Saturday, 27 March 2010

Few answers from this week's budget

It was another big week in politics, with the last budget before the election. Having considered everything that I've read and heard, I'm not sure that this budget was really necessary. It hasn't even tried to set out the answers to the big questions facing the British economy.

Last year when I first started this blog, I wrote a post on the 2009 budget. My argument was that it was possibly the most depressing budget I'd ever witnessed. It suddenly hit home what a complete and utter mess the country was in financially. Almost 12 months later my feelings are exactly the same!

What I find with the current economic climate and this week's budget, is that no matter how strong your interest is in politics, some of the issues can be quite difficult to understand and get your head around.

Reports in the papers can sometimes be overly simplistic or so complex you have to read a report 4 or 5 times before any of it begins to make sense.

This week I tried to avoid reading reports on the budget from the national newspapers. Their reporting can be too partisan as many have their own political agenda.

Discounting the Guardian and the Mirror, all the papers were hugely critical of Alastair Darling's budget, but then they all want to see Labour out of Office. There's nothing wrong with that, but sometimes I want a slightly more balanced view. I want to know, what it all means? Who's telling the truth? Who can be trusted?

Reports that I found really useful and informative include Channel 4 news Faisel Islam' blog which you can read here on the budget. He sets out quite well the figures of government borrowing for this financial year and how the government hopes to reduce it over the next 5 years.

Last year Labour claimed at the pre budget report that they would need to borrow 178 billion over the next financial year, this figure has now been revised to 167 billion! That's still some serious borrowing! They're looking to reduce borrowing figures to 74 billion over the next five years.

Leading on from this you have the following questions that haven't really been answered:

How will the government's spending deficit be reduced in terms of the amount of spending that's required by the government and the amount of money received by the treasury in the form taxes?

How drastic will cuts in government spending have to be?

Should spending be cut sooner or later? The Tories seem to argue that spending cuts should be more immediate, with Labour claiming that cuts now will hamper the country's economic recovery.

For me the most informative reporting that I've read has come from Robert Chote, the director of the independent think tank the Institute for Fiscal Studies (IFS)

Much of what he's had to say is very clear, straight to the point and without any obvious political bias. He went on to say about the deficit reduction that there was a lack of clarity from both Labour and the Tories

"There are an awful lot of judgments still be made, or revealed, notably with regards to public spending over the next parliament. This greater-than-necessary vagueness allows the opposition to be vaguer than necessary, too."

Neither Labour or the Tories seem to be telling anyone how or where spending cuts are really going to come from. This is why in some respects there was no need for this budget. What really needed to be said, won't be said until after the election.

Once the election result is known and we have a new parliament whoever is in power will have to have another budget, which will clearly set out in more detail where savings and cuts are going to be made.

What neither party is really saying is the likely affects that such cuts are going to have on the country. The government is arguing that front line services like Health and Education won't be affected, and the Tories seem to be saying the same thing.

But clearly with spending cuts, we are going to see some major changes in public services. There's the argument that seems to give the impression that it can all come from efficiency savings, but efficiency savings can only go so far.

Regardless of who wins the General Election, I think we're entering a period of the unknown. It doesn't matter what any of the main parties say, you can't be 100% convinced that they know what's going to happen in the next five years and it's increasingly difficult to make any concrete predictions on anything. The only thing you can say is that times are going to be hard for everyone in one way or another.

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