JUST IN - OSBORNE'S SPEECH IN THE BUDGET DEBATE IN FULL ON
I'll send it out separately if I can find a moment!
DARLING NOT PRESENT GONE TO WASHINGTON - to IMF?
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The first item is very serious news indeed. If yields rose
significantly and stayed there it would definitively unbalance even
the shaky mathematics of the Budget for ALL borrowing would cost
more, so more would have to be borrowed just to pay the extra
interest - just like using one credit card to pay off another one!
Then we turn to Heffer. I'm with him most of the way. But he should
pause and think about the Tories being specific about cuts. Osborne
has made one specific - ID Cards. But 15 months berfore he can
preoduce a budget puts too many hostages to fofrtune. One thing
nobody sdeems to have noticed is that the 50% rate comes in sooner
thanm originally planned. This means that Osborne can come to
parliament and abolish it on the grounds that it harms the country
and produces negligible revenue. He was careful on his video
statements yesterday and on Sky News today not to commit the party to
anything until they've examined the books. The Labour party want him
to say things now so that they can attack him. My feeling is that he
should ber very stern about making cuts but refrain from specifics
for now. What's the betting that Darling won't alter all the figures
in his PBR ('Pre-Budget Report') in November ?
There are two other worthwhile reports in the Telegraph but enough is
enough. But I recommend (1) Tom Stevenson on "Paltry support for
put-upon savers will not inspire culture of caution
As expected, Britain's hard-pressed savers have received little from
the Chancellor"; and (2) Chris Sanger on " Britain's got talent,
but not for long with tax at 50p in the pound - The big concern id
the message and impact this could have on the psyche for business"
xxxxxxxxxx cs
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TELEGRAPH 23.4.09
1.at 3.41pm
Gilts continue to slide as Budget 2009 sparks UK
sovereign rating fears
UK government bond prices fell again sharply on on Thursday as
investors continued to reel from the record borrowing announced by
Alistair Darling in yesterday's Budget.
By Philip Aldrick and Amy Wilson
Prices for government debt, or gilts, maturing in 10 years slumped
for a third day after Alistair Darling admitted that the Treasury
will be forced to borrow a record amount this year to plug the gaping
hole in its finances.
Bond investors knew that the Government would be forced to borrow
more but were still stunned by the Chancellor's Budget admission that
it will need to tap them for £220bn this year. That figure dwarfs the
previous record of £146bn set last year and is more than the £180bn
that was expected.
"The main anxiety in the market is that this might not be the worst
of it," Robin Marshall, a bond investor at Smith & Willliamson told
Bloomberg.
According to the Debt Management Office (DMO), which issues the bonds
on the state's behalf, the Government will need to raise another
£197bn in the public debt markets next year, followed by £154bn in
2012/2013 and £125bn in 2013/2014.
Robert Stheeman, the chief executive of the DMO, admitted that "it's
a challenging remit." However, Mr Stheeman insisted that "a funding
strike is in any way a realistic scenario." [? Is there a "not"
missing in that sentence? -cs]
Fears are mounting that the sovereign credit rating will be damaged
by the vast debt burden, which the Chancellor said would double to
79pc of GDP by 2013. Rating agencies had not expected such high
levels of debt. A downgrade would increase the cost of borrowing,
further damaging the prospects for recovery.
"It is worrying," said Jim Reid, credit strategist at Deutsche Bank.
"There is a risk that some people may just throw in the towel as they
can't keep funding this."
Concerns were stoked last month by the first failed auction of
conventional gilts since 1995, raising the prospect that the
Government may have to pay investors more for the debt. However, DMO
chief executive Robert Stheeman, said: "We're confident we'll be able
to sell this. Uncovered auctions are a possibility but I don't think
will happen frequently."
Mr Reid added: "The Government has got to be a bit more credible if
it expects to keep funding this in the public markets. Saying that
the economic recovery will start at the end of the year does not help."
The issuance is so large that the DMO is resorting to new measures.
Some £25bn will be raised through syndication with pension funds and
other buyers rather than risk another failure at auction. Syndication
has been attempted just once before, for £1.25bn in 2005.
====
2. A savage and pointless attack on Middle England
Alistair Darling and Gordon Brown are squeezing the middle classes to
keep their clients happy, says Simon Heffer.
By Simon Heffer
The idiocy, bigotry, tribalism and sheer class hatred of the Budget
at least clears up a lingering doubt some seem to have had about the
Labour Party. We now know for sure that it not only has no interest
in what can be characterised as "middle England", it seeks positively
to persecute that constituency for its own political advantage. Our
country is in the worst economic mess that anyone under the age of 80
can remember. [Don't I know it - I DO remember it! -cs] That mess
has been exacerbated by wanton and ignorant policies pursued by this
Government. The tax rises announced on Wednesday on the so-called
rich show that Labour has no regard for the creation of wealth, and
no understanding that its creation is what makes everybody (and not
just the "rich") more prosperous. This Budget was a Budget for poverty.
Labour is not interested in improving the country it purports to
govern. It is interested only in retaining power. Its policies are
shaped increasingly, if not exclusively, by considerations of how it
advances the cause of its own people. Those who are not in that
category - such as most of you reading this column - get what is
coming to them.
