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.
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