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  • Budget open thread

    by Rumbold
    22nd April, 2009 at 4:24 pm    

    I haven’t examined all of it, but it seems to run as follows:

    More debt, tax rises, and no spending cuts. Oh, and subsidising car production while promising to reduce carbon emissions.

                  Post to

    Filed in: Economics,Economy

    22 Comments below   |  

    Reactions: Twitter, blogs
    1. pickles

      New blog post: Budget open thread

    1. Leon — on 22nd April, 2009 at 4:43 pm  

      50% on the top rate for those earning over 150k a year seems to be big one…not sure how much money that will actually raise but I reckon there’s a fair number of lefties popping champagne over it.

    2. MaidMarian — on 22nd April, 2009 at 6:38 pm  

      Buried almost exactly in the middle of that BBC link:

      ‘Scheme to guarantee mortgage-backed securities to boost lending.’

      Odd isn’t it that that is almost an afterthought.

    3. Kits Coty — on 22nd April, 2009 at 6:48 pm  

      The median salary in the UK is about £25,000 with less than 10% earning over £45,000. Less than 1% earn over £150,000. The aim of the 50% tax rate is to raise about £180 million - that to plug a deficit that will require the issuing of £200 billion of government bonds. The numbers of people are simply not there for it to make any difference.

      And it assumes that that tax goal will be achieved but the people who earn large sums are either very clever with money or rich enough to afford to pay people who are clever with money to reduce tax exposure. It was included to show the government is getting tough with bankers but in economics terms it is bullshit.

    4. Chris Baldwin — on 22nd April, 2009 at 9:36 pm  

      I fully support raising income tax, but we should have done it in 1997. 40% was always unnecessarily low.

    5. Shamit — on 23rd April, 2009 at 7:17 am  

      If you add the NI you are looking at over 62% and the cost of the company hiring these individuals is also very very high. But yesterday already, people were looking to get their earnings through dividends and therefore only pay cap gains taxes — so the Chancellor’s dream of sorting out 5.1 billion through tax increases and fuel duty is as usual overly optimistic.

      The fuel duty, like the VAT would hurt not the rich people but those with limited means. Like all stealth taxation, there is a disproportionate larger impact on those at the bottom of the ladder.

      New Labour under the gifted (read idiotic Chancellor Brown) always went for stealth taxation and open spending. Yesterday, the Government went for public tax increases with stealth s pending cuts — wow — I am sure the Gordon Brown fan club is very happy.

      A while ago some very intelligent and revered soul wrote on these hallowed pages that there is no negative impact on the overall economy if the Government borrows and spends. Well, there is nothing called free money and actually the impact of government borrowing hurts the poorest people most.

      Brown, Balls and their cabal — I think this is the last year of them being in power — thank god for that.

    6. Shamit — on 23rd April, 2009 at 7:44 am  

      A brilliant budget for tax accountants and corporate lawyers.

    7. Kismet Hardy — on 23rd April, 2009 at 8:24 am  

      As someone that used to be all hippy dippy, I’d like to point out that hippidom meant not spending squillions. Investing so much into ‘green issues’ at the expense of so many of the ones that really effect our lives is ridiculous, especially seeing as the more green measures the government make the more they’ll find ways to make us pay for them anyway. I don’t care I sound like a Tory. Being environmentally friendly should be a personal choice. Not a gimmick. ooh let’s all drive electric cars. What the hell will that do the power supply, not to mention the environment, if we all do?

    8. platinum786 — on 23rd April, 2009 at 8:49 am  

      Pathetic budget, nothing less than I expected, nothing special just a few gimmick moves.

      Our governments (past and present) are not sincere about anything. We live in a country where they want us to go “green”, yet a ride on the bus costs more than a taxi, depending on how many people are travelling, the train is the same. Why is public transport not run at cost, rather than by profit making companies?

      We claim to be one of the richest countries in the world, yet how many of us can afford to have organic food with our meals?

      According to post #3 90% of us earn less than £45,000 a year, and the average salary is £25,000 a year. You can’t live off that, or raise a family, yet people do it for less. They don’t live the best of lifestyles, but what is the point of our national wealth when so many of us are so “poor”.

