A Budget for Denial

Today’s budget: no major surprises, tax increases, pork-barrel spending for selected lobby groups. And another stage of denial of the mess they’ve got us into through basing the economy on property (and other) speculation.

Borrowing now officially to go over £600 billion. That’s many times higher than the limits they assured us wouldn’t be breached, even after Northern Rock had blown the first hole in the pyramid economy. Bond markets propped up only by the BoE printing money. And all that borrowing to be paid back in classic subprime fashion, by blind optimism – rapid recovery starting later this year (yeah, right).

Tax rises on high earners, from a 54% to a 65%[1]74%[3] maximum rate on earned income, will probably net little or nothing. For the rich, property and capital gains still attract little or no tax, and inheritance remains the only way to get rich quick without the government taking it. In other words, the policy of penalising the productive and rewarding the wealthy is strengthened.

Huge new complexity in pensions. There’s a “sweet spot” for those earning between £40k and £100k per year, but above that a horribly complex tax regime, and below it no benefit[2]. It was only in 2006 that they simplified pension rules to the point where I could take advantage of them without excessive pain.

Extra help for lame-duck industries will help crowd out the productive and innovative, and smother any prospective recovery. But that’s already gone so far that some of those ducks would probably be waddling along quite happily if they hadn’t been smothered by the bad money that’s driven out good over the years of house price bubble. The chain reaction towards national bankruptcy.

Small “green” measures, alongside much bigger rhetoric and fat concessions to major polluters. But amongst that, some points of interest: a commitment to reduce pollution (that’ll fall to future governments to meet, with whatever creative accounting they deem necessary). And apparently some smoke-and-mirrors that’ll at least reduce the value of the car scrappage nice-little-earner over its headline value.

Oh, and one thing that’s genuinely good (and green) if it actually happens: a long-overdue pledge for universal broadband. No longer will moving house imply an uninsurable gamble that I might lose my livelihood.

Looks like we may remain in denial until after the next general election (which is due within a year). After that will presumably be the austerity faced by Iceland and Ireland. We’re a long way behind them.

[1] The 10% was announced today; the extra 1% is from memory and could be wrong: I have an idea another NI increase was already in the pipeline.

[2] Unless you’re incapable of saving without it. Or unless you play the benefits system and aren’t rich enough to hide your assets in property.

[3] POSTSCRIPT: Turns out 65% was wrong: there’s a 74% band on earnings between £100k and £113k, above which it drops down again.

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Posted on April 22, 2009, in uk. Bookmark the permalink. 2 Comments.

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