Remember Peter Mandelson proclaiming that he didn’t mind if people got filthy rich under Labour? Well, those days have well and truly gone. The 50% tax rate announcement was purely designed to give a signal to the Labour left that he’s happy to make the pips squeak (copyright Denis Healey 1977). What other explanation can there be? It will raise very little extra money and help reduce incentives. A 50% tax rate will encourage entrepreneurs to invest money anywhere other than this country. There is, of course, another benefit. It puts the Tories on the spot. Will they now vote against the 50% rate? In my view they must, but they would do it in the full knowledge that Brown would accuse of them of sticking up for their "rich friends".
But the real scandal is the amount of borrowing - £606 billion over the next four years – which the Chancellor announced. Truly scandalous. He said we would borrow £175 billion in this calendar year. Judging by the record of previous government forecasts, the figure is likely to be far higher than that. It will take decades to pay this back.
And to believe that we will have a 3.5% growth rate in 2011 is fantasy. You can’t go from negative growth to that level of growth in a few months. And if he’s wrong, tax receipts will be lower and borrowing will rise even further.
There was no attempt to haul in public spending, and frankly that’s the only way to reduce borrowing if tax receipts are also in the doldrums. To say you will save £50 billion without anyone noticing and no programmes being axed is something which most people can see through.
The car scrappage scheme is a joke. All it will do is help the likes of Audi, BMW and Mercedes. I could see the point of it in Germany, but not here. It may help a few car dealers, but that's about it. Why not introduce a scheme to help local newspapers, or newsagents, or shops, or indeed everyone? Why just cardealers?
This was a cheap budget from an expensive Chancellor. It was a missed opportunity to set a new direction for the country. All it did was announce a series of wholly unrelated initiatives, some of which may be of limited benefit but most of which no one will notice.
It is a budget which has helped Labour lose the next election.
UPDATE: 77% of Sky News viewers feel worse off after the budget.
64% are against the 50% rate.
UPDATE 2.10pm: From Robert Peston...
Actions have consequences...
Gilt sales this year are forecast to be £220bn - way above all market forecasts. There will be a big gulp from investors. Why is the Treasury's borrowing need so much greater than was expected? Well, the cost of bailing out the banking system appears to have been greater than expected.
I'm not surprised that sterling is now falling. Questions will also be asked again about whether the UK will retain its AAA credit rating. If that were lost, the cost of selling all this debt would rise.
And then there will be the emotional reaction of bankers to the news that their take-home pay is being cut significantly by the new 50% top rate of tax and a reduction in relief on pension contributions for high earners.
There'll be gloom in the City tonight.
125 comments:
But other than that, you liked it?
How much would I have to earn before I paid 50% tax?
What percentage of tax payers will pay tax at this rate?
What a mess , nothing for disabled people yet again the sooner labour are out of office the better.
The Budget was no more than an attempt to shore up Labour's 'core' vote (if it hasn't already gone to the BNP).
Labour knows it has lost and this Budget was solely about trying to avoid annihilation at the next election.
Is it a 'protect the base' budget? In other words, Brown et al have stared over the abyss and realised that their job now is to prevent a catastrophic loss of seats at the next election, having accepted that they will definitely lose it. So they've gone for a a 'tax the rich' base-pleaser budget. I'm just musing, rather than saying that that's what I think.
You're right - it's a Budget that's helped them lose the next Election.
But the idea's formed in my mind that this is what it was meant to do.
I believe that Liebore aren't looking at the next GE, but the one after that.
We'll have a Tory Government come 2010, who will be left with no choice but to increase taxes across the board in order to cut the debt. They will have to cut public-sector expenditure, and there will no doubt be an attendant increase in unemployment.
"Look!", the Labour Opposition will scream. "The Tories are the nasty party - the party of cuts, of unemployment, of higher taxation!".
And by 2015, when the electorate have been through the pain and the public finances are stabilised, New New Labour will promise tax cuts, public services and so on....and win.
