Today’s UK budget debate

Well done to George Osborne for carrying the case for a debate to Parliament and getting us one. Now today we need to show the government how wrong they are to propose a further large increase in borrowing to cut VAT.

I am expecting lots more Labour lies, as this budget is not a serious economic policy statement but a trap for the Tories that has misfired. It is a silly political manoeuvre that has gone wrong. Labour thought they could damage the Tories by getting us to oppose borrowing to pay for a tax cut, and then lying about our motives for doing so. Instead, they are left defending an ill judged tax proposal which most of the public is cynical about, which will not suddenly lift us out of recession. People do not welcome a tax cut which they have to pay for with huge tax rises after the election. Meanwhile they have spurned more modest but more helpful Conservative proposals to assist small business, Council taxpayers and home buyers as they lose out in the downturn. Labour’s temporary VAT cut, far from being a comfort blanket in a crisis, will prove to be a borrowing noose round all our necks.

Labour are still using the lie that I wrote a deregulatory report about the mortgage banks. They refuse to look at the part of the Report which forecast banking problems ahead and urged better and tougher regulation of banks capital and cash. Instead, the government implemented that part of my Report a year too late, in an over the top way which is making the problem worse. They lurched from being too lax to being too tough after the banks were badly damaged.

Labour think they are clever, and can use budget proposals and legislation as part of their spin campaign to portray opponents in a bad light and themselves in a favourable one. They will learn to their cost that people mainly judge governments by what they do rather than by what they say. This latest budget unpicks three of the more foolish and unpopular measures of previous budgets (car tax, 10 p tax abolition, small business profits tax). This latest budget itself will need unpicking, as it is borrowing too much and delivering too little help to a country torn by recession.

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8 Comments

  1. StevenL
    Posted November 26, 2008 at 11:20 am | Permalink

    “Labour think they are clever …” (JR)

    Labour think we are stupid more like. I must admit, to some extent their scam of over-simplifying half-truths and repeating them over and over, again and again is working on some people.

    Then again maybe they actually believe their little mantras. A friend once told me about a fitted kitchen firm his sales manager used to work for. They would recruit bright, motivated fresh faces and encourage them to take out big mortgages and car loans. Every morning they used to have to sit around a table chanting “sell, sell, sell”.

    Maybe in 30 years time when the New Labour Cabinet minutes are released we’ll find out that Blair and Brown were running a similar operation. Promoting bright young backbenchers with no management experience to positions of Cabinet seniority and making them chant “our borrowing is low and now is the time to invest” or something like that all morning before heading on out to their photo-ops and press conferences.

  2. rugfish
    Posted November 26, 2008 at 1:12 pm | Permalink

    As stated yesterday a reduction in VAT won't mean a damn thing to people who've lost their job, are struggling to meet utility bills and higher local taxes, and it won't give businesses more sales, just more work.
    This said, then why take on the burden of debt it will create and for what reason when we already know it won't achieve the result ?

    Plainly, the government should do an about turn on its admitted mistake over the 10p tax fiasco, it should halt council tax increases, it should inject a tax refund or temporary increase to tax thresholds, close tax avoidance loopholes, remove VAT from domestic heating and then it could say they've done something for Britain and the economy once they've shredded the Lisbon Treaty which is giving away our EU rebate which would otherwise meet the costs of these changes over a 5 year term.

    What next shall we hear from these incompetent spin doctors ?

  3. John Lancaster
    Posted November 26, 2008 at 1:31 pm | Permalink

    Has anyone commented on the Government's repeated use of the politics of fear in this financial crisis? There are parallels to be seen in the way they ratcheted up the Weapons of Mass Destruction arguement to justify the Iraq invasion, with the way Brown and Darling are handling this crisis. First they give a very lurid description of the "end of the world as we know it" danger we all face, and then tell us they are the only ones that can get us out of the mess, by naysaying all reasonable arguments and spinning their line to the media who will report anything to fill their schedules. Just as the falsehood of WMD story is now recognised, in time we will see that their response to this crisis is the reason the country's economy will be undermined for the next decade. This Government's failure to improve public and yet hype the need for increased expenditure is another example of creating the perception of a need and claiming their policies as the only way forward. The Conservative Party must now address the issue of reforming the public sector as a top priority, by developing policies that provide essential services but at lower cost, but without recourse to this horrible game, based on the principle of "you can fool some of the people all of the time".

