Amidst the mass of comment today I pick the Telegraph’s two lead commentators to go with that of Bootle I sent overnight ("PBR - late night round-up").
One news item that I had hitherto missed and which gets several mentions is that the Irish had a budget yesterday and almost all comments contrast the way this tackles the dire state of Ireland with the way Darling-Brown have shunted off the hard choices for Britain until well after all the votes have been counted.
If unemployment is a social scourge the Tories are right to make their first priority the removal of as much oif the extra NI contributions as possible as these are a direct tax on employing anybody. It’s not as though the revenue were to be used to reduce our debts! No it is to be squandered on uncreased welfare provisions which all know cannot be afforded. A shabby measure.
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This paper has a plethora of comment and analysis including a trenchant leading article (which I will send out) and a piece by Lord Lamont ("A government addicted to spending - Far from using tax rises to cut crippling debt, Darling is acting as if there were no crisis")
Christina
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TELEGRAPH 10.12.09
Pre-Budget report:
1. Poor show that will only hinder the economy
Political fudge does nothing to get to grips with calamitous levels of debt, says Jeremy Warner.
The Chancellor promised a pre-Budget report for growth, but what he delivered was a risible political fudge which put protection of public spending before the long term national interest and failed to deliver a convincing plan for addressing the road crash in the public finances.
Politically, it may or may not have been a clever manipulation of the disastrous mess the Government has created for itself. Economically, it was a poor show which, far from supporting the recovery, will only hinder it by taxing jobs and stretching out into the indefinite future any serious attempt to get to grips with calamitous levels of public borrowing.
The contrast with Ireland, which announced on Wednesday deep cuts in benefit entitlements and public sector pay to answer similarly explosive growth in government borrowing, could scarcely be greater.
While Ireland acts, the Chancellor insists that he's determined not to wreck the recovery by applying the fiscal brakes too quickly, and won't even begin the necessary fiscal squeeze until the year after next, [by which time our debts will be astronomically higher -cs] .
The political purpose served by delaying the pain until well after the election will be obvious to all, but the Chancellor's economic justification for it – that it will support growth - looks questionable too.
Even accepting that continued borrowing to spend might provide some temporary life support for Britain's beleaguered economy, the manner in which the Government plans eventually to deal with the resulting deficits looks politically motivated and economically flawed.
Rather than attacking the root cause of the problem – excessive spending – the Chancellor plans instead to tax his way out of trouble. OK, so that may exaggerate the position a little. In pursuit of the goal of halving the deficit in four years, the Government accepts that a very considerable squeeze in public spending still has to be imposed.
But to protect "priority" spending on health, schools, the police and benefits, the Government now proposes that a much greater proportion of the heavy lifting comes from tax rises than spending cuts. Prior to the PBR around 80 per cent of the work in reducing the deficit was to done through cuts, and only 20 per cent from tax rises.
These proportions were changed to something closer to 67 per cent and 33 per cent. Most of the difference is achieved by doubling a previously announced increase in national insurance rates. But rather than using the extra taxes to pay down debt more rapidly, the Government plans instead to swipe the proceeds and apply them to protecting public spending.
The planned increase in national insurance, which is effectively a tax on employment, threatens to knock the stuffing out of any private sector recovery by acting as a significant deterrent to investment, trade and job creation.
Add to that the "not welcome here" message the Government has sent to international finance with its plans for a super tax on bank bonuses and it is harder still to see how this can be a "going for growth" pre-Budget report.
In its desperation to save as much as it can of the house that Gordon Brown built, the Government has buried its head in the sand and refused to acknowledge the scale of fiscal challenge that Britain faces.
For those that wonder why the markets didn't react more adversely, there is a fairly simple explanation. Most of what's announced now is regarded by markets as just electioneering, and therefore largely irrelevant. It's what comes after next May that matters, and regrettably, it's likely to be a lot harsher than the implausible mix of make-believe.
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2. Is Darling's statement a suicide note, or a poison pill?
This deeply political pre-Budget report was littered with traps for the Tories, says Benedict Brogan.
From my vantage point during the pre-Budget report, Gordon Brown's right hand was out of sight somewhere behind the Chancellor's back. It was tempting to imagine him as a ventriloquist, muttering through tightened lips the nonsense that appeared to be coming from his dummy's mouth – especially the bit when Alistair Darling told the Commons: "We take these decisions from a position of strength."
The Tories howled with delight at that one. How preposterous! How ridiculous! Strength? Have you seen the state of the economy? Do you realise how close we are to the iceberg? Are you blind? Wake up, man! Strength? Ha!
And we jeered along with them. Did not the re-worked numbers presented by Mr Darling tell a story of national weakness stretching into the distant future? By 2014, government borrowing will still be running at £96 billion a year, and Britain's ratio of debt to GDP will be at 78 per cent. For Mr Darling to talk about "strength" was to stretch the bounds of the fantasy economics that have been the hallmarks of Mr Brown's stewardship of the nation's finances.
