The Chancellor’s claim that the UK economy is more ‘resilient’ than any other major economy to the threat of a downturn or recession was met with a shower of scorn: how can that possibly be so when our public finances are in worse shape than those of almost all our competitior countries and when our economy is so much more dependent than most of theirs on the one sector, financial services, which is clearly in the deepest trouble worldwide? As to the practical content of this dog of a performance: it was summed up by most observers as yet another sting on the middle classes, whose family motoring and wine-drinking costs will rise sharply, while their businesses receive no useful support or relief at all at a moment when the economy is in a dip that could all too suddenly turn into a nosedive.
Labour’s sympathisers in the media have welcomed another tinkering Brownian set of credit and benefit changes for the poor. But as so often with this government, they have already been revealed to carry the sort of bizarre adverse consequences that come from rushing out measures designed to grab headlines or briefly wrong-foot opponents. In this case it was all about ‘child poverty’: but as the sharp-pencilled Ian Cowie points out in the Daily Telegraph, the red book of small print that accompanied the speech reveals that the number of people at the bottom of the income scale who will now pay a ludicrously high marginal rate of income tax is about to increase by more than a million. How does that work? It affects those earning around £6,500 a year who are hit by the abolition of the 10p starter rate of income tax, and by the clawback of tax credits at the rate of 39 pence in the pound above £6,420 of income: it’s effect is to create a marginal tax rate of 70 per cent; and whereas 760,000 were already caught in this trap, more than 1.87 billion will be caught by after the budget changes.
Just how incompetent do you have to be to make a blunder as big as that? And just how disconnected from the real world do you have to be to present a budget so wholly inadequate to the economic circumstances of the day? Really, it’s enough to drive us all to drink, whatever the extra cost.