Tuesday, 22 June 2010
Instant Budget Reaction
George Osborne, whom we at this blog have long found fault with, decided today was the day to go the extra mile. tax cuts and budget cuts, with some rises and the start of an attack on the bloated costs of the UK Public Sector. Overall the right plan, but the really there was poor execution:
1. The VAT rise - This money was used to bolster cutting personal taxes and not cutting the CGT rate. However it is highly inflationary and will surely force the Bank of England to move sooner to raise interest rates. Higher interest rates are a death knell to the hugely indebted UK companies and consumers.
2. He maintained the ring-fence on NHS and Foreign Aid - this was not the year to have anything left out. All must be scrutinised and savings found.
3. Bank Levy - Labour, bizarrely, is correct. Until there is international agreement there will be capital outflows because of this. To Ireland is the plan in the Banks in the City. They are not going to leave precious capital in the arms of HMRC. Daft.
It is not a bad budget and a far better effort than anything the Labour Party could come up with. It is delivered with a healthy view of reality not the delusions of those in the Bunker. It is a big step forward, but more risky than it needed to be. Other savings could have been made and taxes not raised in such an inflationary matter. Time may yet be a harsh judge.