Tuesday 22 March 2016

The Heir to Blair


 Some final thoughts on the 'Omishamles II' budget. And the larger continuity New Labour approach of Cameron's government to being in office.

Firstly, its shocking that it happened at all. To make a humiliating cock-up of one budget is a misfortune. To make a humiliating cock-up of two looks tragically incompetent.
On the business front it was a fairly decent budget. But domestically, a shocker.
Obviously something went on before the actual budget. Reforms to pensions were stopped. Reforms to tax credits failed. no doubt behind the scenes a 'Thick of It' style panic was ensuing as the centrepieces were withdrawn and the economic news grew daily worse. it all looked a bit lastminute.com. And now even that has been shelved.

It does appear, that like Tony Blair, The Prime Minister leaves the matters of finance to his Chancellor. He simply sets a few 'red line' areas that cannot openly be crossed and entrusts the Treasury to do its job. Admittedly, the PM has had rather a lot on his own plate recently. The EU has sucked up all his spare time for months. But, not to have checked the budget's contents against his Spads and officials?
Gordon Brown famously refused his Prime Minister access to his budgets. was deliberately vague and deceptive. Rumour has it the first Blair new of many of his new taxes was when the chancellor got up to speak at the budget.

Second point.
Following in Blair's footsteps, income tax cannot be touched. This makes no economic sense. In the bad old days of Wilson and Thatcher income tax moved all the time. In 1987 the top rate was still 60% and had been for six years. Having been cut from 83% in 1981. It was 1990 when it was cut to 40%, where it remained until the Scorched Earth, elephant trap Labour policy of 2009 made it 50%.
This was solely so labour could reclaim some economic competence. Brown's fiscal rules.
In reality taxes continued to rise. And by a considerable amount. Just not income tax.

This led to the third point:
Unable to pull the big lever, the chancellor had to pull all the small ones. Corporation tax. Council tax. VAT. National insurance. Employer's NI. Holiday taxation. Car taxation etc.
Brown's favourite money grab was to just let people drift into the highest rate taxation, and inheritance taxation, and highest stamp duty rates, almost as if it was just nothing to do with him.

The time Brown did mess the income tax rates, the 10p tax rate cut, he got it spectacularly wrong. The actual change was a cut on the basic rate from 22% to today's 20%. It was largely smoke and mirrors just to fox the Tories.  The 'Wizard of Odd' Chancellor cut the lowest rate, to benefit a higher rate. It was all pence losses for the losers. But it had a massive political impact and almost finished him off mid-term when it came into effect.
For most people a rise of 1% on basic rate income tax is not going to be crippling. Ignoring bands and tax free allowances for simple maths, a 1% rise on £10,000 is £100.  £500 for  a £50k income?
Its a lot of money for HM Treasury .
The fear of raising income tax has been a good thing, overall. Previously governments couldn't resist sticking 2p on here. 5p on there.
But by denying the tax raising power for purely political purposes, the Treasury has continue to perform the same Brownian motions of old. And sooner or later, the trick goes wrong.

Finally, why is George Osborne still Chancellor at all? This is , again, continuity new labour.
Serving prime ministers feel that a change of Chancellor might put them at risk of taunts that their entire economic strategy is wrong. Why should they fear this? Previous governments did not.
Mrs Thatcher had 3. Harold McMillan had 3. Clement Atlee had 3. Most PMs have 2.
The reason Brown was in place so long was as much to do with the civil war within Labour as it was with the stability of government and presenting that firm hand image.

Tony Blair has not been Prime Minister for almost a decade.
It might be time to stop creeping along in the shadow of New Labour


John miller said...

Why would Labour not elect a Corbyn?

Were politics not so tribal, 75% of the Labour Party in 1997 could quite happily thrive in the Tory Party of 2016.

No point in electing another hypocritical posh public schoolboy.

Dick the Prick said...

And continuing from your final point - had Brown been shifted to the foreign office directly after 2005 then everyone would have been a hell of a lot happier.

Ken Clarke waxing lyrical this afternoon said 'if you think this is bad, let me tell you...' and he's absolutely right. George should definitely have moved just to get Philip Hammond back to his paperclips.

It was nice what they said about IDS - meh, i'm a sucker for fake sentimentality but it seemed like they'd grown up a bit this weekend. My friend and I are #TeamTheresa - it's such good fun! Gove was showing George a youtube on the front bench and they were pissing themselves whilst McDonnell was getting abuse for being a terrorist sympathiser - high brow stuff indeed!

One thing of Cammo keeping George is that if 1 goes down so does the other - total opposite of Blair & Brown.

James Higham said...

What would Brown have done to the FCO?

SumoKing said...

Last week the blog was praising a "solid budget"

This week it's an omnishambles but with the obligatory special pleading that osborne is not that bad and look, look back here 10 years ago we didn't like Brown, remember him! please remember him!

I assume despite this, the previous budget, hinkley, not getting a majority in 2010, only getting a majority in 2015 due to the SNP arse raping labour and the increasingly Trumpian Hair style, we will still be treated to some random post on Friday which suggests that Osborne is a "tactical" genius.

Serious guys, I get that you're season ticket holding blues but sometimes you need a night of the long knives.

Jer said...

"Finally, why is George Osborne still Chancellor at all? ...
Mrs Thatcher had 3"

Yes, and one of the discarded ones killed her!