Budget 2010: A Very Tory Budget


Shamefully, Liberal Democrat Danny Alexander washed away any suggestion that he should be ashamed of himself for campaigning throughout the election months on the premise that the Lib Dems would DEFINITELY NOT have to rise VAT in order to fund their economic plan, only to announce jointly with George Osbourne, that VAT would have to rise. Alexander defended it by suggesting the economic situation, since he took office, had “dramatically changed”. The trouble is, none of us know how it has dramatically changed. In fact, for all intents and purposes, it’s safe to say the situation hasn’t changed at all. The smirking face of Clegg sitting behind Osbourne as he made his budget speech, was all I needed to see, to ensure that I would never vote Liberal Democrat Tory-lite again. Alexander then said that the budget was progressive in that the richest, contributed the most. He lied again. The Institute for Fiscal Studies said that the budget was “not progressive” in that the richest households did not pay more, the corporations who tax avoid were not being punished, and banking bonuses were not being taxed. Cutting benefits, raising regressive taxes, and then cutting corporation tax, can never ever be described as progressive, no matter how blinded you are by current Lib Dem rhetoric. We all know that Labour lied appallingly in their last manifesto, but Clegg and the Liberals have taken political deception and selling out their principles, to a whole new level.

Whilst in Australia, i’ve kept a close watch on George Osbourne’s “emergency” budget situation. The term “emergency” in that phrase, the Tories have used for the past few months, and it’s very tedious. Playing politics with the economy, which they largely have very little control over anyway, is a little unnerving.

Cameron and Osbourne have suggested that the economic figures for the last Parliament could have been ‘fiddled’ and pledged to make sure that kind of behaviour would never happen again. The problem is, the figures were not fiddled, as a report from the Office for Budget Responsibility pointed out recently. The same report rubbishes another Tory claim that the UK could become the next Greece. The report shows that Greek debt is double the UKs, Greece is still in recession and we’re not, and the debt maturity for Greece is 3 years, compared to ours which is 14. We, quite conclusively, are not Greece. The OBR report also revised figures for borrowing, showing that the situation had indeed improved. George Osbourne, having seen the Labour had not fiddled the figures, and that we were not the next Greece, and that borrowing had improved, responded quite ridiculously with:

“this is damning evidence that the mess the previous government left behind is even bigger than we thought.”

It is against this report that Osbourne made his first budget speech. The key points are:

  • VAT will rise from 17.5% to 20%
  • Council tax frozen for a year.
  • Capital Gains Tax will rise from 18% to 28% from midnight for higher rate taxpayers.
  • The “entrepreneurs relief” rate of 10% on the first £2m of gains will be extended to the first £5m.
  • Child benefit frozen for three years.
  • Tax credits reduced for families earning over £40,000 a year.
  • Housing benefit for longterm unemployed will be cut.
  • Sure Start maternity grant restricted to first child.
  • Single parents punished for not looking for work, when their child starts school.
  • Welfare in general, cut by £11bn over three years.
  • Pensions linked to earnings again.
  • Retirement age increased to 66.
  • NHS budget protected.
  • Corporation Tax cut by 5% over three years.
  • Small Companies tax rate cut to 20%.
  • No real commitment to tackling climate change.
  • 25% cut from every department.
  • All children under 15, will be punched in the face.

    Okay I made that last one up.

    How is this a progressive budget? It couldn’t be any more regressive unless one of the pledges was to reintroduce Feudalism. The NHS budget is protected, which is good. But departments like the Home Office (which means crime and education) will be slashed viciously. As will Climate Change financing. We are regressing, and not just by enough needed to ensure recovery, we are regressing for ideological reasons.
    No tax on banking bonuses. No punishing the banks. No tax avoidance loopholes closed. No punishing companies who have spent the past twenty years actively tax avoiding, costing us pretty much our entire budget deficit in lost revenues? No acknowledgement that it was not the Public Sector that failed, it was the Private Financial Sector that failed. Just an attack on people who have no political power. Same old Tories.

    The medical checks for Disability Living Allowance, along with 25% cuts for the department are massively harsh. The majority of those claiming this benefit, are the elderly, to help pay for their care. 25% cuts will not just hit those who are scrounging the benefit, it will hit the elderly who need it too. But it’s okay, because whilst they will now have to work an extra year anyway, the money that would have gone to providing care for the elderly, will now go to funding
    the “relief rate” of 10% on the first £5m a businessman earns. Thank God for that. The elderly should not be given any help, when the money could instead be used for more important social needs like buying a businessman a new yacht.
    The goal is to get us into budget surplus again, in six years time. Labour had pledged to halve the deficit over four years. There is no urgent need to create a budget surplus in six years. It is ideologically driven, rather than driven out of necessity.

