Society

Thursday

13 Mar 2008

A Budget response

The Chancellor’s projections for economic growth look to be on the sanguine side. Having said that, the Treasury’s economic forecasts have tended to be closer to out-turn than has the independent consensus over recent years. Whether they will continue to be so in these uncharted economic waters remains to be seen. In terms of the state of the public finances, the Treasury’s recent borrowing projections have consistently been over-optimistic and many will consequently take them with a pinch of salt. If this again turns out to be the case, it will have consequences for the sustainable investment rule, which will come perilously close to being broken even on yesterday’s central

John Mcfall

The Government have got their priorities right

Alistair Darling’s first Budget was a Budget for uncertain times. Given the current global turbulence, the Government have taken no chances. This is not the time for a showstopping Budget. But the Government have nevertheless reconfirmed their priorities in this Budget, and have shown they are determined to achieve their social goals. This Budget will help the elderly, with raises in Pension Credits and winter fuel allowances; it will help those struggling with rising energy prices; and it will bring an additional 250,000 children out of poverty, reaffirming its commitment to end child poverty by 2020. Climate change was also high on the agenda—though the Government have delayed a rise

Martin Vander Weyer

Hangover time

Anyone who stockpiled their vodka collection ahead of yesterday’s savage increases in alcohol duties will probably be feeling a little rough this morning; and so too will Alastair Darling, I suspect, even if he carried on drinking tap water through the evening, as he did at the despatch box, and confined himself to a bowl of thin cockaleekie for his supper. For no performer in any theatre, political or otherwise, has taken such a savage pasting from the critics since Michael Barrymore’s last West end comeback. Dismal, blinkered and dangerously misguided would be a fair summary of what the pundits thought. The Chancellor’s claim that the UK economy is more

Fraser Nelson

Spinning a revolution

At 7.10am this morning, there was a prime example of why Brown may get away with posing as the champion of welfare reform. Kim Catcheside, the BBC’s social affairs correspondent, was explaining Alistair Darling’s new plans to test everyone on incapacity benefit to see what work they could do (ie, the Tory plan). Catcheside said disabled groups are worried because “at least 50,000 over three years could fail this new test.” Um, that works out at 16,700 a year, or 0.7% of the 2.6m on incapacity benefit roll, ie, an utterly meaningless reduction and ergo an equally meaningless policy. But the funding, she said, was “potentially the most fascinating thing

Wednesday

12 Mar 2008

Alex Massie

Email of the Day

In a whimsical Facebook moment I suggested that life would be more bearable if everything were as fine and reliable as a good pork pie. Too true, you may feel like saying and I wouldn’t blame you. Need it really be said that the ready availability of quality pork pies is one of the great benefits of returning to the United Kingdom? A friend emails: “Your status update puts it beautifully. There is something about pork and pastry alright. I’m a sausage roll man myself, but there are so many poor versions out there it’s always a gamble. The upside of pork pies is that anyone who bothers to make

Alex Massie

Howzat for Culture?

I’ve mentioned CLR James’ Beyond A Boundary before now, but searching a moment ago for something else I came across this 1984 review in the The New York Times. The author asks: It is… hard to tell how much of what Mr. James says is playful hyperbole and how much is passionate advocacy. Can he be entirely serious when he writes, ”I believe and hope to prove that cricket and football were the greatest cultural influences in 19th-century Britain, leaving far behind Tennyson’s poems, Beardsley’s drawings and concerts of the Philharmonic Society”? Well, would anyone take the other side of this argument? That is to say, who would claim seriously

Alex Massie

Department of Credibility

I’ll have more to say about this video discussion at National Review in due course. The summary, mind you, gives you a decent flavour of the thesis: The Decline and Fall of Europe: Chapter 3 of 5 Prof. Thornton discusses how a bureaucratic European Union “super state” is undermining the old nation-states of England, France, and Germany — a dangerous process. Uber-nationalism, of course, gave us the fascist European movements of the 20th century. Under the “enlightened” guidance of the EU, however, any nationalism is looked upon as reprehensible. Thornton counters that deep-rooted nationalism is a net good, and that its deterioration will coincide with the loss of representative democracy.

Adam Creighton

Why save?

The Chancellor made much today about the government’s attempt to encourage saving. But with up to 40 per cent of people’s income taken away from them before they even get to see it (PAYE and NI) and another 18 and a half per cent of it taken away again when they spend it (VAT), what’s left to save with? It is little wonder that the household saving ratio is now under 4 per cent. Meanwhile, all the big issues in life have progressively been taken out of our hands since the War: social security, health, education. (Darling even proudly announced today the building of 70,000 new homes—should the government really

Oliver Hartwich

Unjustified smugness

The Chancellor may have claimed that Britain was better prepared than any other nation to deal with a cooling world economy, but looking behind the headline-grabbing initiatives on ‘sin taxes’ it is clear that his figures do not justify such smugness. Britain now faces a 2.9 per cent budget deficit while even Germany is recording a budget surplus. What planet is Mr Darling on? Dr Oliver Marc Hartwich is Chief Economist at Policy Exchange

Adam Creighton

No company

The Chancellor waffled on about the millions of new companies created in the past ten years, yet these ‘new’ companies are simply a legal re-branding: sole-traders and partnerships that have become companies for tax reasons alone. If you look at the data for total UK businesses, there is a surge in the proportion of companies and a matching decline in sole traders and partnerships since 1997. But nothing real has gone on here; Brown’s and Darling’s new companies are simply the same old businesses re-branded but having to jump through a whole set of administrative hoops to take advantage of the 0 and 10 per cent starting rates for companies

Howard Reed

A Budget for social justice?

