The con is on.
There are some budgets where you wish the chancellor hadn't bothered. There have been some when the chancellor needn't of bothered. Then there's today's, where George Osborne really shouldn't have bothered.
This isn't to imply that today's budget hasn't done some remarkable things. Indeed, if anything, there hasn't been quite enough recognition of the shock medicine Osborne has just administered to the British economy, or of just where he's got his ideas from. Straight out of the Thatcher era was the anticipated announcement of Enterprise Zones, which may one day provide the model for the entire country, as Eamonn Butler of the Adam Smith Institute would like. New businesses set up in the zones, 10 of which have been located and 11 more are still to be decided upon, will pay no rates whatsoever over a five year period up to the value of £275,000, while the planning laws will be watered down to the point at which it seems as if any construction which isn't completely outlandish or ridiculous will be waived through.
Taking into account that elsewhere in the budget, in one of those classic contradictions that only the most oleaginous politicians can get away with, Osborne made clear that even while giving "local communities a greater say in planning" he expected the default answer to development to be yes, the prospect for even more ill-considered and life-sucking out-of-town box industrial estates and business parks is massive. For all Osborne's repeated mocking of Gordon Brown's failure to end boom and bust, nothing is more likely to come to symbolise the unsustainable splurge for growth of any sort such zones will deliver. Even if they provide a short-term boost to areas of the country hit especially hard by the recession, there's no guarantee whatsoever that the jobs and businesses will stay once the incentives to be there come to an end, as they must. It's instructive that of the Enterprise Zones from the 80s, the only one considered a true success was the one set-up in London on the Isle of Dogs, Canary Wharf now towering over the surrounding area.
Just as clear is whom Osborne is really relying on to drive growth, and it isn't the entrepreneurs and small and medium sized businesses he hopes will take most advantage of the Enterprise Zones. The faster than expected cuts to corporation tax, coupled with the less well noticed plans for an effective rate of 5.75% "on profits derived from overseas group financing arrangements" and the abolition of the 50p top rate of tax on earnings over £150,000 as soon as Osborne can get away it will deliver what Chris Sanger, the global head of tax policy at Ernst and Young said was "getting close to the ideal", i.e. one in which big business hands over the minimum in revenue it can get away with to the exchequer while taking the largest possible rewards for themselves. This is trickle down economics in its most virulent and ugly form, the government hoping against hope that no one will see them pursuing exactly the same policy as New Labour did and which put us in this mess in the first place.
For there was almost no mention whatsoever in Osborne's hour long dirge of the banking crisis, referring to it only once in the entire speech. Like Bob Diamond suggested, the time for apologies and retribution is clearly over. Then again, there were so many other things which were better left unmentioned: like the austerity which is just about to hit in earnest and which formed the backdrop but which wasn't up for discussion as no more was asked for today. Unemployment too somehow only crossed the chancellor's lips twice: once to claim that it would peak this year, something undermined afterwards when the red book showed that the government expects the claimant count to be higher than previously thought, and then much later when announcing the expansion of apprenticeships. As welcome as those extra places will be, they are no replacement for the abolished Future Jobs Fund, one of the coalition's first acts of vandalism.
The real chutzpah in fact came right at the very beginning, as he promised to help families with the cost of living. The raising of the personal tax allowance to £8,015 helps those on low incomes the least, and the average saving of £45 is frankly pitiful, while the maximum amount it will hand back will be £120. Even then this will be grasped back by indexing allowances with the consumer prices rather than the retail prices index. The same sleight of hand is in evidence on the 1p reduction in fuel duty, the "unexpected" announcement trick which Gordon Brown so often resorted to in his budgets which were heavy on the micro while being light on the macro. The Sun will doubtless be delighted with Osborne going further that it demanded in this morning's editorial, yet when the rise in VAT had already put 3p on a litre of petrol at the beginning of the year it's hardly the most generous of giveaways. If anything, it's the opposite: to pay for it and the "fair fuel stabiliser" (an appropriate acronym) Osborne decided to raid the North Sea oil companies, with there being no guarantee whatsoever that the cost of the windfall tax won't be passed on to the consumer, regardless of Danny Alexander describing the prospect as "nonsense" later.
The massive gamble then is still on, with Osborne continuing to raise the stakes. Faced with higher inflation, lower growth and higher unemployment than he had previously pencilled in, all the chips are being placed on the private sector taking advantage of his schemes for growth. It would be incredible if they didn't, considering what he's throwing their way: whether it will be enough is something else entirely. As for the long term consequences, one can only guess at what the tearing up of regulations and planning restrictions will wreak. No really George, you shouldn't have.