    I have never understood the need to cut a deficit in the middle of a recovery. The budget was a Tory ideological budget. A glint in their eyes. As far as I knew, you prop up an economy when it’s falling. When it has recovered, and tax revenues increase, you then start to decrease spending.

    As far as i’m concerned, the Tories were wrong when they told us everything would be wonderful if they sold the railways, gas, and destroyed British industry; they were wrong when they told us minimum wage would drive companies out of Britain and leave us in a terrible position globally; and they are wrong now. To massively cut a deficit when recovery is underway, is like kicking away the walking stick from a man whose broken leg is still getting better.

    By calling it an ëmergency budget for the past few months, and by blaming Labour for the problems with the banks, rather than a mix of Tory banking deregulation and Labour lax oversight, they are merely indulging in a bit of ideological warfare. I guarantee unemployment rates will shoot up, and then they’ll blame Labour. Or the gays. Or muslims. But if/when double dip recession hits, they will no longer be able to blame Labour.

    The budget was a very neoliberal budget. It bases its entire existence within this new coalition, on the premise that budget deficits are necessarily awful things that must be cut immediately. There are many many economists who would tell you that that way of thinking, is not “actual knowledge of basic economic principles” and only serves as ideological Friedmanite warefare. Milton Friedman would have very different ideas about what constitutes basic economic principles, than John Keynes.

    Deregulating finance, in the 1980s led massively to fake booms economically, because credit became far too easy, and consumer debt went through the roof. And all of these new fake booms, fromt dotcom to subprime, failed miserably. That’s the legacy of right wing economics. And now, this budget, is a throw back to the days when deregulation, and cutting corporate tax whilst increasing regressive taxes and hitting those less fortunate, was considered a wondrous solution to stagnation. It didn’t work before, it wont work again.

    The Tories, on their quest to rubbish the N.I rise during the campaign also failed to mention that they whilst they said they’d scrap it completely, what they meant was they’d only scrap it for employers. Employees are still going to be hit with the rise. They said they had absolutely no plans to raise VAT, in fact, they made it part of their campaign. So in essence, they have no mandate to do this. Actually, they have no mandate to force deep cuts this year anyway, given that the majority of the country voted for cuts to come over a five year period.

    Attacking single parents, for not working is another harsh measure. As is cutting housing benefit for longterm unemployed. If the economy was flourishing and jobs were in abundance, it would be almost understandable; but that isn’t the case. There are very few jobs. Cutting benefits during a recovery from the biggest recession in decades, is simply throwing another generation onto the scrap heap. Forget any ambition you might have, you either get a job in McDonalds, or you go homeless. Professor Colin Talbot of Manchester Business School estimated that because of the cuts promised, one fifth of all public sector workers would lose their job. What about them? The Government will fire them, and then offer very little help? It is the lack of compassion that drives the Conservative Party, and now, the Liberal Democrat Party.

    The Liberal Democrats should be ashamed. They are now firmly placed on the right wing of the economic scale. They are not progressives. They are Tory-lite.

    Contrary to what Osbourne claims, we are not “all in this together”, because when 77% of savings comes from cuts rather than taxation, the poorest will always be hardest hit. When Tory friends in the City are rewarded with tax decreases, yet VAT rises and benefits are cut along with departmental spending, the wealthiest are not helping to cut the deficit, they are benefiting from it. This was not a budget for you and I, this was a Tory budget for the rich.

    The economic problem that we face, is not just figures and statistics, it is the philosophical base of the economy itself. Until we as a society take note that those on benefits take up such a small piece of the public purse, and those scrounging benefits even smaller in comparison to the corporations who actively tax avoid, we will never progress. We have just elected a government, who have no problem with corporate tax avoidance and private sector over-extravagance. Until we realise that neoliberalism got us into this mess, and so electing a neoliberalist government will not get us out of this mess, we will never progress.