  4. Alan Wheatley
    Posted November 26, 2008 at 3:06 pm | Permalink

    I note your comment that the government "lurched from being too lax to being too tough after the banks were badly damaged", a point I believe you have made before. As I understand it, this is a significant factor as to why the banks are not lending more.

    What I find strange, to say the least, is that at a time when the banks are under attack on all fronts for not lending more they are not explaining that this is at least in part due to the regulations introduced by government. Why?

  5. adam
    Posted November 26, 2008 at 7:25 pm | Permalink

    The budget was weak after a fair amount of hype, the economic problems are serious and the government response isnt.
    Even the left is having trouble defending it. They have jumped on the higher taxes for the rich as their favourite.

    I dont think many believe that Gordon is won round to tax cuts. The IMF advice that spending increases and tax cuts are the best response seems designed to maximise nation state debt.
    The problem would largely go away if banks started lending again as, with the exception of sterling exchange rate, all the fundamentals are good.
    The correct solution is to find out why banks wont lend and how much it will cost to fix it. Then you would have a choice about which direction to take.

    Gordon doesnt understand mathematics or economics and has a very limited understanding of banking.
    His principles, perfected during his ten years as Britains foremost economic expert float away on a breeze when he encounters some trouble. Suddenly heartless tory tax cuts become his big announcement. What no public sector solution?
    Where is the Keynesian stimulus, the big public works project. Build a dam somewhere or a new maglev.
    How about an expansion at Heathrow.

    The BBC did their best to spin the planned VAT rise in the future. They presented it as an 'either, or', government had been thinking about raising VAT but decided to cut it.
    No, from what i could make out from their report government plans a short term cut followed by a rise to 18.5% in a few years.

  6. mikestallard
    Posted November 26, 2008 at 9:40 pm | Permalink

    I think John Lancaster's point above is excellent. I had seen that the Media are revelling in a set of excellent stories. I had seen Mr Brown actually start to look happy and satisfied at last. But I had not seen why.
    The strength of the Conservatives under David Cameron has been, from the very start, going away, having a really good think, coming back and discussing it, then writing excellent, thoughtful things in conclusion. Of course, the Labour government has been there to take some of the ideas, water them down, and then take the credit.
    Now, surely, is the time for the Conservatives to show this strength to the electors?
    It has been sadly obscured ever since the annual conference was ruined by the Labour crisis.
    The Labour party are now getting really ugly and, frankly, unelectable; the Conservatives need to show they can handle the chaos that they will leave behind. Do you remember the thrill of Mrs Thatcher when she was first fighting for election? We need a touch of that magic.
    George Osborne provided it in the reply. There is hope yet.

  7. Beechbelle
    Posted November 26, 2008 at 10:04 pm | Permalink

    I would like to read your, " deregulatory report on mortgage banks" as it has been mentioned a lot. Is it the same as the Economic Competitiveness Policy Review listed on the right under downloads or is it a different document?

    Reply: Yes, it is.

  8. Tony
    Posted November 27, 2008 at 3:05 pm | Permalink

    I run a small business which is registered under the VAT flat rate scheme.

    The amount of VAT I charge my customers has been dropped from 17.5% to 15%.

    The amount of VAT I pay the government has just dropped from 13% to 11.5%

    So, the amount I charge the customer has dropped by 2.5%, whereas the amount I pay the gov has dropped by only 1.5%

    That means I'm 1% worse off, right?

    How exactly is this supposed to help me?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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