Except that the Chancellor was right, in one significant respect. When it comes to the politics of the PBR, Labour is in a strong position because it is – for the moment at least – in government. Yesterday's pre-election report – to use George Osborne's phrase – was a demonstration of what a party in power can do even when it is cornered.
Wherever it lies in the polls, a Government holds most of the cards. It can make numbers say what it wants, it can use the power of executive fiat to stack tax on the rich and hand out cash to the poor, and it can deploy the weight of the state in its favour. We might mock an administration on its last legs, but it still controls the flow of play.
In fact, if anything, the PBR surpassed the expectations of those, like me, who had predicted that it would be an exercise in political opportunism. This was crafty politics on a grand scale. Less than five months from the likely general election date of May 6, Labour is pouring all of its efforts into skewering the Tories before then, and preparing for the years of opposition that will follow. Every line of the Chancellor's statement was calculated for maximum political advantage, with a mix of digs at the Conservatives, sops to the markets, handouts for Labour clients and raids on the wealth of those who, across the income scale, are expected to provide the energy that will drive the recovery.
So, how does it shape pre-election politics? By rights, this should have been the second longest suicide note in history, a moment of epiphany for the millions of aspirational voters who increasingly suspect that Labour is, as of old, genetically set against them.
The danger, though, is that it won't be. That it will instead consolidate Mr Brown in his bunker, while adding to the challenge facing David Cameron. For Labour, the PBR gives them the suspension of disbelief that they need to get through to polling day. It defers the pain far enough into the future to make it a problem for another time. By identifying the NHS, schools and the police as protected species, while putting off a departmental spending review, Mr Darling allowed his party to campaign on specious promises to "protect front-line services" while avoiding awkward questions about the cuts of between 14 and 20 per cent that other departments will have to bear as a consequence.
The party's core voters – and its all-important activists, who, however depleted in number, must still be motivated for a fight many believe to be lost – will rejoice at the perverse decision to increase payments to the elderly, children and the disabled when inflation is effectively nil. Putting the state pension up by 2.5 per cent when other countries are tackling structural deficits by slashing entitlements is perhaps the most egregious poison pill in this package.
Mr Brown also hopes the grassroots will appreciate the substantial taxes on the wealthy, be it the raid on bankers' bonuses or the new tax on employers' pension contributions that hits those on £130,000 or more. The polls show public support for taxing the rich, so he and Mr Darling have obliged by pandering to a national desire to see the elites made to pay for the mess we are in. [= ‘they have got us in’ -cs] But that should not distract from the pain they propose for everyone else – Labour is doubtless hoping that the public might not spot that it has put up income tax for just about everybody, through an additional half-point rise in the National Insurance levy. The increase is designed to make it even more difficult for Mr Osborne to reverse the original half-point rise, which he has said will be his first priority when finances permit.
In fact, if you follow the Chancellor's text, it is littered with digs at the Tories that provide a useful preview of the Labour election campaign – like that final bash at those who preach "austerity driven by outdated dogma", for which read: "Watch out for the Thatcherites, who are out to slash and burn."
For the Tories, the task now is to turn the PBR against Labour by exposing it as a direct attack on aspiration, and on the compact between the parties that has lasted since the early days of Tony Blair. By introducing a marginal tax rate for the better off of more than 50 per cent, and taxing their pensions, Mr Brown has cast aside all pretence that Labour any longer stands for those who, in Mr Osborne's most effective intervention, "want to get on in life".
The Shadow Chancellor needs to act fast, though, as Labour has him in its sights. The party recently tested a billboard poster that showed Mr Osborne outside No 11, holding a red Budget box aloft: the image turned stomachs among the focus groups. Labour is also harvesting every murmur from the City that suggests it has doubts about Mr Osborne. Lord Mandelson's point yesterday that politicians may not choose their schools, but do choose their clubs, confirms the kind of class-war attacks on "Bullingdon economics" that are still to be unleashed.
In many ways, the situation is akin to that in 1992, when Labour showed its hand too early in the run-up to the election with an ill-judged Shadow Budget, and the country shied away. Until now, it has been the Tories who have been under pressure from Labour to reveal what they will do on tax. Yet it is Mr Brown who has spelled out what we get if we vote Labour: Middle England will pay more.
This, therefore, must be the Tories' moment. Labour has laid bare its economic incompetence and its class-war instincts. Now that the battle is joined, it is time to ignore Mr Brown's traps and crafty politics. Mr Osborne was right about the greatest golden rule of all – that you can't trust Labour with your money. He and Mr Cameron must now remind us, with conviction, why we would have any more of it if we put them in charge
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