By the time Alistar Darling rose to deliver his speech Prime Ministers Questions had already set the tone with David Cameron undermining the government’s projections at every opportunity and Nick Clegg questioning the record of delivery on pledges of ‘one million new jobs’. Darling had an impossible task because the media narrative of a government ‘ready for the knackers-yard’, as Cameron puts it, is already pretty well-established but even by a reasonable measure the Budget was truly dismal and totally failed to rise to the challenge of the times.
Looking at the ‘headline grabbers’ the surprise was unquestionably the announcement of the new 50p top-rate of income tax for those earning over £150,000 and it being brought forward to next year instead of left until 2011. Cameron trying to tie these into duty rises for fuel, tobacco and alcohol as part of a package of ‘tax rises for all’ in an attempt to undermine there popularity is unlikely to work; people are used to punitive taxation on alcohol and tobacco certainly and they are becoming inured to it on fuel too. However, this does put both opposition parties in an interesting quandary whether to oppose or support the increase. If we are committed to a taxation system that is fair then we have to support a shifting of the burden and that naturally involves the top-rate paying more.
Where this budget falls down and does indeed lack imagination and boldness as Nick Clegg rightly said it does is tackling the other end of a redistributive tax program; namely the easing of the tax burden on lower and middle incomes. Without easing the pain on the lower end of the scale the small amount raised by the top-bracket is so tiny as to be almost totally symbolic. This is obviously where our call for tax cuts is focused and where it is strongest in opposition to the governments program. One fly exists in the ointment of our proposals; the extension of National Insurance to multiple jobs is a punitive tax on precisely those people we are trying to help who are desperately trying to make ends meet. Also, we will have to watch carefully our proposals for reform of the tax system with regard to the families and children who have been the main beneficiaries of the government’s largess for the last two budgets.
However, it remains stronger and more redistributive than what the government is offering. The area where it is much stronger is that we are looking to radically restructure the taxation system. Darling indicated that the government may well start to sing from our songbook on this area of policy at least. Force of necessity and a budget deficit the size of which you could house several families in is compelling the government to close these; pension tax relief on those earning over £150,000 is to be restricted.
National debt is projected to stand at £175 billion for 2009 and fall incrementally in the following years and this is the other ‘headline grabber’. Darling’s projections remain wildly optimistic and are predicated on a surge in consumer confidence and thus consumer spending. However, since what people, except families or those with children, gain will be limited the likelihood here is that Darling’s timidity will undermine the very foundations of his own budget. Cutting taxes for lower and middle incomes is economically sound because these people are the kind least likely to save and thus spend and get the cash flowing round the system again; not being more bold clearly is storing-up trouble ahead. This is especially true when you consider that the 0.5% hike in NIC’s is yet to come in 2011 and that will see these groups spend less; assuming it gets implemented. People will see the headline deficit and baulk but the picture get’s even worse if you look at the projections of the net debt which is expected to rise to 79% by 2013/14.
The further £9 billion in extra effciency savings that will be trimmed from the public purse is in reality a political move. Darling wants to postpone ‘tough decisions’ until after an election; if Labour win the next election they will have 5 years to plan and pump extra money in towards the end of their term and if they don’t they can blame the Conservatives. However, here again is where we should push our plan for the reform of the taxation system; in theory, reformed properly it should minimise the hurt for the public sector and allow most services to remain unscathed. Instead, we are left with one measure which will raise a billion in revenue. Also postponed were proposals for reform of the financial sector which will doubtless be sneaked out because they are not going to be as tough as the rhetoric implies.
The real sin of this government is not that it is doing nothing but that it is making bold promises which simply don’t come to fruition as Nick Clegg rightly says. The endless schemes and grand ideas either never get implemented or else never yield positive results; it is in this vein that I view the continued extra funding for Job Centre Plus. Why do Job Centres need an extra £1.7 billion? Job Centres do not employ people; businesses do and here once again the grand promises of the stimulus have failed to deliver. Credit is still not flowing; people are not spending, the % of sectors showing growth is miniscule and also allot of people are losing their jobs. If the stimulus had worked and the credit was flowing; even at lower levels than before, this extra investment (still mystified as to what is going to be done with it) wouldn’t have been needed. I have even heard reports that credit card companies are actually increasing interest rates; a move which needless to say is entirely counterproductive to combating debt and getting people spending.
However, more welcome is the money ring-fenced for creating additional sixth-form places. I would be greatly surprised if Darling will be able to deliver on his promise to get everyone under-25 who has been unemployed over 12 months into work and/or training by January next year. Investment in clunky, failing schemes is ten-a-penny under this government but real investment where it counts and where it could actually make a difference is harder to find. Thus we find that a paltry £100 million is the only money that local authorities will get to develop eco-friendly housing. Again, our Green Tax Switch is much more radical than this government which is too timid of it’s past to actually take the moves necessary to get the economy back into shape (a prime example of which is the stimulus which was given to the banks gratis).
Bold and radical change which is redistributive in nature is actually the best medicine our economy could have and in that sense the interests of the market and social justice are in perfect harmony as opposed to how it is often portrayed by right-wing free marketers. A healthy market needs a healthy society and vice-versa; a market which does truly serve the people is actually in the markets best interest. Never has there been a more pressing need for those that believe passionately in social justice and redistribution to make their case heard; this government has failed because it is timid and far too reactive; the roof is leaking and Alistair Darling frantically scurries around looking for buckets. We can be proud of the package we are putting forward as an alternative and know for sure that social liberals are actually charting the way forward. We need to be weary of leftish soundbites which actually achieve zero-sum results in terms of being of real benefit to people and hold the government to account where it fails there so we can rightly call for the money to be invested where it is needed.
By Darrell Goodliffe