    The whole notion of needing more, has been the base of our economy for the past thirty years. The idea that growth, on a national scale, has nothing to do with actually bettering society, and everything to do with owning more shit that none of us actually need is mirrored in the idea of growth in the individual, growth is not the idea of personal betterment, but how many holidays someone can go on in a year, or how much better your car is compared to your next door neighbour. That mindset is ingrained in our minds. Including mine. Our sense of self is based entirely on what we consume, and anyone who disagrees is an evil socialist. I completely 100% blame Thatcherism and Reaganomics for that idea. New Labour and today’s Tories are just an offshoot of the 1980s. Because before Reagan, even President Nixon, a Republican, would have been considered a socialist by their standards. I’d suggest that to combat this horrendously weak base for an economic system, we should be investing public money in new industry, we should be directing funds and encouraging investment toward the betterment of society and we certainly shouldn’t be redirecting money away from the poorest and toward the richest. There needs to be a fundamental move away from the failures of Neoliberalism and toward a far more progressive left direction. Otherwise, all we are doing now is laying the foundations for the next economic collapse, and the circle will continue for another generation.

    If anything, i’m pretty sure England can again produce some fantastic anti-Tory music. A new Clash please!

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  • 7 Responses to Budget 2010: A Very Tory Budget

    1. Graham says:

      Excellent article, completely on the money.

      Progressive Tories?? A smokescreen for filling the pockets of the rich while mugging the majority of the population.

      The Lib Dems have sold their soul and will not be trusted by the electorate again for decades.

      My fear is now that Lib Dems have chosen their path we are a true two-party state with even less political choice.

      Whilst Labour got a lot of big things wrong, they did create a more compassionate and supportive society which will take only 4 years of this coalition to pull apart.

      The Tory ideological worship of Freidmanist economics and the slavish belief in the notion that the private sector can cure all economic ‘ills’ has been proven by the failure of the financial markets to be fatally flawed. In my experience of both public and private sectors, the private sector seeks to milk the public purse whilst delivering products of questionable quality and then points the finger of any blame at ‘beurocrats’.

      No tackling of the financial sector that got the UK into this mess; no public accountability of them for repayments to cut the deficit; minimal taxation of obscene ‘bonuses’ (for acheiving what exactly?? Oh – more un-taxed profits…); and the banking mess has now conveniently been swept under the carpet so the Tories and their Liberal fops can carry out their ideological programme (ignore Cameron’s PR-wash and laughable green pretensions) which they always had front and centre when back in power: to dismantle the public sector and cast the poor, needy and less fortunate than their Oxbridge mates in the City adrift.

      Evolution? Revolution.

      A new Clash indeed – with some Specials

    2. Hugo says:

      “cutting corporation tax, can never ever be described as progressive”

      Actually it can, because of tax incidence. Corporation tax is paid by some combination of the corporation’s shareholders, customers and employees. Current research indicates that about 70% of the burden of corporation tax is paid by employees. Therefore cutting corporation tax is progressive because it would increase wages.

    3. Hugo says:

      VAT is regressive but justified/necessary. To get out of recession, we want to encourage production. Taxing production (e.g. income tax/national insurance) would discourage it. Therefore it is better that, if we have a choice, taxes fall on consumption rather than production. VAT is a consumption tax so it is right to raise it.

      Obviously there is a trade-off with the hardship it causes which is why they’ve only raised it 2.5%, not (say) 25%. But if that tax didn’t fall on consumption, it would have to fall on production instead which would be worse.

      (Yes, I know, production and consumption will tend to be equal, because you can’t consume something that hasn’t been produced and you shouldn’t produce something that won’t be consumed. However, Say’s Law is that production drives consumption, not the other way round. There will never be general overproduction, only localised overproduction, which is why Keynesian encouraging of aggregate demand (consumption) is precisely the wrong policy.)

    4. Hugo says:

      “slashed viciously”

      You mean “slashed”. Or do you really think he’s enjoying this?

    5. Hugo says:

      (Really you mean “cut”. “Slashed” is by analogy with a different, irrelevant meaning of “cut”.)

    6. Hugo says:

      “will now go to funding the “relief rate” of 10% on the first £5m a businessman earns. Thank God for that. The elderly should not be given any help, when the money could instead be used for more important social needs like buying a businessman a new yacht.”

      “earns” is misleading. Remember that it’s 10% on Capital Gains, not Income. Because it’s capital gains, not income, it won’t be already existent businesses, but only on new or expanded businesses. I.e. newly created wealth. Which is what you need if you want to be able to tax its income to pay for old people.

    7. Hugo says:

      “the N.I rise during the campaign also failed to mention that they whilst they said they’d scrap it completely, what they meant was they’d only scrap it for employers. Employees are still going to be hit with the rise.”

      Another case of tax incidence. The incidence of National Insurance Employers Contributions is over 100% on workers’ wages. (Over 100%? Why yes. A dead-weight loss.)

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