Shave and a haircut..

First thoughts.

Seems that benefits will be hit hardest. £7 billion cut to welfare. Not really a surprise. Welfare is the government's work and if it has to cut then that's where the cut comes. Council spending looks like being significantly more than Osborne's 7% cut claim. Will have to look at the numbers a bit more later on.

The government said it needs to cut £83 billion in public spending over the coming four years in order to wipe out a £159-billion deficit — the largest in Europe after Greece and Ireland.

The arguments for and against are pretty clear. Cut now, say Labour, and the recovery will end and tax receipts will plunge at the same time as unemployment will rise. The government points to a record £43 billion a year in debt interest alone and worries that a % point increase on borrowing would necessitate even deeper cuts later on.

In 2008 the debt was an already dangerous £525bn. Mr Brown was trying to find some way of pretending the phony 'golden rules' were still in place. Then the credit crunch. And the debt is doubled. So Labour's wait and see is not an option. When a nation has spent two years doubling its debt trying to buy off a recession its just not an option to suggest doubling it again just to be sure.

The 490,000 job losses will hurt if those people don't find other work. { suspiciously just under the 1/2 million tag George?} Something we should remember. When the 30,000 workers of Woolworths were kicked out with 4 weeks notice and a paltry statutory redundancy, no one thought they would never work again. Surely the same with public sector workers. If you listen to Unite you'd think people were being confined to their homes forever more. In shopping centres and high streets across the UK they haven't seen as many 'opening
soon' units being readied for Christmas since 2007. Osborne is probably just about right. The recovery is on.. so why wait?

And anyway, he can't wait. The coalition cannot follow Alan Johnson's advice even if they thought it was correct. For a start they can't do nothing. What kind of chancellor would George be if he decided that on obtaining power after 13 years he considered 'It's OK. Everything was already under control.'

Politically the coalition must act early on. They must cut and pray, fingers crossed, that it all works out and the early pain can be overcome by later tax cuts and spending commitments. The weakness of a fragile coalition, the public's temporary and only semi acceptance of Labour's wasteful spending, and the need to prove Blue was right and Red was wrong have driven the government to gamble on a cuts strategy.

Pre-Budget and Comprehensive Spending Review

"Badger" Darling was doing his masters bidding today in presenting to Parliament this report. A pre-election fest for us all, with no election. Quite scary when you look at the giveaways, practically nothing.

The cupboard is very bare now and there are no more baubles left for us; In the bleak midwinter...

So my 2 cents:

Taxes - A small concession to married couples for inheritance tax; Aping the Tories without going as far as them. No move on corporation tax, a tax rise for Capital gains, some vaguery about hitting non-doms; overall a little tax grab here and quite a nasty one for entrepreneurs who have invested heavily in R&D and building their own companies (as if the PE boys will notice!). Finally, some peanuts for local government, although that will be lots of money for the few Labour councils that are left as other councils won't be likely to be favoured. Council taxes still expected to rise at above inflation rates. Ouch.

Economy & Public Debt - Slight reduction in forecasts for growth - still wildly optimistic but then we would expect nothing else. A promise of no real tax cuts to come. Said nothing on Northern Rock as plans are clearly still be re-written in the Treasury as the lending situation becomes more murky. On the government side some heroic lies have been spun that will come back to bite hard if the opposition remembers them. There is simply no way the UK net debt will be £23 billion by 2010 ( that won't even cover the Olympics, will it?). Equally another £10 billion of savings is pure chicken feed, a mere rounding error as Chris Dillow points out.

CSR Spending - Health to still have more money poured into it. No mention of re-negotiating the GP's settlement or how the trusts are going to cope with the PFI debts going forward.

Education to get more money for personalised learning (another dead end waste of time. it is discipline and staff motivation that is needed, not this). More money to to go on investment in research; hopefully no the abused corporate R&D tax credit scheme. However with the tax change on entrepreneurial investment this all seems very disjointed.

Housing - Help for people to renovate poor housing, beyond me why this is needed as there is a clear economic incentive to develop your own property as it is. tampering with mortgages too in an effort to reduce our addiction to variable rates. Another poor idea as very few people will want to fix something now and miss an opportunity in the future; why is the government trying to in the game of guessing people's risk appetites?

Other baubles - not much for culture, a pittance for the army, some very belated funding for flood defences, more money for overseas aid and more money for people with kids on benefits ( loving the incentives here, i hope you are too..)


This lot must make some shocking reading to Labour supporters everywhere. There is no effort at reform in here, they can't even copy the Tory policies properly and the money has run out for any kind of sizeable giveaways to the core public sector constituency on whom they rely for votes....And this in 2008 when growth has been very resilient. The guarantee of tax rises next year are going to be very unpopular as the economy cools and house prices give way.