Tuesday, May 20, 2008

The Difference Between Finkonomics and Daleonomics

Danny Finkelstein disputes my interpretation of David Cameron's speech today. Read his full piece HERE. What sparked him off was my assertion that "He [Cameron] doesn't actually abandon George Osborne's pledge to match Labour spending for two years, but he might just as well have done." Danny begs to differ.
Well, no. He doesn't remotely do that. Quite apart from anything else this pledge was produced for an early election that didn't happen and has been rendered irrelevant by the fact that there won't be a Tory Government during the period in question.

Er, come again? The pledge was made way in advance of last year's phantom election and so far as I know was meant to relate to the first two years of a Conservative government whenever it is elected. If Danny is saying that pledge is now irrelevant, I say hear hear. Towards the end of his piece Danny argues...
Now, the purpose of reform and reducing demand for government services is not tax reduction - that is a (welcome and necessary) by product. The purpose is to change the relationship between citizens and the state, to build a stronger society and to improve the quality of things like health and education.

An interesting, if flawed assertion, straight out of the Social Democratic Hymnbook. The purpose of reform and reducing the demand for government services is to shrink the state, make it more efficient and cut the amount of money the State takes off its citizens. It is the stronger society and improved quality of public services which are the by-product. These may seem like semantic differences, but they are important. Danny continues...
It is important that, while the need to put state spending on a new path is not forgotten, the desire for swift tax cuts does not distort the entire programme or the way it is explained. Tax reductions are not the only thing, in fact not even the most important thing, a Tory Government will wish to achieve.

Put state spending on a new path? Do me a favour. Translated, that ought to mean 'cut public spending'. David Cameron says public spending has reached the limits of acceptibility and he is right. No one is saying that tax cuts should 'distort the entire programme', least of all me. Any tax custs must be affordable and funded and they will only be achieved through increased growth, reduced spending and reduced borrowing. Even my Grade E 'A' Level economics tells me that.

Of course tax cuts are not the only thing a Tory government wishes to achieve, but if a Tory government cannot achieve a lower level of taxation after a five year term, then one has to ask what it is there for? If we wanted to continue with high public spending, high borrowing and high taxes we'd vote Labour. Over to you, Mr F.

25 comments:

Henry Mayhew said...

They're afraid of their own shadow.

John Pickworth said...

I usually like Daniel's stuff but I'm not entirely sure what he's getting at here?

The impression I get is that he's produced a piece of lazy writing simply because he has the space to fill and not the ideas for it.

I think Cameron said everything we need to know at this point and clearly DF agrees because he begins with... "It's by the far the best account of his position that he has given."

So you have to wonder about the need for Daniel's reinterpretation? Like I said, he needed to fill the space with something I guess.

stuart said...

Apologies for going off-topic, but a new polls has appeared in today's Guardian: http://www.guardian.co.uk/politics/2008/may/19/polls.labour

Tories 41 (up 2)
Labour 27 (down 7!)
LibDems 22 (up 3)

Apparently it's that poll company's best Tory lead since 1987.

@newmania Nice to see the LibDem vote holding up well. I reckon Norman B. is safely home again.

Johnny Norfolk said...

This is the problem when the Tories are not yet clear about their main policies. They need to firm up on their basic attitude. Are they going to match Labours spending. I hope not, as that is now NOT what the country wants. Even the most dim voter can at last now see what Labour have done yet again. They have spent to much as they alway do.
Every one needs tax cuts.
They have doubled education spending for no benifit, as many children are as thick as ever with poor teaching. Its how things are done that matters not just spending.

Dandaresspacetracercompass said...

Doesn't the EU have to approve the member States spending/borrowing plans for the next 2 years. Isn't this why Brown had to agree to keep to the Conservatives spending levels when they came in and why Cameron has agreed the same thing for when the Cons. get back in? Obviously if you are not in Government you can't set spending/borrowing so you are stuck with the previous lots figures.
Is this an EU myth?

TheMadCobbler said...

Gordon Brown also promised to keep the spending to the same level as Major's outgoing government when they were elected to power for 2 years.

Then all hell broke loose.

It's likely they'll hold the same position while they run a full audit of the government and work out ways of refining the system, cutting the form filling and killing off a large number of Quangos

NorthernEconomist said...

The Tory spending pledge is for the period 2007 - 2010. There is no pledge to renew it afterwards.
See when the announcement was made - http://conservativehome.blogs.com/torydiary/2007/09/tories-will-mat.html

Anonymous said...

You got an 'E' in your A-level economics ?! Ha ha !

Don't try and do an 'Oliver Letwin' here and talk up big tax cuts and swingeing cuts in public spending, with a 'nod and wink' - there are no commitments here, so the 'promises' aren't worth the paper they aren't written on...

John Coles said...

Daniel Finkelstein is a Social Democratic poison at the heart of today's Conservative party. Messrs Cameron and Osborne seem to be in awe of his verbosity. He doesn't have the courage to state his true political calling and so is happily suborning the Conservative party. The sooner he is seen for the yakking political coward he is, the better the prospect for true Conservative policies.

Chris Paul said...

Finkonomics wins hands down. There was NOTHING in that speech but pie crust promises from David Poppins. Easily made, easily broken.

Tory Treasury Shadow on last night was very careful to pepper his argument with "long process", "long term" and "economic cycle" blether.

This is not a change. It is a dog whistle. Both tax take and state size are smaller now than under Maggie. We've just had a tax cut for (almost) everyone under 40K. And the regimes above that are are exceeedingly easy on the very rich.

John W said...