Scary thought.
D
Is it a 'protect the base' budget? In other words, Brown et al have stared over the abyss and realised that their job now is to prevent a catastrophic loss of seats at the next election, having accepted that they will definitely lose it. So they've gone for a a 'tax the rich' base-pleaser budget. I'm just musing, rather than saying that that's what I think.
Iain,
Anything detailing that debt will be 79% of GDP cannot be described as CHEAP!
Oh, I get what you meant. Yeah, cheap!
PD
50% Tax is also a manifesto breach (not that Labour care about manifesto promises obviously)
I entirely agree with you Iain. This is the most cynical budget of my lifetime. It has just made me a full blown Tory!
Roll on the election...
Iain, your tie is lovely!
And the real key is that the assumptions about future growth are all heroic.
Future Governments will therefore inherit an even worse picture than now foretold.
Labour are criminals; all lies and spin.
How many people with cars 10 years old or more actually buy new?
People with a 10 year old car are not going to by posh German cars. It will help (if it helps anyone at all) the Korean car industry.
But this is really just a case of
"Whew! There there, thats a nasty day over with - the budget is gone. We can carry on living in fantasy land for another year."
SKY is pointing out that the IMF have just released figures saying -4.1% growth this year and -0.4% next year. So if they are right then Darlings projections are so much junk.
This gives the Tories a lot of wriggle room since they can say they cannot offer definite promises until they see the books.
But the big Big BIG story of this budget is that it confirms that Darling is Browns poodle, a sad inept inadequate.
Instant prediction: Over the next few days we will see either Moodys or Standard & Poors (maybe both) taking down the UK's coveted AAA status. For the Chancellor to admit that he will be borrowing more than ever has been borrowed ever is prove that this country is in a torrid state.
So that 2p exstra on a pint or glass of wine that makes 200 mllion for the gov which is nuthing but will put 59,000 jobs at risk and make it harder for us to enjoy a drink in the pub bring up bing drinking as it will be cheeper to drink at home and overload. All in all a bad tax!
Right going into Town to speek to people to see how the 2% tax hike on drink will effect peoples life. I will pop my findings on the blog.
www.grapes-of-joy.blogspot.com
1 What businessman will leave ? Will hedge fund managers be leaving if taxed at 50% marginal? Where will they go?
2 On this logic should the rich be taxed at all?
Send Gordon the Shirt Off Your Back Campaign at Old Holborn
Are you sure of your analysis Iain? The BBC tell me that everything is wonderful - http://scarymarytory.blogspot.com/2009/04/all-hunky-dory-then.html
@Ted: precisely! All this £2k bung will do is push up the price of old cars, thereby making it more difficult for lower income groups to afford them. Great result Gordon!
We drive an old banger because we can't afford a new car and giving us £2,000 to scrap it would still mean we couldn't afford a new car. What planet did 'eyebrows' descend from?
The longest suicide note in political history now has a contender. Anyone ele suspect most of this was written mainly in number 10 as opposed to number 11?
This 50% tax issue was a blatant bit of party political propoganda. I look forward to the day this shower are voted out. A strong response by Cameron and is bang on the nose with regards to the public mood as Labour can say what they like now. No one believes them.
Anyone watching £/$? Oh dear...
cheap budget delivered in a manner unworthy of a man with the title of Chancellor of the Exchequer. Well he's just Gordon's puppet isn't he ? When the chips are down Labour reverts to form, peddling all the petty little class warfare crap, some things never change.
What a pathetic class envy and I'll announce that again budget.
At first Darling was boring me to sleep and then POW.
What a load crap.
*off to become a member of the payroll vote*
Ian - hope this cheers you up
http://thecrownblogspot.blogspot.com/2009/04/gordon-brown-dance-of-comedian.html
I don't buy about the 'protect the base' argument. I think that given a situation where we're forced to have tax rises due to economic incompetence most people would prefer the rich to pay more. The thing is that the general population only have any power during an election whereas the rich have it all the time. That's why they're doing when they are. They're gambling that the press won't risk alienating lower income readers by giving the tax increase the hard time they would normally.