Given the tight position of the public finances and the global economic slowdown this was never going to be a Budget for big giveaways. In this context the fact that the Government was able to find an extra £1 billion to help reduce child poverty over the next three years – through increases in Child Tax Credit and Child Benefit, and changes to Housing and Council Tax Benefit – mean that they are getting back on track. But with half of all poor children living in a working family, the Government still needs to do more to ensure that work not only pays more than benefits but guarantees a decent,

Adam Creighton

Darling’s regressive tax increases

With the tax hike on alcohol and cigarettes, Labour, supposedly the party of working people, is effectively increasing taxes on the poor as a much larger proportion of poorer people’s incomes are spent on alcohol and cigarettes. Every economist knows that these kinds of tax increases are regressive. The public health argument for these tax rises is dubious in the extreme. Alcohol and cigarettes are already prohibitively taxed and price increases like today’s are unlikely to deter anyone who enjoys a regular smoke or a pint. Rather, the tax will result in a direct transfer of wealth from drinkers’ pockets to government coffers. Smoking and drinking can produce

Corin-Taylor

Making things worse

The opening remarks of Alistair Darling’s Budget speech showed that the Chancellor is well aware of Britain and the world economy’s ongoing economic woes. How troubling and disappointing, then, that his first Red Book will only make things worse. There are four key failings. First, the Budget raised taxes yet again, the very worst thing to do at the start of an economic downturn. £1.5 billion extra will be raised from alcohol over the next three years, £1.6 billion from cars (even with the delayed fuel duty rise), and £1.7 billion extra from businesses, much of it in the familiar form of anti-avoidance measures. Second, it failed to modify previously

Peter Hoskin

Budgeting for reform

I’ve just been talking Budget with Andrew Haldenby, the director of Reform (read their contribution to Coffee House’s Budget coverage here). Like most of us, he’s incensed by the level of Government borrowing – particularly as it increases the burden on future taxpayers, a.k.a. today’s “IPOD Generation”. But he’s a little more optimistic about public service reform. The reason? The Budget proposes a “Public Value Programme” to “identify where there is scope to improve value for money and value for money incentives”. According to Andrew and his colleagues, this could kickstart widespread reform. The outcome will be a good measure of Brown’s Blairite credentials. Do read Reform’s full response to

Fraser Nelson

What a difference a year makes

The below table shows how we will be paying the costs of Brown’s profligacy for years. In the space of a year, the picture has markedly worsened. This is gross government debt, in the Maastricht definition which ministers can’t tweak. UK Government gross debt, tables C4 and C5 from Budget 07 & 08 Debt, £billion Debt, %GDP Budget 2007 Budget 2008 Increase Budget 2007 Budget 2008 2006-07 568 574 6 43.5 43.3 2007-08 611 616 5 44.3 43.8 2008-09 644 679 35 44.4 46.1 2009-10 679 728 49 44.5 46.9 2010-11 712 771 59 44.4 47.2 2011-12 744 809 65 44.1 47.0

Adam Creighton

Debt-ridden Britain

Despite the sophistry of the Budget speech, the fact remains that Britain—after 10 years of solid economic growth—still has an enormous stock of debt, around 40 per cent of GDP. Moreover, it’s growing; this year there will be another £15 billion of borrowing to fund a bloated and enormous state. Darling made many comparisons to the state of British finances in the 1980s and early 1990s, but these comparisons through time are completely unfair given the different state of the economy then. The more relevant comparison is to that of other governments since Labour came to power. The Institute of Fiscal Studies tells us that of 21 comparable countries, 19

Adam Creighton

A fixed rate fix

Darling banged on about how the government would encourage or facilitate the growth of a long-term, fixed-rate mortgage market for home buyers, especially first time buyers. Reviews and committees are apparently to be set up to examine this product in more depth. London is, probably, the world centre of new financial product development and it seems odd that such products would not have been developed and marketed already if they were economically feasible. The likely reason they have not is that fixed rate mortgages are more expensive than variable rate mortgages: someone has to bear the risk of underlying interest rates moving around, either the bank or the borrower. A

Adam Creighton

Taxing the patience of business

The Chancellor’s claim that his Budget provides a stable tax regime for business is absurd. Far from providing a stable tax regime, Labour has repeatedly tinkered with the system, increasing confusion and weighing down businesses with paper work, retarding business creation. The government has changed corporate tax rates in seven of its 11 years in office. Such constant fiddling has more to do with looking dynamic than any desire to provide a sensible tax policy. And don’t be under the impression that there is a single rate of corporate tax: that would be much too simple! The government currently treats companies like people and taxes them more as they earn

Fraser Nelson

A line of cocaine is now cheaper than half a pint of cider

The biggest story in today’s Budget – ie, what will hit the public immediately – is the booze hikes. From 6pm tonight, they take effect. An extra 4p on a pint of beer, 3p on a glass of wine (touchingly, the Red Book says 175ml is typical – has anyone from the Treasury ordered a glass recently?), and 55p on a 70cl bottle of spirits. These increases will rise at 2% in future years on top on inflation (itself expected to be 2%). So, congratulations Gordon: a line of cocaine (on Dec07 street prices) is now cheaper than half a pint cider. What a wonderful country we live in. Do

Andrew Neil

Binge borrowers

The TV pundits still don’t seem to grasp the enormity of the Chancellor’s borrowing binge to come, all the more significant because of the borrowing binge we’ve already had. The sustainable investment rule, for example, is no more. It states that national debt must not exceed 40% of GDP. Even on the Chancellor’s own forecasts it reaches 39.8% by 2010 which, given consistent underestimates of borrowing, means it will be broken. Add in all the off-budget items carefully squirreled away by this government — from Northern Rock to PFIs to Network Rail — and it will hit 45%. Busted!