      Pardon me for being a sexist bigot, but when I grew up my mum didn’t work, she was a full time Mum, when i get married and have children, i want to be able to provide that to them too, but cant he person earning £25,000 afford to give their child the “luxury” of having his mum come and meet him/her at the school gate?

      Why is it that shelter, a basic human need will cost us hundreds of thousands of pounds. Is that fair? If a good house cost £30-40,000 and there were enough to go round, could the guy on £25,000 a year afford for his children to have organic food or their mother meet them at the school gate? Yet in 1998 I recall houses on some streets around us being £8000, 10 years time they cost 10 times as much.

      I no it’s an “idealist” outlook on the world “unrealistic”, but surely it’s only unreachable because a group of really rich men won’t allow us to try and reach this goal?

    9. Shamit — on 23rd April, 2009 at 9:07 am  

      Platinum 786 —

      Mate your comments are getting better and better. And the comment above is excellent.

      The thing is the Government might want to show the wider public and their devout followers that see we are taxing the rich. But if we take your analysis a bit further, you would notice, the group that pays the most taxes is the educated middle class (usually earning between 30 - 60K) — and raising a family in that income becomes difficult more most people.

      And, under the Brown premiership, the advances we had made under Blair premiership in education with academies and other trust schools, have been reversed — thanks to dictator Balls. So, the middle class (and that includes people who earn around 100k in London) wish to send their children to private schools and anyone who blames them for that are being stupid. They want their children to have the best opportunities in life — and obviously, if you look at the A level results this year — you will find that the comprehensive system is far behind the private system academically.

      I believe that those among us who earn more must pay more towards society however, there needs to be a more balanced approach to taxation — putting someone earning 33,000 and someone earning 100,000 in the same bracket is naff. Those in that bracket end up paying around 53-54% of their income to the Government and what do they get — nothing.

      why the hell cant we have a progressive taxation system in this country?

    10. platinum786 — on 23rd April, 2009 at 9:31 am  

      Taxation in this country is a joke. The cut off for the government paying your uni fees is £20,000 (i think), if your household income is less than that, you have to pay your own fees. In this situation, a household with a 14-15K income, is better off than a household with a 30K income, because the poorer earners will have their kids uni fees paid and they’ll recieive benefits to top up their income. The guy on 30K a year can only dream of his kids going to uni.

      It’s depressing.

    11. bananabrain — on 23rd April, 2009 at 10:06 am  

      i have only two words: “legalise drugs”. why is everyone in the party chemicals industry paying no tax? why is nobody accountable? let them pay employment taxes and pension costs for lawyers and accountants and R&D costs for engineering PhDs and HR specialists and deal with advertising, marketing and corporate IT systems. let them keep their money in this country, not in switzerland and bermuda. save money on the police by not making it their problem any more. save money in the NHS by making the quality of products and services controlled rather than cut with who-knows-what.

      they’re going to lose the election anyway, so perhaps they should actually try and *be* radical.



    12. platinum786 — on 23rd April, 2009 at 10:24 am  

      How do you know the government is going to lose the election.

      I’ll tell you…

      When Daily Mail readers support Pakistani immigrants in Britain on student visas accused of being extremists and planning on commiting acts of terrorism in Britain, over the government.

      I mean C’mon these guys tick all the boxes, Muslim, Pakistani, Immigrant, extremist (accused), terrorist (accused), and yet the Mail readers still have more contempt for the government.

    13. douglas clark — on 23rd April, 2009 at 10:41 am  

      platinum786 @ 12,

      Good point.

      But, I mean, we’re all going to vote Tory?

      What’ll that get you?

    14. Rumbold — on 23rd April, 2009 at 10:45 am  

      If people were to vote for the Libertarian party, we would see spending and tax cuts galore.

    15. Rumbold — on 23rd April, 2009 at 10:45 am  

      Excellent points from Shamit in #5.

