Monday, November 24, 2008

An Expensive Mistake

If the government is going to borrow up the hilt, and saddly every family in this country with an extraordinary amount of debt, then it ought to be for a very good reason - and it ought to work. For those who believe we should be borrowing our way out of recession this is way beyond their expectations, but we should also be hearing more from those who believe (like me) that we can achieve the same impact but done so by reducing the overall growth in spending. All over the country, families are tightening their belts (one resident saying to me this weekend, he didn't think his belt has any more notches) so why shouldn't the government?

The proposals announced today by the government left me totally underwhelmed; what in all this is going to make families start spending? The 2.5% VAT cut has left me actually angrier than relieved. How many retailers are going to pass this on? How many prices are going to be altered? Most people - worried about the overall economy - are not going to spend on the basis of this cut. It isn't targetted, doesn't apply to a lot of products and isn't enought to make a difference. Tiny adjustments here and there are not the solution.

The most bizarre aspect of the day, that we as one of Labour's favourite "hard working families" benefit little - but we'll certainly be hit by the higher tax to come later. For the first time in History, people will know before an election that Labour will raise their tax.

On the political side, I thought that George Osborne - and David Cameron on the media - did extremely well. He had some good points and looked like he was enjoying himself. Vince looked wobbly, to be honest, and Darling looked like a man against a wall. The laughter in the Commons when he said this problem was made abroad gave away the lie; everyone knows that Downing Street and Brown personally are at the heart of these problems.

Toady media types and celebrity commentators are lining up to call this brave, decisive and smacking of firm leadership. Far from it; this is the dying days of another failed government - they always leave us bankrupt, sky high borrowing and economic problems. Nothing announced today will change that.

1 comment:

Andreas Paterson said...

I disagree, I'm really don't think government belt tightening is such a good idea at this stage Anthony. Much of the rhetoric preceding and during the early Great Depression was about the need for a balanced budget, the commonly held view seems to be that cutting back on government spending exacerbated the problems at that time. Since our jobs depend on there being demand for our services it seems wise not to take an axe to a group of potential customers.

The VAT cut is a bit of a stealth tax cut, but it should in my view help to stimulate falling demand and help us through the worst of what's to come. I think there is likely to be a good deal of pressure on retailers to pass on the saving, those that don't are likely to be found and exposed by the media. I really don't buy the line that injecting an extra £8 billion into the economy won't have an effect, sounds like the desperate assertions of a panicking opposotion party left floundering in the face of a confident and resurgent opposition :p