I got angry with Brown's smirking responses to the rebuttal. That's it for me. I thought maybe a crisis would bring something interesting out of him but he's clearly just a berk.
Cameron fluffed a word or two but was generally very good I thought.
The facts from the German scheme are that it had the largest effect on small car sales so has not helped Audi, BMW or Mercedes. Opel Corsa sales up 50%. So seeing as small cars are made in the UK Honda and Vauxhall and Missa it may well help. People that buy Mercs and BMWs tend to buy on credit and change them every three years.
Enquires for office space in Frankfurt have increased
"77% of Sky News viewers feel worse off after the budget.
64% are against the 50% rate"
Yes Iain, that's right. The viewers of Sky News definitely provide a fair reflection of the country.
What did you, or anyone else, expect? They do not know what they are doing. On the M20 this morning we passed a lot of lorries. There were more from Hungary than from the UK, and many more from Poland than Hungary. Others were from all over Europe. There were barely a handful of UK ones. The private sector is in real real trouble, so how is it all going to be paid for?
Which sados are watching the budget announcement on Sky tv in the middle of the day?
Thought you were already fizzing this morning Iain ... and ouch "77% of Sky News viewers" etc NO NO NO. That is NOT a chuffing poll. That is a self-selecting bunch of Sky News viewers letting off some fizziness.
Calm down, calm down.
Cameron's response got my goat too. Mean and yahboo and looked like the work of D Hannan. Mistake. And IDS talking down the recovery. And so on and so forth.
50% over £150,000 is it? So if you earn £200,000 you'll be paying £10,000 more tax? Is that it.
If that is you're not already avoiding your way out of most of the liability anyway ...
Why is the borrowing scandalous? Explain! Why do you think that?
The car scrappage is an odd one. Granted. But not a surprise that should be getting a grown man angry.
Calm down.
I agree it might favour "overseas" manufacturers. But then again their schemes may get spent on UK built cars. And yes, the dealers, and the garages doing the services, and the environment ...
Iain why should the Torys feel they have been "put on the spot"..If they and you believe rich people should not have to pay a higher proportion of Tax.
Then you and the Torys need not wibble wobble over it....Do what Margaret would of done Nail your colors to the mast...And let the people see were you stand.
Your reluctance and suggestion the torys will be so to.
Show the dishonesty at the heart the conservatives and their supporters..
Also what he did not say and has just come out. All benefits exculding oap pensions are frozen from next year, tax credits, child benefit, incapcity.
Wonder why he did not make a big anouncement on that and why not implement it now?
It is all unravelling the 2K car scheme isonly 1K from the govt and the car manufacturers or dealers have to put in the other 1k. What ever this lot say is just spin, spin, spin.
It was at least a Labour budget - not vindictive against the poor.
Sadly, I still the Tories will win the next election, and I expect to see the sheer vindictiveness of that party on display. In terms of tax rates, the Lib Dem proposal to lift income taxes altogether from low paid workers was the best and should have been adopted.
http://englisheclectic.blogspot.com/
Very upset over this budget. I am a carer on income support and carers allowance, and nothing, zip, zilch for us. We save the country billions and get no thanks in return. I'll never vote Labour again.
Anyone notice how "happy" that darling chap was looking when "Windbag Cameron" was talking?
He looked like he had died!
The 45p rate on £150k incomes and above will be increased to 50p. Those on £100k will not benefit from increase in thresholds. Why ?