This isn't to imply that today's budget hasn't done some remarkable things. Indeed, if anything, there hasn't been quite enough recognition of the shock medicine Osborne has just administered to the British economy, or of just where he's got his ideas from. Straight out of the Thatcher era was the anticipated announcement of Enterprise Zones, which may one day provide the model for the entire country, as Eamonn Butler of the Adam Smith Institute would like. New businesses set up in the zones, 10 of which have been located and 11 more are still to be decided upon, will pay no rates whatsoever over a five year period up to the value of £275,000, while the planning laws will be watered down to the point at which it seems as if any construction which isn't completely outlandish or ridiculous will be waived through.
Taking into account that elsewhere in the budget, in one of those classic contradictions that only the most oleaginous politicians can get away with, Osborne made clear that even while giving "local communities a greater say in planning" he expected the default answer to development to be yes, the prospect for even more ill-considered and life-sucking out-of-town box industrial estates and business parks is massive. For all Osborne's repeated mocking of Gordon Brown's failure to end boom and bust, nothing is more likely to come to symbolise the unsustainable splurge for growth of any sort such zones will deliver. Even if they provide a short-term boost to areas of the country hit especially hard by the recession, there's no guarantee whatsoever that the jobs and businesses will stay once the incentives to be there come to an end, as they must. It's instructive that of the Enterprise Zones from the 80s, the only one considered a true success was the one set-up in London on the Isle of Dogs, Canary Wharf now towering over the surrounding area.
Just as clear is whom Osborne is really relying on to drive growth, and it isn't the entrepreneurs and small and medium sized businesses he hopes will take most advantage of the Enterprise Zones. The faster than expected cuts to corporation tax, coupled with the less well noticed plans for an effective rate of 5.75% "on profits derived from overseas group financing arrangements" and the abolition of the 50p top rate of tax on earnings over £150,000 as soon as Osborne can get away it will deliver what Chris Sanger, the global head of tax policy at Ernst and Young said was "getting close to the ideal", i.e. one in which big business hands over the minimum in revenue it can get away with to the exchequer while taking the largest possible rewards for themselves. This is trickle down economics in its most virulent and ugly form, the government hoping against hope that no one will see them pursuing exactly the same policy as New Labour did and which put us in this mess in the first place.
For there was almost no mention whatsoever in Osborne's hour long dirge of the banking crisis, referring to it only once in the entire speech. Like Bob Diamond suggested, the time for apologies and retribution is clearly over. Then again, there were so many other things which were better left unmentioned: like the austerity which is just about to hit in earnest and which formed the backdrop but which wasn't up for discussion as no more was asked for today. Unemployment too somehow only crossed the chancellor's lips twice: once to claim that it would peak this year, something undermined afterwards when the red book showed that the government expects the claimant count to be higher than previously thought, and then much later when announcing the expansion of apprenticeships. As welcome as those extra places will be, they are no replacement for the abolished Future Jobs Fund, one of the coalition's first acts of vandalism.
The real chutzpah in fact came right at the very beginning, as he promised to help families with the cost of living. The raising of the personal tax allowance to £8,015 helps those on low incomes the least, and the average saving of £45 is frankly pitiful, while the maximum amount it will hand back will be £120. Even then this will be grasped back by indexing allowances with the consumer prices rather than the retail prices index. The same sleight of hand is in evidence on the 1p reduction in fuel duty, the "unexpected" announcement trick which Gordon Brown so often resorted to in his budgets which were heavy on the micro while being light on the macro. The Sun will doubtless be delighted with Osborne going further that it demanded in this morning's editorial, yet when the rise in VAT had already put 3p on a litre of petrol at the beginning of the year it's hardly the most generous of giveaways. If anything, it's the opposite: to pay for it and the "fair fuel stabiliser" (an appropriate acronym) Osborne decided to raid the North Sea oil companies, with there being no guarantee whatsoever that the cost of the windfall tax won't be passed on to the consumer, regardless of Danny Alexander describing the prospect as "nonsense" later.
The massive gamble then is still on, with Osborne continuing to raise the stakes. Faced with higher inflation, lower growth and higher unemployment than he had previously pencilled in, all the chips are being placed on the private sector taking advantage of his schemes for growth. It would be incredible if they didn't, considering what he's throwing their way: whether it will be enough is something else entirely. As for the long term consequences, one can only guess at what the tearing up of regulations and planning restrictions will wreak. No really George, you shouldn't have.
Labels: budget-2011, Conservative-Liberal Democrat coalition, economics, George Osborne, politics, spending cuts, the budget
| Permalink
Post a Comment