Grade E at a-level says it all really. Allow me to tell you with my upper second class honours in economics from Cambridge that while Finkonomics is flawed, Daleonomics is straight out of the alchemist's handbook.

Anonymous said...

Tories 41 (up 2)
Labour 27 (down 7!)
LibDems 22 (up 3)

It would be interesting to know where the other 2% went.

Anonymous said...

Hmm.. this poses the tricky little conundrum - who is the intellectual heavyweight of either Iain Dale or Daniel Finkelstein...

Hmmm.. tricky question, can I ask the audience ??

Newmania said...

Both tax take and state size are smaller now than under Maggie.

Chris , tax take is of course enormously larger and the state share is highly misleading to quote at this distance for reasons I am so convinced you understand anyway I am not going to bother with. I do wish you would stop saying things that even you know are silly , I just don't see the point.


The elephant in the living room here is that given the amount of debt the plunge in receipts and the increase in state hand outs as the economy slows , tax rises are inevitable.The argument is altogether sharper than Finkelstein or Dales' world of political gesture , it is about whether tax cuts must be swallowed as a necessary part of avoiding recession . Cuts in both tax and spending are inevitable , the question is can we afford not to make them soon and not later.

This is still the phoney war

tapestry said...

The regime on the very rich is 'so easy' Crispall, that I left the country. I paid 40% until 1996 in income tax. Gordo uncapped NI to make it 65% today.

I stopped paying myself income in the UK in 1997, losing the IR about GBP1.5 million since then (if 40%).

I left the country in 2006. Tax above 40% is unacceptable and counteproductive to the cause of raising tax, or having a well-founded economy.

Gordon's motivation in taxing high is to make wealth illegal unless you're a foreigner living in the UK as a non-dom, a labour donor, or both.

Excessive taxes on income is why companies have opted for private equity, as gains were taxed at only 10% (now 18%). Only a bloody fool would consider actually working for living in the UK.

The destructiveness of tax on effort is greatly underestimated in British discussions on tax. For the last ten years Gord kept the economy going by allowing the consumer economy to let rip on borrowed money. Britain is now paying the price.

Why not cut tax back to a level at which people don't find emigration attractive, or living only by investing capital? Or do Britons really detest the idea of their wealth creators working, or successful members of their nation having money?

It's completely barmy. I've had enough as have 1 million other higher earners who have left the country since Brown took over and created the sub-prime economy.

Now you will have to live in a putrid underfunded cesspool while countries of the supposed third world grow and overtake you within a decade.

The only answer is the airport.

Anonymous said...

"Finkonomics" runs off the tounge better than "Daleonomics" - therefore the former will come out on top.

This is also true of taller men. Which of you is tallest?

Anonymous said...

Changing the subject, can you please comment Iain on yet another piece of dismal big-brotherism from the Government today?

http://news.bbc.co.uk/1/hi/uk/7409593.stm

idle said...

Such was the shambles in 1979, the sainted Margaret had to drive the size of the state up from 49.2% (which she inherited) to 52.9% in 1982, before getting it down to 44% in 1989. During this period, she turned a PSBR of £12bn into a suplus of £9bn.

If two Tory parliaments can achieve the same percentage improvements on expenditure and PSBR, I for one will be delighted. I have heard nothing that makes me think they plan to do so.

Anonymous said...

Just to add a reeality check-
Certainly there is alot of potential to cut paperwork etc- anyone active day to day in business and education (like ) can see it, and it must be the same in health etc.

But the reality is the budget deficit is huge- as is public debt. And I am not talking only the official numbers, but one has to include the "Enron accounting"- off balance sheet stuff like unfunded pension liabilities, PFI, Network Rail, etc, etc. Any private company would have at least to include unfunded pensions in the accounts- these alone are about the same as the national debt.

Even Labour has realized money has run out and they can't fiddle the accounts any more.

There will be no money for tax cuts because the country is basically bust.

Buckinghamshire Tory said...

Chris Paul is lying.

"Both tax take and state size are smaller now than under Maggie. "

No, the state has grown by enormous amounts since 1997, and the tax burden is almost the highest in Britains history. We've actually got higher taxes than Germany,

"We've just had a tax cut for (almost) everyone under 40K. "

Indeed, Gordon Browns attempt to bail himself out of the current mess, and the forthcoming defeat in C&N. He of course paid for it by increasing borrowing.

The Remittance Man said...

You know? I wonder if Danny isn't at least partially correct when he says the aim is: "to change the relationship between citizens and the state."

For far too long both the state and the majority of the citizenry have been of the opinion that every problem is to be solved by "government".

Even now, people argue about changing the way government does things. In reality what is needed is for the government to stop doing stuff, a lot of stuff, and for people to start taking responsibility for their own problems.

Unless such a fundamental change in the national psyche can be encouraged, any tax cuts the Tories introduce will simply be reversed whenever they get un-elected again.

Anonymous said...

both of you suggest that the government reduces demand for public services. government can only reduce the supply of public services. in the long term this will reduce the demand in that the private sector will compensate for this reduction, but i think this point needs to be made clear.

Anonymous said...

Gordo's recent tax U-turn is not a tax cut because it doesn't reduce Government income.

It is an increase in spending.

tapestry said...

Correction. 2 million Britons have emigrated in 10 years under New Labour - the biggest figure for 100 years.

See Telegraph

Tax has nothing to do with it according to Crispall.

Anonymous said...

John Coles said...

"Daniel Finkelstein is a Social Democratic poison at the heart of today's Conservative party."

Just as he was a Conservative poison at the heart of yesterday's Social Democratic Party. Self-important twat that he is.