The IFS calculated that the Government would maximize the revenue it collects from those earning over £100,000 by imposing a marginal rate – the additional tax paid on each pound of increased income – of 55.6 per cent. This is perilously close to the ( April 08) marginal rate of 53 per cent charged when income tax, national insurance contributions and indirect taxes are all included. (Dominic Lawson). The IFS concluded that "there is not a powerful case for increasing the income tax rate on the very highest earners, even on redistributive grounds." The other day the IFS showed that Imposing a new 45p rate of income tax on the rich will actually cost the Treasury money, The top rate of tax will force rich people to leave Britain or use accounting rules to avoid paying income tax on more of their wealth , they said .
This further increase will presumably cost even more.
http://www.independent.co.uk/opinion/commentators/dominic-lawson/dominic-lawson-back-with-a-vengeance-the-politics-of-envy-817245.html
http://www.telegraph.co.uk/finance/financetopics/budget/5189609/45p-rate-of-income-tax-will-not-work-warn-economists.html
Summary: load of old hogwash. This budget was the sort of frantic scrabbling for cashflow that precedes a bankruptcy. Borrowing on a scale not seen since the Marshall Plan. Only we're not trying to rebuild a war-ravaged continent, we're simply trying to keep everybody in iPods, electric toothbrushes and gold-plated pensions.
Let it go people, let it go. This was the opportunity to re-evaulate. This was the chance to say "modern life is not making us any happer." This was the possibility of getting off the treadmill, yet we've chosen to crank it up to 20 and hope we can run fast enough for long enough to get to where we think we might be going.
Hello, is that the IMF? Erm, Gordon here. Nobody will buy our bonds, miserable buggers, any chance of an advance?...
@Also "what he did not say and has just come out. All benefits excluding oap pensions are frozen from next year, tax credits, child benefit, incapacity.
Wonder why he did not make a big announcement on that and why not implement it now?"
Because people living on such benefits, like me, are scrabbling to live. I have AIDS, I worked 16 years after that diagnosis, even though I thought I was going to die soon.
Now, I am genuinely ill. The meds make me sick. There is nothing wrong with my mentally, but for a good part of the day I need to be within 6 feet of a toilet. Which kind of restricts job options I can take.
The Tories will kick down people like me.
No doubt Jimmy, Boothroyd and Paul will be on here soon telling us what a wonderful budget this is and we're all a load of ingrates for not supporting it.
The sight of the smirking buffoon nearly cost me a new television. ARSE!
I have no sympathy for people earning over £100k. pa.
The CAR SCRAPPAGE SCHEME - would be only any good if it can be used to buy small GREEN cars only. Is there any details out yet?
BBC's Nick Robinson says this:
A scan of the Treasury's Red Book of Budget stats suggests that that headline grabbing rise in the top rate of tax will actually raise less than increased fuel duty (up 2p a litre in September) and the squeeze on public spending.
For those who like the figures the new top rate of income tax will raise an estimated £1,130m next year, the pension claw back a mere £100m whereas the fuel duty increase will raise £1,250m.So there you have it, most of the taxes incl beer etc will fall on anyone but the rich
Yes absolutely.A budget of stark political cowardice, but worse still, continued economic incompetence.
Darling repeats his absurd forecasting with the 3.5% projection which of course will adversely effect borrowings.
Mindless electioneering to bring more pain for most of us. Cameron's response was powerful.
They should avoid arguments with the IMF, alas they may need them soon.
This budget has been a gift for the Conservatives ... making them every more likely to win the next GE
In 1997, which was the last year I paid myself any income, I paid 40% tax all-in, including Income Tax and National Insurance.
Then Brown uncapped Nat Ins, and income tax went to over 50%. Now It is going to be around 63%, I estimate, not the 50% headline.
Since 1997 I lived on capital (gains), which is now taxed at 18%, previously 10%.
Except that since 2007 I pay 0% on income and capital gains as one of the 2 plus million Britons who've emigrated since 1997.
Brown's borrowing GBP 200 billion a year is laughable. That was almost the whole of government spending in 1997 when the fool took over.
I cannot imagine anyone with any brain will be staying in the UK to suffer yet more idiocy at the hands of the greatest economic buffoon in the country's long history.
