Politics

28 March 2009

Fraser Nelson reviews the week in politics

There is a third option, of course: to cut spending. In theory, Mr Osborne is committed to increasing overall government spending every year if elected — but I understand this pledge is unlikely to survive the drawing up of the manifesto. Insofar as Mr Osborne will discuss his plans at all, increasing spending is likely to be spoken of as an aspiration rather than a pledge. Real cuts are the grim but unavoidable remedy to a budget crisis caused by an explosion in government spending.

One Keynesian principle that the Tories would be advised to observe is his dictum that when the facts changed, he changed his mind. Every month, the size of the projected deficit grows larger. The latest estimate is that the government will have to borrow £180 billion to pay its bills in the coming financial year — more than the entire economic output of Ireland. Government spending is the last bubble left to burst.

In a speech in Birmingham a fortnight ago, Mr Cameron apologised for being part of a ‘cosy consensus’ on tax-and-spend and indicated he is ready to start again. Yet officially, both parties still propose increasing spending (albeit by a modest amount) regardless of the tax base, paying for it by almost doubling national debt to £1 trillion — while proposing an entirely tokenistic 45p tax for the rich. Rhetorically, Mr Cameron may have detached himself from Mr Brown, but economically the Tories still have him in a boxer’s clinch.

Once, it may have made political sense to minimise such differences with Labour. The decision to stick with the 45p tax proposal is an echo from this era. But when even the Bank of England is distancing itself from Mr Brown’s approach, it is time for Mr Osborne to stop taking his economic prescriptions seriously. It is now horrifyingly clear where they have led.

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HYUFD

March 26th, 2009 1:04pm Report this comment

45p is not that big an issue considering that the top rate was at 60p for most of the Thatcher years and provided it stays at roughly that level. In any case, I doubt that there will be much emigration by those paying it considering that Australia, Canada, France and Germany and most of Europe and China all have top rates at 45p or more. Even the US is going to raise the top rate under Obama.

Doug

March 26th, 2009 1:13pm Report this comment

Fraser Nelson smacks of double standards. Week in week out there are discussions about British culture, British integration and a sense of British nationalism. We want people to be more invested in the fate of the country. But this doesn't matter to Fraser when it comes to the wealthy. Apparently all those statements about British this and British that shouldn't apply to the wealthy. This is exactly what happened in the last ten years when the wealthy financial power brokers were excused from their responsibilities because of the tax revenue and money they bribed us with. Look where it got us. They were major players in the current economic downfall. And Fraser wants to excuse them again when it comes to the tough decisions of putting this country back on a sound footing. This isn't seventies when income and investment taxes for the wealthy could be double what they are today. There is latitude for tax increases. In any case it's about time that wealthy Brits were expected to get with the programme like the rest of the nation who have little choice but to suck it up, dig in, suffer and turn the country around.

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