Watched The Budget from start to finish and Jeremy Corbin's response too. My first thoughts are that it could have been a lot worse and that there's actually quite a lot to applaud. Of course that's not the whole picture.
The things that cause the most annoyance to me personally are around the political game playing and the over reliance on forecasts. People talk about statistics and lies in the same breath, but I wonder if anyone has ever seen a financial forecast that lasts more than five minutes, let alone comes true, independent or otherwise. Of course you have to make decisions based on the best information available, but you also have to allow for it being wrong and no chancellor ever does that, they all talk with certainty that their predictions will come true and don't bat an eyelid when something else happens.
The Autumn Statement is a case in point, remember autumn? It's not so very long ago, all changed since then.
So, what were the major points and what's good? Osborne started with a brag about how the UK economy is growing faster than any other developed economy and about how the deficit is down by about two thirds and about high employment and fewer benefit claimants. All of which is well and good, but it's not the budget. Then we got the speech about how the global economy is weaker etc, which is why the forecasts have changed.
He said we should 'act now so we don't suffer later', if he's looking to long term stability then I can applaud that, shame Gordon Brown couldn't see the need for stability. Actually he too boasted about an end to boom and bust, then spent far more than he'd any right to and blamed the unforeseen global downturn for our problems. It's never their fault, leave us in a worse position than just about any other country when things turn sour, but it's not Gordon Brown's fault. You can't trust politicians and you can't trust forecasts.
Osborne did say that his plans were designed to fit the independent forecasts, rather than making forecasts to fit his plans, which is something, but actually I think he should plan for the worst case scenario, not some pie in the sky forecast, but that's just me. Of course we got the speech about how the forecasts that we will continue to grow faster than other countries are predicated on staying in the EU. Since I support staying in the EU I think that was worth saying, but not labouring, especially since I'm so sceptical about the forecasts anyway.
In motor racing one chooses tyres according to the weather conditions not what is forecast, in sailing if the forecast is good but it's blowing a gale I wouldn't put out to sea in a small boat. In economics I'm more interested in what's actually happening than what's forecast, so when the chancellor says we should cut our cloth according to our position I think he's right, but it's our actual position right now that counts.
Our actual position is that if you factor in all liabilities including state and public sector pensions, the current national debt is close to £4.8 trillion, some £78,000 for every person in the UK. Even not factoring those things in it's close to £1.7 trillion. And what if interest rates go up, or we lose our international credit rating which helps keep our rates low?
Then there's personal debt, mortgages, loans, credit cards and student debt, we're drowning in debt. And so many people think deficit is debt, even a BBC interviewer talking to Farage after the budget. However, as intelligent people know, the deficit is the difference between tax receipts and government spending, the deficit is just the amount the debt goes up each year. When they talk about a ten billion surplus FORECAST for 2020 they're suggesting that in 2020 for the first time in years they'll reduce the trillions we owe by a tiny fraction. That is NOT a surplus.
Still, it's not all doom and gloom, employment is actually up despite some caveats we'll come to later and the National Debt is actually a tiny bit lower at this moment than the previous forecast (that word again). The chancellor has missed his target on the debt as a percentage of gdp though. Personally I think if he'd sold off Lloyds Bank he might have plugged that particular gap, but I do also think he was right to delay that share sale given the uncertainty in the markets. I'm surprised he didn't mention it in a way.
Extra borrowing this year will probably be over £70 billion I say extra because that's borrowing over and above the huge debt we're carrying, I'd actually not only like to see no deficit but in fact no debt at all. Conventional wisdom is that countries are big enough to carry debt, but why would you want to? Of course many businesses carry debt to invest and that's what Labour want, to borrow more to stimulate the economy, but how many politicians are successful businessmen? I wouldn't trust them to invest a penny of mine; except I do every time I pay tax!
After the lectures, which moved on to child poverty, pensioner poverty and the gender pay gap, we got more forecasts and more dogma, but we did eventually get some actual information about what's going to happen and one statement which I whole heartedly agree with, even if I'm not sure our politicians can deliver it given the figures above - 'security means living within our means'.
So, we got some action against tax avoidance and evasion, closing loopholes left open by Labour, for example some companies currently borrow in the UK to invest overseas, but claim the interest on the loans against UK taxable profits. Overseas companies will store goods here and sell in the UK online, via EBAY for example, but get around VAT competing unfairly with small UK High Street businesses.
Closing those sorts of loopholes is to be applauded I feel, even though consumers may pay more in some cases. He then announced a reduction in Corporation Tax which will help small businesses as a well as large and encourage businesses to invest in the UK. It's sensible, but it's one of the things, the latter that is, that Corbin objected to; which is why as much as I applaud Labour's desire for fairness, they just cannot be trusted with the economy, which at the end of the day pays for everything we hold dear.
So called micro entrepreneurs are to get tax free allowances and small businesses will get business rates relief, six hundred small businesses will, we're told, pay no business rates at all now and since I was once a small businessman I think that's great. Large stores which make our High Streets what they are, and who employ vast numbers of people now we're a service based economy and don't make anything, will see their rates simplified, which is something I suppose. The statement that we don't make anything is of course an exaggeration, but it's a shame we don't make much more.
