Politics Thread!

[pogo]

OSBORNE HAS RUN UP MORE THAN £700 BILLION IN DEBT. The OBR can't stop him.

Did you even read what I wrote? My point about the OBR is politicians often do things like bribe the electorate (only for the cost to become clear later on). Previously they could do it with impunity; the opposition can challenge it but often they're no more trusted. Newspapers similarly. But now we have an independent body charged with analysing govt. decisions and predictions, created by this government.

In a way it's a mirror of Gordon Brown's giving the BoE control over interest rates in 1997. Before that governments could cut rates before an election, only to stoke inflation and a boom which then required a rate rise causing a matching slowdown. That was an even more impressive move, giving up one of the main economic levers the government had. It was the right decision though; it brought inflation under control and so led to the extended period of growth and stability that followed our exit from the ERM.

Sadly it did not, as Gordon Brown seemed to think, end boom and bust altogether. Busts could still happen, due to a financial crisis, due to excessive borrowing. Which leads back to the first part of your comment. The recession started, and borrowing shot up, when Labour were in charge. Since coming to power the Conservatives have been reducing borrowing (note: data from the OBR according to the caption):



I.e. you can blame Labour for the size of the deficit. The Conservatives have been getting it down as fast as they reasonably can but there's a limit to how much they can do given the slow recovery and the problems in Europe.

[gravy]

Everything from 2013 / 14 onwards is basically George Osborne's list of what he wants from Santa.

In fact didn't the chances of hitting those targets take a big boot on the cobblers yesterday?

And yes the figures from the OBR are independent a reflection of their own judgement but a good proportion of that judgement has to made taking the governments projections on face value.

Fair dos borrowing is coming down but posting that graph as a proof of anything is ludicrous given this government has consistently over promised and under delivered economically.

[merman]

The analysts are saying Osborne will have to borrow at least £70 BILLION over the next five years AND make more cuts to reach his target.

Why do people trust the Tories and this idiot, when it is clear they have utterly failed with every promise? He is going to stand up in Parliament and lie again and again.

[pogo]

Everything from 2013 / 14 onwards is basically George Osborne's list of what he wants from Santa.

They are just projections. Reasonable ones given they just continue the trend so far, which has been a steady decline in borrowing in line with the recovery, but only projections. I was posting the graph mostly for the up to date record of borrowing so far. And it shows that borrowing peaked under Labour, while the current government have managed to reduce it every year since. I.e. to blame the current government for borrowing too much is ludicrous.

It's true it's taking much longer than expected to eliminate the deficit. Much longer than anyone expected. Labour in 2010 promised to reduced the deficit quicker with fewer cuts.

The problem is Europe's recession coincided with ours, has dragged on much longer and is still unresolved. As the EU accounts for most of our trade the export-led recovery we'd expect with the collapse in the £ never happened. Instead we've had a much slower recovery, led by domestic investment and confidence.

[Absolute_Zero]

Why do people trust the Tories and this idiot, when it is clear they have utterly failed with every promise?

...asks the idiot that held up France as an exemplar of growth.

I suppose had Gordon [the man that saved the world] retained the crown, the Euro-zone wouldn't have dared enter an epic slump... and we'd all be served ambrosia by indentured elves.

Good grief, an intelligent change to stamp duty.

[gravy]

Everything from 2013 / 14 onwards is basically George Osborne's list of what he wants from Santa.

They are just projections. Reasonable ones given they just continue the trend so far,

No they aren't. As I said we had the reveal yesterday that decreased tax revenues mean that those targets will not be met for next year.

Thinking a projection is reasonable because they 'follow a trend' is an utterly ludicrous concept. On that basis my 6 year old is going to be 100ft tall when he's fifty.

[pogo]

They're projections, i.e. best guesses based on the information available. But they are in the end just guesses and are always wrong. I would not be too worried about the immediate shortfall as long as the the trend continues. It's interesting that in todays announcements borrowing is up this year but has been revised down in future years as reduced inflation and interest rates mean benefits and interest payments will be less.

On to other announcements today. The stamp duty change wasn't expected and is broadly welcome. Removing the sharp jumps at the boundaries makes a lot of sense, and clawing back some of the losses at the high end so it's broadly redistributive makes sense. But it should have been revenue neutral, or even raised more money. House buyers and our bubbly house market are far from the best target for a £800m tax cut. In the same spirit freezing fuel duty, and so handing motorists a tax cut, hardly makes sense.