Labour's client base is broad. It starts with its own MPs, to whom it
only the day before the Budget offered an expenses deal that will
look after most of them very well. It extends through an enormous
state bureaucracy and salariat to a generous welfare state. This ever-
expanding and ever more propitiated group has to be supported by a
shrinking number of those in work, and a shrinking number of those
who have saved to provide a decent standard of living. The Budget was
inadequate because it sought to deal only with the needs of the
clientele, not with the needs of the country.
An election is no more than a year away. The starting gun for its
campaign was fired yesterday. At least there is - or should be -
clarity in the battle lines. The middle classes are there to be bled
white. Labour is now quite open about that. The question only remains
of whether the Opposition will choose to defend the interests of its
supporters as robustly as Labour is defending the interests of the
clientele.
For be in no doubt about two things. First, the mess in this country
- which Mr Darling, in keeping with Government policy, chose to
depict as having happened almost by accident and as a result of
global forces outside his control - has been aggravated by the
practice of reckless economics. The few of us [speak for yourself
Heffer. Plenty of genius here -cs] who saw this debacle coming
required no genius to do so: it happened because the then Chancellor
of the Exchequer, Gordon Brown, chose between about 2000 and 2007 to
allow the money supply to grow by between two and three times the
rate of inflation plus growth. This imitation of Alan Greenspan - who
did the same in America to fulfil Bill Clinton's desire to make as
many people as possible feel well off - fed our present catastrophe.
Money was there to make everyone feel good - whether bankers or first-
time buyers with silly mortgages. It seemed as though prosperity no
longer had to be earned. The printing presses rolled: quantitative
easing was happening long before we knew it. And even the
Conservative Party, to its shame, was taken in, with its ludicrous
line about "sharing the proceeds of growth".. [When I get a moment
I'll try and trace when I first pointed that out! It seems ages ago!
-cs]
Second, the desire to keep power means continuing to keep the
clientele in the style to which it is now accustomed. This means
generous benefits that do not become reined in as earnings in the
private sector are. It means continuing to create jobs for the
clientele in entirely socially unproductive areas. Jobs advertised in
yesterday's Guardian for, among others, a "democratic services
officer" in Hackney, or a "customer experience manager" for the
Department of Work and Pensions give an indication of the care, and
the ease, with which public money is spent. It is the Government's
determination to continue to bribe its voters that causes not just
the wealth-destroying taxes, and a further raid on pension funds, but
also the insane levels of borrowing: £175 billion this year and £173
billion next. It was instructive, too, that when the Leader of the
Opposition quite correctly attacked the Government for this atrocious
profligacy, Mr Brown was pictured sitting on the bench opposite him
laughing. It is moments like that that make some think either of
strangulation, or emigration.
Wednesday's events were definitive. They showed that Labour has
reverted to being a class-based party, and like all such parties is
determined to rob the class in which it is not based. Those tens of
millions of Britons who work hard, save hard, take responsibility for
themselves and make no claim on the state are to be targeted to
provide the resources to help Labour secure re-election. The Budget
was the most naked attack on the middle classes since the 1970s. By
this act of bigotry, Labour has repatriated us to the land of flared
trousers, British Leyland and the Bay City Rollers.
Yet it has also, as was intended, put the Conservative Party on the
spot. Foolishly, Mr Cameron chose not to reject last November's
proposal to raise taxes to 45 per cent for those on more than
£150,000 a year in 2011. He now finds Labour is intending to raise
them to 50 per cent, and a year earlier; and the same group to be
affected by this will also lose tax relief on pension contributions,
in another assault on savers. So what does Mr Cameron do? Does he say
that the "rich" must be punished for the failings of the Labour
government that he hopes to replace? Or does he say that this
partisan policy, which will raise relatively little money, is unfair
and counter-productive, and will not be persisted with should he come
to power after April next year? [See remarks in intro]
The argument seems straightforward. The Conservative Party should not
be class based, so it should not favour a tax that hits one section
of society so disproportionately hard: after all, we are all supposed
to be in this together. It can also argue that the revenue to be
raised is minimal - indeed, it may turn out to be nothing. The Laffer
Curve suggests that if you wish to get more revenue, taxes should be
cut, not raised. Also, as we saw in the 1970s, high taxation of the
most successful in our society drives not just them, but their
businesses, abroad. Of course the books have to be balanced: but
there are ways that are not merely fairer but also more effective.
Labour's way of doing it is sheer vindictiveness, and with a
political purpose: it will do only harm to the country, to the
stimulation of demand, to growth and to employment.
It was hard to believe a word Mr Darling said. His forecasts have
proved to be worthless, and Wednesday's smelt fictional. His growth
forecasts were particularly absurd. Labour's record should speak for
itself: destroying wealth, raising unemployment, presiding over
waste. Now, though, it seeks to pursue a policy to retain power that
puts in the party's sights the very productive and self-reliant
people on whom the country must depend for a recovery. It represents
a savage and pointless attack on those without whom Britain is sunk.
Mr Darling's failure, like that of the Government he serves, is
abject. This is Mr Cameron's moment. And it is not just victory that
awaits him if he seizes it, but success.
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