Friday, 24 April 2009

Whistling in the Wind

by Daphne Liddle

CHANCELLOR Alistair Darling promised it would all be over by Christmas – the recession that is – as he delivered his 2009 Budget speech. The Tories squealed when he raised income tax on the rich to 50 per cent but the Chair of the Labour Representation Committee (LRC) said this was too little, too late. And working people were hit again with more duties on petrol, beer and tobacco.
Darling claims that though the British economy will shrink by 3.5 per cent this year it will soon pick up. He says it will grow by 1.25 per cent next year and then expand by 3.5 per cent every year from 2011. But nobody believes him.
Official Government figures show that the British economy is now in deflation and that unemployment rose by another 177,000 to 2.1 million between December and February. Thousands more job cuts are known to be in the pipeline.
The International Monetary Fund calculates that the global economy is set to decline by 1.3 per cent in 2009 – the first global recession since the Second World War.
In January, the IMF had predicted world output would increase by 0.5 per cent in 2009. It now projects that the British economy will shrink by 4.1 per cent in 2009 and by a further 0.4 per cent in 2010.
Darling shouldn’t feel too bad; other major economies are predicted to shrink even more, with Germany declining by 5.6 per cent, Japan by 6.2 per cent, and Italy by 4.4 per cent in 2009.
The truth is that none of these capitalist economists have a clue about the real size of the economic crash they have cooked up between them.
Darling announced that Government borrowing levels will rise to a massive £175 billion this year. This is the result of the massive bail-outs to the banks.
In theory those banks should be paying back some of that money over the next few years; the Government now technically owns some of them. But the global power of the banks is such that they can demand governments shore them up at whatever expense to taxpayers or their collapse will wipe out not only the governments but whole state economies overnight.
Gordon Brown could of course reduce public borrowing by many billions simply by scrapping Trident and pulling the troops out of Iraq and Afghanistan. It would probably win him some votes too.
Brown’s promise to revive the economy by using public spending to create new jobs turned out to be a damp squib.In housing, where he could have done most good by creating jobs and homes for workers at the same time, Darling announced only a scheme to guarantee mortgage backed securities, an extension of the stamp duty holiday and a measly £80 million for a shared equity mortgage scheme.
There will be £500 million to restart stalled housing projects and a mere £100 million for local authorities to build energy efficient homes.
There will be new investment in retraining redundant workers and keeping young people in education longer. This will create jobs only for teachers but it will help to massage unemployment statistics.
There will be £2,000 subsidies to persuade people to junk old cars and buy new “green cars” to boost sales. But since just about all motor manufacturing here is owned by global giants in Europe, Asia and America and all these giants are in deep trouble, the fate of our car industry is beyond the scope of anything much our Government can do.
And for every job created the Government’s very small public investment schemes, far more are likely to be lost in the swingeing public sector cuts that everyone knows are just around the corner.
Darling and Brown did make one move in the right direction by bringing forward and raising to 50 per cent the increase in income tax for those earning over £150,000-a-year. But this is not nearly enough and most of this elite one per cent of the population have accountants, who will maximise their personal allowances and other avoidance strategies.
LRC Chair John McDonnell MP said: “Although the 50p rate is a small step in the right direction, it really is twelve years too late and a tokenistic measure, given that the poorest will still be paying more of their incomes in tax than the rich.
“For the Government to announce tax avoidance measures amounting to only £300m per year is derisory when £100 billion is estimated as lost to the Exchequer by tax avoidance.”
Most very rich people pay very little tax and though Darling did announce some tightening of tax loopholes, it is nothing on the scale of what Merkel and Sarkozy have been calling for in Europe.
This was a budget that showed a Government trying to pretend that economic prospects are not as bad as they really are; trying to reassure voters in the run-up to the next general election.
Whoever wins that will be forced to bring in big tax rises and big public spending cuts as soon as the results are announced, whatever they say in their manifestos.
But with Tory leader David Cameron’s mind still set firmly in the Thatcher era, we know his solutions will be the more painful for workers in Britain.