    16. Kismet Hardy — on 23rd April, 2009 at 11:52 am  

      i have only two words: “legalise drugs”

      (in sotto: shut up. Do you want my kids to starve you heartless brute?)

    17. MaidMarian — on 23rd April, 2009 at 12:11 pm  

      Rumbold (14) - ‘If people were to vote for the Libertarian party…’

      Well, that’s the point that an awful lot of people seem to miss on here. Platunum786′s rhetoric is all well and good, but the voters (depending on which talkboard you read) are all green, will defend the right to drive to the death, love low taxes, demand more public spending, want a strong foreign policy, hate interventions, feel that civil liberties are unacceptably eroded, not enough is being done about terror and feel that the housing market has overheated and demand ever more vast house price equity as a right.

      Labour’s mistake in 1997 was to try and keep everyone who voted for it in the big tent. In 1997 Labour won places it had no right to. Trying to keep everyone happy resulted in a tendency to please all and satisfy none.

      Government does not exist to legislate for individual prejudice and in a society with little consensus you probably will keep very few happy. People aren’t voting Libertarian because they don’t want their neo-con in disguise world view Rumbold. What some of the comment on this budget seems to do is confuse consensus with self-indulgence.

      Which brings us onto the subject that remarkably few seem to want to talk about – the housing market. Sure, some people on here may be cash-poor, but no one seems to want to hold back on ripping off others in the housing market – which is after all a big driver of the financial trouble we see. I will happily pay tuition fees, vast child benefit, fund a 30 year high-on-the-hog pension – just give me the housing stock and associated wealth back.

      Some talk on here about the ‘middle class’ as though income is all that matters. ‘You can’t eat a house,’ no doubt will come the cry, as though house price hyper inflation is somehow neutral. I would hazard a guess that what this budget shows up is the generational divide between those able to use the housing market to rip off the next generation. And I struggle to see what government could have done (in the real, not talkboard world) about house price hyper inflation.

      Shamit (5) tells us, ‘Well, there is nothing called free money and actually the impact of government borrowing hurts the poorest people most.’ Apply that thought to house prices and you start to see where the inequality highlighted in this budget stems from.

    18. cjcjc — on 23rd April, 2009 at 12:43 pm  

      Willem Buiter has a pithy and rather devastating analysis:

    19. Shamit — on 23rd April, 2009 at 12:48 pm  


      The big tent that Blair proposed and succeeded in getting was that we build a fairer society where there would be opportunities for the many and those who work hard would be rewarded.

      And I do not see anything wrong with that. Blair was elected on aspiration and on various domestic issues including education, health, transport and pushing a knowledge based economy it did work- and again that big tent approach and I see nothing wrong with it.

      The reason Blair won over both the labour party membership and the wider electorate (3 times) is the message of the big tent based on fairness and reward for hard work.

      Somehow part of the definition of success became that everyone needed to be a house owner and real estate was seen to be the quickest way up the financial ladder was to own properties. This also allowed us as a society to keep the median wage low — and most of us were happy with it as long as our quality of life did not suffer.

      The Government needed to let the regulators do its work and Blair’s fault was to take away the Bank of England’s responsibility to monitor and control debt in the economy. And, that along with lax banking regulation has brought our economy to its feet.

      Interestingly though, until the economy tanked, Balls and Brown were trying to take credit for their vision in getting BoE independent — and Fabian Society jumped up at Milburn saying Ed Balls articulated it in 1992 or whenever that megalomaniac did so. Now, we don’t hear about it — I have no problems blaming Tony Blair for screwing up the regulatory powers of the BoE. He was the Boss and he is partly responsible for this economy and also for keeping Brown in the Treasury. That megalomaniac should have been fired and none of these idiots such as Balls etc should have been given seats in the Parliament.

      This government forgets that they won not because of the left vote — they won because they could convince the middle of the ground voters that they can make a difference to their lives.

      And, this unelected PM has lost that middle ground and Cameron has succeeded in presenting himself as someone whose message resonates with the middle ground.

      In last night news headlines, if anyone did a poll on the bits by Darling and the bits by Cameron — Cameron comes up much stronger even in labour leaning voters.

