraging enterprise and investment. Every time you think we have got to the bottom of this hole we find another step downwards. We are in terrible trouble.
Rainer Unsinn
September 21st, 2009 1:27pm Report this commentI've been suspicious ever since they came into Govt. No honest Govt needs the kind of propaganda machine that ZaNu Laybuh built. Those gaggles of communications managers or whatever ZaNu called their spin-doctors, had only one function - to lie to the public and make it sound like everything was hunky-dory.
Rainer Unsinn
September 21st, 2009 1:30pm Report this commentIrene
Why isn't Osborne or someone saying that the figures are old but the breakdown is new - because Labour, Sky and BBC are making Osborne look like an idiot.
They have said it, it's just that the MSM is bending over backwards to favour the Labour stance that these figures are not new.
Cuffleyburgers
September 21st, 2009 1:57pm Report this commentAs of Monday afternoon Paugh Waugh on the standard reckons this is explained by growth and fiscal drag - Fraser, comments please
Anna
September 21st, 2009 2:24pm Report this commentUm, these numbers were actually published in the Budget in Table C7... You just need to gross them up using the GDP data. May I suggest that all the hacks/Tories run their "leaks" past the IFS first for verification?
Name
September 24th, 2009 7:39am Report this commentShould that be 15, or 51 billion?
P Klitofsky
September 25th, 2009 6:06pm Report this commentNothing the Labour party does surprises me anymore.They were corrupt in 1945 just as they are now.Badge of office in this party seems to be a police record or dishonesty.What with Madams and people commiting perjury what next?
Charles E. Harley
September 25th, 2009 6:13pm Report this commentPublication of numbers in C7 is not misleading, merely irrelevant. Unless, of course, you practise to deceive.
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