Britain's IQ level will sink in the sea of Leninist Brown's debts and taxes.
Boy - am I glad I left.
Can anyone say how much extra revenue the 50% tax rate will raise?
The 3.5% growth forecast is an absolute joke - nowt more than a flight of fantasy.
Britain United, the world's 4th biggest economy of last season has just been relegated from the Premiership to the journeyman Championship - there to languish amongst Holland Rovers, Croatia Albion and Hungary Academicals.....
What we don't know is whether we'll end up in the Beezer Homes League division 2, playing against the likes of Syria City and Haiti Banana Republic?...
If only we had a chairman who would give Brown and Darling a vote of confidence....
@Anon
"Also what he did not say and has just come out. All benefits exculding oap pensions are frozen from next year, tax credits, child benefit, incapcity"
That is bad. But what are you saying. Benefit rates have just risen by 5.1% - based on last years inflation in September. If the RPI is less than 0% in this coming September, then there will be no rises.
Bread, Milk, bus fares, and mince - all the resort of the poor - do however keep increasing in costs.
>>I have no sympathy for people earning over £100k. pa.<<
Magnificently irrelevant.
If you can demonstrate the new tax level will raise significant cash without harm to the economy it would be more helpful.
In any event, the Tories have already announced that its repeal is not a priority, thus rendering it politically as well as economically irrelevant.
Rather like the rest of Darling's speech.
... i should like to add....
I do consider it immoral for a government to take more than 40% of your earnings. Who ever you are....
So, as a tax raising exercise Gordumb Broon reduces tax relief on pension contributions made by those people who want to provide for their own future, simultaneously increasing higher rate of income tax to 50%...so he and fellow public servants can continue to enjoy index linked final salary pension schemes at our expense.
Delving through the budget notes on the Treasury web site, I note that HMRC has closed off a tax loophole whereby some people who where given accommodation as part of their job had not been paying tax on the benefit....tut tut. (but of course MPs are different so there is no question of any of their perks being taxable).
Also in the Treasury notes is the proposal to name and shame anyone responsible for misdeclaring / underpaying tax of £25k or more...gets more like communist China / Russia every day...next stage will be public floggings and executions.
But the real scandal is the amount of borrowing - £606 billion over the next four years – which the Chancellor announced.Add that to the PFI borrowings and we must surely be north of a Trillion in a hole?
Man, I never thought that Labour could borrow enough to make their old 'Tax and Spend' seem like fiscal prudence!
If you hated it that much, he must be doing something right.
Tax rises! oh no, it is the end of all!
What is the alternative? Just slash spending across the board and hope to sink out of the recession? Leave people out of work in the hope that they get on their bikes?
The debt is a problem, yes. But investment is sorely needed to keep the economy afloat. Cutting everything left, right and centre will make things far worse.
To be fair, i'd rather that the growth and borrowing figures were, shall we say, more realistic, but pumping money in is the best way to pay back a smaller debt-bill later. It's true in business, the "real" world, so why not government? It is, some just don't like to accept that.
I'm 24, so it's hanging round MY neck more than Mr Dale's and i support it, in principle if not practice.
Also, the Third poster who wants someone to do more for the disabled must be mad if they think the Conservatives would do MORE for the disabled.
And I commend this post to the house!
For the benefit of Anon@2.24..
Of the top 10 bestselling cars in the UK last month only the Astra is
assembled in the UK (Ellesmere Port).
If the scrappage scheme has any impact (which I doubt) it will be workers in Germany,Belgium and Spain who benefit.
Cameron's response got my goat too. . . and looked like the work of D Hannan. About damn time.
I hope Iain's right about it being the budget that loses the next election for Labour, that's the only positive thing about it.
This budget is a farce. An utter farce. Someone has to call them on this - it should not pass through Parliament. We should all call upon our representatives to vote down this blatantly political budget!
The 50% tax rate will reduce tax revenues and the massive borrowing will cripple us for decades, leaving the Tories to clean up.