[The ghost of raids past]

The upper rate of tax shoukd have been moved much higher. Its been so eroded by inflation over time that is drags alot of people into the band.

[pogo]

It would make sense to raise the top band in line with earnings. If it's just raised in line with inflation then more and more people get dragged into the top band. Or at least normally: with wages not keeping up with inflation raising it in line with inflation would have meant more people dropping out of the top band.

The act of not raising bands as pay rises is called fiscal drag. It's very popular with governments as it lets them collect more tax in a relatively pain free way. High earners aren't a sympathetic lot and if they complain the govt. can just say its collecting more because of economic growth, which is true. And governments always have something to spend it on, such as raising the personal allowance to benefit the low paid. So don't expect governments to stop doing it any time time soon.

[Dio]

The upper rate of tax shoukd have been moved much higher. Its been so eroded by inflation over time that is drags alot of people into the band.

Rubbish. Follow Osbourne's plan of raising the top band to £60k and you'll give everyone in the top tax bracket a £2000 tax cut. It's a ridiculous idea when we're paying tax credits to people earning £15-20k, subsidising their wages because they can't afford to live without.

[pogo]

They've only said they'll raise it to £50,000. And that won't keep up with wage inflation but will drag many more taxpayers into paying 40%.

Nearly 1m more middle earners to be dragged into 40p tax band despite David Cameron's conference pledge
Around 5.5 million people will still be paying income tax at 40 per cent – 900,000 more than do at present - If the threshold is raised to £50,000 a year

So more fiscal drag. You would not believe it given some of the comments here but this government's tax policy has been very progressive, raising allowances and so cutting tax for the lowest paid while freezing or lowering the starting point for the top rate so more and more taxpayers fall into the 40% band.

[The ghost of raids past]

The upper rate of tax shoukd have been moved much higher. Its been so eroded by inflation over time that is drags alot of people into the band.

Rubbish. Follow Osbourne's plan of raising the top band to £60k and you'll give everyone in the top tax bracket a £2000 tax cut. It's a ridiculous idea when we're paying tax credits to people earning £15-20k, subsidising their wages because they can't afford to live without.

But would it reduce revenue ? It may well give a tax cut but it may actually increase the Tax take as people would not be tempted to fire up the accountant and look for creative avoidance schemes.

[merman]

The Office of Budget Responsibility is warning of huge cuts, more borrowing and A MILLION MORE PUBLIC SECTOR JOBS BEING CUT with a pay squeeze for the rest.

The Institute of Fiscal Studies says that another £35 billion in cuts will have to be made to reach the target of balancing the books by 2020. Oh, and the reform of stamp duty turns it from a really bad tax to a bad tax.

Ed Balls is right - every target, every promise, every projection broken.

[pogo]

There's consensus that the government's plans as announced don't add up. The cuts in particular aren't going to happen as described. Some more cuts are possible but not on the scale described. Here e.g. is John McDermott yesterday:

the government’s economic plans do not really add up. In the next parliament, taxes will have to rise, fiscal targets will have to be missed, or spending will have to be cut in a way that is even more brutal than currently expected.
[...]
Of course, the party or parties who take power after the May election may decide to do things differently. I suspect there will be a mixture of tax rises, delayed targets and spending cuts, regardless of who becomes the next prime minister. But whatever the policy mix, you will hear more about it after the election than before it.

So you can think of this as an early statement of principal but one that's going to change both before the election and after (assuming the govt. is re-elected).

Seems the IFS is a fan of a mansion tax instead of stamp duty, but I think they've got that the wrong way round. One good thing about stamp duty is it's always affordable as it happens at a time when people have money available to buy a house – they have to budget for it. They may have to budget for a slightly less impressive mansion now but it's not going to drive anyone out of the market. A mansion tax though would hit many people unable to pay it, as they're in a house which has appreciated in value but they have no other assets. Anyway advocates of a mansion tax seem to want it in addition to stamp duty, as another revenue stream, not instead of it, so there's no political support for the IFS's position.

[tufty]

A mansion tax though would hit many people unable to pay it, as they're in a house which has appreciated in value but they have no other assets

They have a house. If you see where I'm coming from.