The discussion of the budget has revolved around relatively minor matters of taxation that have most immediate impact on people. The three largest parties have been engaged in a strange dance over how to rejig taxes on alcohol, each defining a different position.
The government has allowed press speculation to build that they may increase taxes on middle class drinking. People are being readied to face increased duties on wine and spirits, sparing the lager drinking classes. We read lurid stories of how people are overindulging in the privacy of their own homes , and how this is according to some, possibly close to Labour, at least as bad as being sick on the streets, and turning violent in the town centre.
The Conservative party wants to spare the home drinkers and hit the young binge drinkers, opting for higher tax on drinks favoured by that group, balanced by reductions in alcohol tax elsewhere.
The Lib Dems arrived late at the auction following a little local difficulty abstaining on the EU. They decided they want to tax all alcohol drinkers more, balanced by a healthy reduction in tax on fruit juices. Memo â€“ they are going to have some great parties then, going heavy on the guava juice.
Itâ€™s as if the Credit Crunch was still 2000 miles away and a few months ago. It was as if the banks were soon going to return to the â€œnormalityâ€ of last spring, when deal makers were threatening to gear up to take over the largest of the corporations in the world market, and when Northern Rock would offer people 125% of the value of the house they were buying in a loan package designed to take the waiting out of wanting.
The reality is very different. Last week fear stalked the global marketplace. There was little money to buy bonds and to the lend from one bank to another. Good quality paper (loans that can be repaid) fell again in price. Buyers were only available in reasonable numbers for first quality government debt. The prices now being established for good quality instruments, if they become the norm, would mean huge new write offs across the banking sector. More write off means less capital available, which in turn means less money to lend. It also means a further huge increase in the amount of shareholder capital the world system will need to recapitalise the banks, and means a longer period of people having to pay more for their borrowing relative to money market prime rates.
The budget has to sort out this problem in the UK. Far from being exempt, we are a big part of it. The UK government, by being overborrowed itself, has left us weaker to respond. The increasing budget deficit and the failure to control public spending make us more vulnerable to the cruel winds of the credit crunch.
The Chancellor should turn his mind to the big picture. He should try to get on top of his own spiralling debt and spending, without damaging important public services. The good news is he can do so easily, because the management of the public sector is today so poor.
He could start by cancelling the nationalisation of Northern Rock and putting in place a proper banking package, to manage the taxpayer debt down over a sensible time period with clear controls and a repayment schedule. This would prevent the large increase in public indebtedness that will result from the inclusion of all Northernâ€™s obligations on the public balance sheet.
He could continue by imposing a staff freeze on all new recruitment for non front line staff, to bring the civil service and quangoland back under some control over numbers after the years of rapid growth.
He could cancel or delay many of the large computerisation projects that bedevil this governmentâ€™s approach to management.
He could take some simple steps to increase energy efficiency across the public estate. He should institute reform of personnel management, to bring the public sector absentee rate into line with the private sector, where it tends to be considerably lower, saving staff resources.
We are in dangerous and uncharted waters. The UK ship of state is carrying too much surplus weight and is not being sailed well. We need more liquidity in markets, and lower interest rates, but the poor performance of the UK public sector constrains UK action.
PS: It is curious how Vince Cable got so much air time from the BBC when he became the consistent advocate on Northern Rock nationalisation, at a time when the government appeared to be dithering. It is almost as if the government wanted a Lib Dem to front run the idea, so Labour could not be accused of going back to Clause 4 and their old nationalisation agenda. Presumably the BBC gave Vince so much airtime for his idea because they had reason to believe the government would pick it up. They gave practically no airtime to more sensible proposals to contain the damage and bank Northern Rock intelligently, because they were aware the government would not go that way.