An effective article by Bruce Anderson in today’s Independent on how Brown’s playing politics with the public finances. Here’s a key passage:
“[Brown] is happy to risk further damage to the economy as long as he can inflict damage on the Tories. The only recovery which interests him is the recovery in his poll ratings. Today’s measures are not economic. They are political.
That is why they are based on a wrong diagnosis. In fact, the current ailments are not fiscal; they are monetary. Even before today’s increases, government borrowing was likely to break through the £100 bn barrier, so it would be absurd to claim that fiscal policy is too tight. Assuming that the weekend’s advance briefing are accurate, the government is proposing a stimulus of around one per cent of GDP. We are being asked to believe that while 100 per cent is inadequate, 101 per cent will work miracles. What nonsense.”
As James wrote earlier, there’s a strong sense that this 45 percent rate for high-income earners is purely political too. After all, despite the briefing push it’s getting, it’s hardly going to raise bucketfuls of cash for the Exchequer. Robert Chote, director of the IFS, is saying that only 400,000 people will be affected. Whilst, in answer to a Parliamentary question in 2006, the Treasury said that a 45 percent rate on those earning over £150,000 would raise only £1.2 billion – and that’s most likely not a dynamic assessment.
Then there’s the timing of the measure. It’s not expected to be introduced until after the next election – by which time, borrowing will be pushing £120 billion a year. So this tax hike is the equivalent of one percent of one year’s borrowing. In fiscal terms, it’s peanuts. A rounding error wrapped in so much hoo-haa.
All in all, it seems like the key aim of this income tax change is to box in the Tories, as James described. Call me an idealist, but I don’t think that’s any way to manage the public finances as our country’s economy takes a nosedive.
Comments