Stamp duty has been re-jigged and I think the new system will probably be fairer, ninety percent of property buyers should pay less it's said and nine percent will pay more. Looks like the bands have moved upwards, which, given the price of housing makes perfect sense, don't know what happened to the other one percent but apparently the chancellor reckons the changes will also net the treasury another five hundred million. Nice conjuring trick but refer back to the size of the national debt and in monetary terms, as it affects the nation, it's hardly worth mentioning!
The chancellor then goaded the SNP who had based their economic predictions for Scotland, had it become independent, on oil revenue at prices from before the recent drop. Of course just like Gordon Brown they'd have blamed someone else. Actually Scotland entered into union with the rest of us when it was bankrupt. It's funny that the Scots are famously reputed to be tight wads but cannot save money. I disclaim responsibility for their reputation.
Taxes on oil industry profits were duly reduced drastically, but I have to say that they're not making any money and ten percent of nothing is still nothing, he could have given them a lot more really and sounded truly generous. We had another little brag about what the Tories are doing for Scotland and Wales with infrastructure to link North Wales with the so called Northern powerhouse for example, and a fifty percent reduction in River Severn crossing tolls, well in 2018!
If the speech had been half as long without the preening and jam in the future it might actually have been impressive. HS3 the high speed rail project to link Manchester and Leeds got the go ahead, as did four lanes for the M62 and improvements to a couple of A roads, 66 and 69 I think, my pen struggling to keep up, but it's academic. It's all good, but whether it's enough to really create a Northern Powerhouse remains to be seen.
I don't know what the costs of infrastructure projects in the North actually are but London already has Crossrail one East to West and will get Crossrail two North to South, which is great. Whether the north and south of the country and the regions are being treated equitably I'm less certain. No time to analyse that yet.
Spending on flood defences in York, Leeds, The Calder Valley and Cumbria are to be boosted with a seven hundred million investment, which is good for residents and jobs, but it's to be paid for by a hike in insurance premium tax, so, since we all need some sort of insurance, we're all going to pay for the false economy of cutting flood defence budgets in the first place and I wonder what insurance premiums for people in the affected areas will be!
Hull's City Of Culture project will get some help as will museums who take exhibitions on the road, all good, but tiny details in what's supposed to be about the most important thing of all, making the economy sound, which if done would pay for so much more.
A major plank was education and a plan to drive local authorities out of education altogether and make all schools self governing academies. In the long run it might make schools better. However, as a kid I passed the eleven plus, just, and went to a school which became comprehensive the following year. The upheaval and change did my education nothing but harm and those changes disrupted the education of many of my generation. Politicians must learn to stop meddling. As Corbin said afterwards, class sizes and teachers leaving the profession are more important matters.
Osborne repeatedly lectured us on how this was a budget for our kids and grandkids, but actually meddling in education is more about showing himself to be a big hitter and a future prime minister, not just the chancellor; just as Boris's joining Brexit is about his career prospects not the nation's prospects.
They're all on the gravy train for fame and fortune. Naturally for all the big talk there was nothing to help students who are getting into debt and being taught that debt is how you live these days. In fact I would also suggest that the schools budget has effectively been cut, since although it's neither up nor down, the schools are paying for a pay rise for teachers, leaving less for other things.
Another thing I applaud however, is a new tax based on sugar levels in sugary kids drinks, which I'm sure is right, even though Cameron said it was wrong not so long ago. The manufacturers will probably reduce sugar levels, whilst any increase in prices will hopefully make parents think twice. We're told that the revenue raised from this measure will be spent on sport in schools. Great if it happens, applaud that, not sure how they'll do it since Thatcher's Tories sold off the school playing fields which have now been built over. The forecast, that word again, is that the measure will bring in five hundred and twenty million pounds. I wonder if the accuracy of that forecast will ever be revealed and where the money will really end up.
Big announcement, but again look at that figure and relate it to the national debt.
Fuel duty, that is tax on petrol and diesel to you and me, is frozen again. Politicians love to present a freeze as a tax cut, but then they're a bunch of manipulative lizards on the whole. Applaud the freeze though, taking advantage of the fall in fuel prices would have been dirty and it's not just about private motorists, so much is delivered by road that it makes a considerable difference to other prices and to inflation as well.
Tobacco duty to rise as previously announced, fine, help for the pub trade, by freezing duty on beer and scotch, well, again I don't know how much it helps, we've lost thousands of pubs already, but at least he's not made a bad situation worse.
Help for the self employed with the abolition of class two National Insurance, excellent. Capital Gains Tax reduction, headline rate from 28% to 20%, 18% down to 10% for most, also excellent because it encourages enterprise and investment. I imagine the Labour party won't see that, just as they won't see the benefits of reducing Corporation Tax. However not profiteering on petrol and diesel, National Insurance changes, Corporation and Capital Gains taxes reductions should all be a stimulus, as should help with business rates and closing tax loopholes; properly presented it could have been a great budget speech.