I missed the live broadcast, but cannot wait to see it later on the net.
It seems to me by what you said to be another lame attempt at not doing anything in particular.
Brown is doing it, the chancellor is doing it and the Labour party is doing it.
They do not want to rock the boat before the next election, but by doing so, they are having the opposite effect.
Please read my blog if you wish to hear about some of the breaking political stories!
Thanks.
www.Richard-Wilkins.blogspot.com
There is one question that Iain still has not answered. Are you going to be cutting down on newspaper reviews for Sky in order to avoid the new 50% rate of tax? :-P
On a more serious note, this very much felt like the budget of a government which is about to die. Alistair Darling certainly looked and sounded like a zombie when he was delivering it. Also noticed that, as ever, you could almost see the Prime Mentalist pulling the strings. Pathetic.
The 50% tax abnd doesn't come in until next year and Brown will be out by then. Will a Conservative government rescind it?
The 50% tax abnd doesn't come in until next year and Brown will be out by then. Will a Conservative government rescind it?
I have a car that I bought new in 1998. It has low mileage for its age and works well but I would probably have replaced it in two or three years.
I am now being offered more than its likely market value too scrap a serviceable vehicle and replace it.
The fact that the chancellor is stupid enough to do this does not mean that I am stupid enough to refuse the offer.
The only bright spot of the Budget was DC.
The line about scrapping decrepid 10 year old bangers was perfect
The BBC pundits did their very best to find something positive in this ridiculous budget and somehow managed to drag the Tories into it. But...'at the end of the day' even they looked very shell shocked by the very large borrowing figures being tossed about by Captain Darling. Will the last person out turn off the lights.
A Sky presenter was talking bollocks about the 50p tax saying it would raise 7 billion by 2011.
In fact it will be 1 billion - if you believe the govt. In fact it will be less.
Not vindictive against the poor? 2p on a pint will work through to 10p at the bar. Bad bad news for pubs. But labour only want to destroy traditional Britain.
Chris Paul and his minions ignore the elephant in the room.
Public spending is out of control and tax revenues in decline.
Darling has done nothing to suggest that the gap is going to be filled. His fig leaf is that the world economy is going to grow and this will save us. Pie in the Sky. Growth of some sort would occur anyway. we still need to repair the public finances.
Labour are wilfully refusing to face reality and are inventing scenarios to help them talk their way through to the LA and Euro elections.
By the time the next govt get round to facing the problem it will be even bigger. a scorched earth budget.
Several of the commentators on the BBC coming from different perspectives have agreed that the projections for economic growth, and therefore the chance to put the books in order a decade or so down the line, are based on highly optimistic assumptions.
To me this is the main story.
It could be described as a "fingers crossed" budget.
Iain, Martin Wolf of the FT has just written Brown's obituary.
And you thought you were angry!!
Given the rather optimistic assumptions for future growth, it strikes as a "fingers crossed" budget!
Yes it looks like a very political budget to protect the Labour Party base, lose in 2010 and at the same time deliver an irresponsible mess to the Tories.
I would even think Brown has not given up hope that he could have a stab at leading the LP in 2014/15 - after all this is a global/ US problem, whereas the actions Cameron will have to take will be painted as bad old Tories - good game innit !
Just the increase in interest rates on government debt over past few days has already cost each UK child at least another £1,000 in interest.
"50% over £150,000 is it? So if you earn £200,000 you'll be paying £10,000 more tax? Is that it."
I make it 5,000. Or 2.5% of gross income. But let's not let facts interfere with hysteria.
Sorry Iain for repeat posting. I didn't notice that comments only become visible after approval!
I've gone through the actual effect of this Budget here: http://soc-liberal-party.blogspot.com/2009/04/budget-09-let-down.html
having gone through the entire document finding out the figures behind the announcements.
