I couldn’t possibly let this week go by without commenting on the budget, which took place last Wednesday. I don’t think it’s an understatement to say that it was quite possibly the most important and significant budget that’s ever taken place during my lifetime, and probably since the end of the Second World War.
If someone asked me for my first thoughts and reactions on the budget, I think the polite way in which I would respond is by saying ‘What an absolute total mess we’re in. How did we get into this situation?’
For the past 18 months or so we’ve all known about the credit crunch, we’ve seen the economy slip into recession, but Wednesday’s budget seemed to take the seriousness of the situation to a completely different level.
Last Thursday, I scanned the front pages of the daily papers. Every newspaper these days seems to interpret news events through their own prism of how they see the world. So for the right wing press such as the Mail, Express, and the Telegraph, the budget was a return to bad old days of class politics, in fact judging from the Telegraph’s front page, you’d think we were on the verge of another Bolshevik revolution!
In contrast the Guardian seemed generally more supportive of the budget, whilst the Daily Mirror painted Alistair Darling as a Robin Hood figure, taxing the rich to help the poor! The Sun amused me though, with its front page, which listed all the bad things we can focus on before noting that at least the sun was shining!
I’ve really tried hard this week to read as much about the budget as possible, to listen to all the different reactions, and analysis and to find out just how good or bad this budget really is and what this means for the UK’s economic position.
Having done this to the best of my ability, I’ve come to the conclusion that overall it was a pretty bad budget on the day, and will prove to be a bad budget over the next few months and years. The Chancellor's predictions for economic growth over the next few years appear to not only be overly optimistic but have also been totally discredited by economic experts, the City and in particular the IMF. I’m not quite sure how the Chancellor and the IMF can come to such widely different estimates in economic growth! Obviously someone has got their figures wrong.
Alistair Darling claimed the 50% tax rate on high earners was not politically driven, reports say that Labour had conducted a number of focus groups which the results suggested that this was a popular measure with key Labour voters. Seeing as Labour has spent so long ignoring is traditional working class support base it’s of no surprise that they’ve introduced this measure. People are rightly angry with the banking class that is partly responsible for getting us into this mess, they’ve become Public Enemy No 1.
The argument against this is that the revenues received form taxing those earning above £150,000 won’t make a significant difference, and that in reality we are penalising those who are responsible for generating wealth in the country. I get pretty tired of hearing this argument about wealth generators.
It gives the impression that only this elite group of high earners are making a significant contribution to the wealth of the nation, surely all of us in employment paying taxes are contributing to the country’s wealth? Generally I’m not overly concerned about those individuals earning over £150,000, I’m sure many people on low incomes still pay a significant amount more of their incomes in tax then those high earners.
What I would like to know is why this government isn’t making more of an effort to claw back some of the millions lost in corporation tax that many major companies seem to be avoiding. Only the other week, The Sunday Times reported that the Internet company Google has avoided paying £100 million in UK tax despite annual revenues of over £1.25 billion!
What has really stood out for me about this budget was the amount of government borrowing that will be required over the forthcoming years, and the increase in national debt, and the unavoidable tax increases which will occur. The whole thing has made me incredibly disillusioned with our political class. I just struggle to get my head around some of the figures and to understand how we’ve ended up in this mess. It seems that for 10 years of so we were happily going along with continuing economic growth, easy credit, rising house prices, the supposed end of ‘Boom and Bust’ economics but all along we were sitting on a ticking time bomb!
From what I can see that main reasons why Britain if facing such a difficult recession in comparison to other countries is that our economy has been over reliant on the financial services industry which has collapsed, a level of personal consumer debt which has been too high for far too long, and an over-inflated housing market.
I’ve always been generally quite optimistic about politics and our politicians. I’ve never been the sort to say ‘They’re all just the same, they’re all as bad as each other’ But I have to say that at the moment I’m feeling very let down by everyone. The Government for being in power over the last 10 years and the Opposition for failing to highlight or see any of these problems.
The only politician who I think has emerged with their reputation enhanced is the Lib Dem's Vince Cable. He’s the only person who I have real faith, confidence, and respect for in his views on the economy. Not only do I think that he should be running the Lib Dem party, but I’d feel much more confident about things if he was actually Chancellor of the Exchequer.
Who ever wins the General Election next year, I believe that not only do the have the problems of dealing with the worst economic conditions that most people can remember in their lifetimes, but there is also the issue of trying to restore public faith and confidence in the political establishment and their ability to competently run the country’s finances. For me I’d just like to see some genuine honesty and respect from politicians which seems to have been totally lacking at times when it comes to running the country’s finances.