Next we had the funniest moment of the day, although behind it was something rather unfortunate for all of us had we the sense to see it. The chancellor talked about people not investing in pensions, the complication in the system, well that's true, but it's politicians who made it so. When talking about taxes on pensions and his new plans he made a hilarious jibe about keeping the lump sum and abolishing the Lib Dems, in a right good one two he suggested 'from midnight tonight'.
Of course the Tories went hard at Lib Dem strongholds in the last election and decimated the party. Fact is though that the Lib Dems actually brought some fair minded liberalness to what many see as an unfeeling government. Actually the coalition worked surprisingly well and one of the Liberals key policies is now seen as a Tory one.
Increasing the threshold at which tax is paid is something I've advocated for years. What the hell is the point of taxing people before they've earned enough to live and then paying it back to them in low income support, the bureaucratic waste is beyond stupid. And by raising the threshold you make it worth coming off benefits and going to work. I've been bleating about it for years, the Lib Dems made it happen, Osborne has raised it to eleven thousand pounds this year with a proposal to raise it to eleven and a half next year. Still not enough, I don't know how anyone feeds themselves, houses themselves, clothes themselves, pays local taxes and has some basic quality of life, transport etc on less than one thousand pounds a month.
It lifts the poorest people out of taxation and poverty to a degree, it allows people to spend, it's an absolute no brainer, it has to be popular, it's the Lib Dems who made it happen and the Tories are doubtless drip feeding it in so they can brag about it year on year.
More chest out macho stuff from Osborne at this point; we're told that under Gordon Brown one pound in every four of government spending was borrowed and now it's only one pound in every fourteen. I imagine that's true even if I don't trust statistics much more than forecasts and if so it's a start. Anyone who's read my articles before will know I have nothing but contempt for Gordon Brown, starting with his pension raid when he too was chancellor. Don't worry though his pension will be fine, especially since he got the top job without anyone voting him in other than his own cronies.
This chancellor is right about pensions being overly complicated and about young people having difficulty saving and being conflicted, because they want to save for a home as well as for a pension. So what has he done? He's introduced a 'Lifetime ISA' for people under forty, for every four thousand pounds people save towards a house or a pension the government will chip in a grand. Actually I think that's excellent to add to the other excellent measures listed above.
For old codgers like me, the ISA allowance goes up from fifteen thousand a year to twenty; since I haven't had fifteen grand to put aside for as long as I can remember, it helps me not a jot, nor millions like me, still, if you do have a windfall, sell up, well, what I'm saying is there may be occasions when ordinary people might benefit.
The forty two thousand pounds per annum threshold at which people start paying higher rate tax is being raised to forty five thousand. Quiet applause for that one, I think it's a populist move, however I'm in favour of low taxation generally and I do believe the middle classes are the powerhouse of the economy, so a little bit to the good.
That's about it really. It must be hard for the leader of the opposition to respond instantly, I'd prefer they were given time to consider. Naturally they have a speech three quarters prepared based on their own dogma and that's what we got, a litany of accusations of failure as if we should trust the idiots who wrecked the economy to fix it. On TV the other day the shadow chancellor couldn't help slipping in the line 'of course we'd borrow'. What he meant was borrow more, Labour will never learn.
Much of what Corbin said was nonsense, like the chancellor he could have done much better keeping it short and making only valid and important points. Mixed in with the dross about hedge fund managers were a couple of good points about care of the elderly for example, he referred to government standing by while the steel industry bled, and I'd like to see Britain make things too. He talked about the Northern Powerhouse being outsourced to London, I don't know enough detail to comment. He referred to local government budgets and the closing of libraries, swimming pools having shorter hours and suchlike.
Now I care about libraries and sports facilities, I really do, we need a strong economy to pay for them and I don't trust Labour to deliver it, in fact as tired as people get of hearing that Labour broke the bank it's no less true for the repetition. He made a valid point about security coming from knowing you've got a job and what you're going to earn, he was attacking zero hours contracts and I agree they're a fix, a fiddle and they're wrong. He continued about in work poverty but the increase in the personal allowance, from the now almost obliterated Lib Dems remember is doing more to address that than Labour's tax and then wastefully give out here and there policies ever did.
He talked about the gender pay gap but his claims that Labour would be able to end it are pure speculation, politicians have to make unsupportable claims, why do they do that? He did make some valid points about NHS debt and policing budgets.
To summarise, some very good measures to help ordinary people and stimulate the economy mixed in with a load of puffed up bull and a load of small announcements politically motivated which affect the big picture not at all. Way better than it could have been, despite some promises which doubtless won't come to fruition, like spending on school sports. Lib Dem Susan Kramer commented that some of the infrastructure announcements had been announced by her when she was in government and that it would be nice if they stopped announcing things repeatedly and actually did them!
Bring back the Lib Dems at the next election, they've lurched to the right, I'm thinking especially about the vote to bomb Syria without a strategy, but it was the signal or lesson they took from the election I think, since the polls did not predict such a swing to the Tories whose aim is now to wipe the Lib Dems off the map completely. Many a true word spoken in jest, but we don't want to become divided between extremes as America is and look what's happening there. We must keep a middle ground party or live with the consequences.