      I for one can’t wait for the election and Brown being trounced.

    20. MaidMarian — on 23rd April, 2009 at 8:20 pm  

      Shamit - Thank you for your reply.

      Firstly - ‘And, this unelected PM has lost that middle ground.’ No, I’m sorry, but that is a real bugbear of mine. Do the voters in his constituency not count for some reason? Several Prime Ministers have taken office following an election. I’m not saying I like that, but it is not the jump-up-and-down thing so many make it out to be.

      Whilst your comment is a bit of spittle-flecked spleen-venting in search of an argument, I think I broadly agree with your points, I just have niggles.

      ‘Somehow part of the definition of success became that everyone needed to be a house owner and real estate was seen to be the quickest way up the financial ladder was to own properties. This also allowed us as a society to keep the median wage low — and most of us were happy with it as long as our quality of life did not suffer.’

      Surely that was the definition of success well before Blair. Sure, Blair didn’t change that but this did not start in May 1997.

      Similarly, when you say, ‘most of us,’ I assume that actually means, ‘most homeowners.’ Those of us priced out were far from happy and suffered a lot.

      Of course, the quickest way up that ladder is emphatically not property - it is house price inflation specifically, ownership and asset inflation are not per se the same thing. I know many people who owned but lost on their property.

      I agree with much of what you have to say about banking regulation, but please don’t ask me to feel sorry for people who have seen the full benefit of house price inflation, regardless of what they earn. If people want to send their children to private school, great - if it means that much, why can these people not have recourse to their house price wealth instead of the taxpayer? Unless you are telling me that there is a God-given right to equity?

      One other thing - that line about £100k being middle class, you weren’t serious there, right?

      And as to boy wonder - well, to my mind Cameron suffers from ‘George Bush Syndrome.’ He himself is probably quite a nice bloke. The people he surrounds himself with frighten me to death. For the purposes of our exchange, I simply do not believe that had Cameron been PM in 2002 he would have actively reigned in house price inflation or the debt bubble.

      Best of luck to you.

    21. Shamit — on 24th April, 2009 at 1:05 pm  

      Maid Marian -

      I think you misunderstand me. And, seems like I have offended you which was not my intention in any way. I was also not spoiling for an argument rather I was venting my frustrations about this Government. That was probably a bit over the top — but sorry.

      Going back to the budget issues you have raised.

      1) “Most of us” - Most Britons did follow that logic and the credit card debt quadrupled in a very short space of time. And, homeowners as well as non homeowners were quite happy to take these massive loans and credit card debt.

      The housing bubble fueled this debt spiral and you are correct when you say those who are not homeowners were worse off. However, one might also argue that homeowners are now worse off and in negative equity with huge debts. And few ways of servicing these debts.

      While personal responsibility is key my point is you cannot absolve the Government and the gentleman who has been running the treasury and blocking reforms in public sector. And now he is Prime Minister.

      And I do not like the political headline grabbing tax rises — which do not do much for the economy and it still ends up hurting those making between 30 - 50K.

      Where were the regulators when debt was spiralling out of control?

      why didn’t we learn from the mistakes of Japan of exorbitant land and property pricing?

      2) the 100k issue — I was serious and being on 100k with one person earning and living in central london with a family of four with some chronic illnesses and high rent and mortgage — and I am not describing personal circumstances but I know of various instances.

      3) On Cameron and his lot — compare the front benches and I think they probably look better than the incumbents.

      I am a progressive and I believe in a fair society and I believe in aspirations and local accountability. Those are the reasons Tony Blair got my vote — and Brown would not. Local accountability and decision making was a key part of Blair’s adminsitration and especially in Education and overall local government — he achieved it.

      But most of the reforms are being either stalled or reversed and power is being pulled back to the centre. The other issue is now it is well documented that then Chancellor and now PM stood in the path of way too many reforms such as Social Security — more independence to local authorities and associated bodies..

      I am willing to give Cameron a chance — and I have a feeling the country would too. Cameron is trying to build the big tent and he just might succeed

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