From January, all people aged 25 years or younger will be given a job or training if they have been unemployed for 12 months or more. This is forecast to help 250,000 into employment.
http://business.timesonline.co.uk/tol/business/economics/article6147421.ece
Is this how Labour plan to reduce the number unemployed in the run up to a general election?
Looks like 2010 is the only election date now! I am assuming this is January 2010 (When it will be introduced).
I don’t think it will work by the way. It seems aimed at graduates and school leavers.
The "do nothing budget".
If you look over it, really there is nothing of any significance that is new.
Now if you want to get really worried- the Gilt sales in the budget for this year are a MINIMUM 220 billion pounds, possibly as much as 260 billion- assuming growth starts by end of 2009. So real number? Who knows? Almost certainly more than 200 bn, could be 300bn easily.
Whoever wins next election will have to have the most almighty huge cost cutting AND tax increasing budget of all time.
Check out the pic on the Telegraph website.
Darling looks distraught. Brown looks elated.
Brown is seriously nuts.
Slight update about Iain's Tweet about the pound:
The Pound is down about 1% against the US Dollar.
The Pound is down about 1.5% aganst the Euro, the Yen and the Swiss Franc
Puzzle : I can afford a new car.
If I buy a clapped-out old banger for £50 can I then have £2000 off the new one?
I'm only asking...
Paul Halsall
"It was at least a Labour budget - not vindictive against the poor."
Old cars, the type poor people drive, have just gone up by £2000.
Idiot
Last April the IFS calculated that the Government would maximize the revenue it collects from those earning over £100,000 by imposing a marginal rate – the additional tax paid on each pound of increased income – of 55.6 per cent. That was perilously close to the ( April 08) marginal rate of 53 per cent charged when income tax, national insurance contributions and indirect taxes are all included. (Dominic Lawson). The IFS concluded that "there is not a powerful case for increasing the income tax rate on the very highest earners, even on redistributive grounds." The other day the IFS showed that imposing a new 45p rate of income tax on the rich will actually cost the Treasury money, The top rate of tax will force rich people to leave Britain or use accounting rules to avoid paying income tax on more of their wealth , they said . Now the 45p rate on £150k incomes and above is to be increased to 50p. Those on £100k will not benefit from increase in thresholds.
This presumably costs even more
.Duncan at Duncan`s Economics Blog sketched the scale of conflagration before the budget. ‘Assume GBP hits 100%, and cost of government debt (in terms of annual interest) rises to 6% (currently less than 3.5% and probably will be for a while but in the longer term that may well rise).Then the government will need to spend 6% of GDP annually on interest payments (currently closer to 2% of GDP before the new borrowing).Tax is currently about 37% of GDP and government spending will be around 45% of GDP If we want to hold the debt ( not pay it off) then we need to find an additional 12% of GDP (the extra interest payments and balancing the budget).12% of GDP ..would mean cutting about 25% of all public spending. .....or about a 30% increase in taxes’
IMF here we come weeeeeeeeeeeeeeeeeeeeeeeeeeeeee!
Borrowing £606 billion. Will this be from the banks which we bailed out by nationalisation?
Worst. Budget. Ever.
From Worst. Government. Ever.
The Government is now borrowing money that my great-grandchildren, as yet unborn, will have to repay.
Labour never has any economic policy except borrowing. This time they have not only run out of our money it is possible that the amounts they wish to borrow are not there to be lent - a forecast I made 6 months ago, by the way.
The increase to 50% tax rate for earners is going to raise the equivalent of 50 hours worth of public borrowing (using the chancellors optimistic figures).
Nothing to do with economics. Everything to do with ideology.
“Our children will be in poverty for decades to come,” announced David Cameron. Er, yours won’t, Dave. There isn’t even a mortgage on any of your three houses. And do you really not know that there were no unburied dead during the Winter of Discontent? Either you don’t, making you too ill-informed for office. Or you do, making you too dishonest for office.
My Right Honourable Kinsman could put to the top rate up to ninety-nine pence in the pound. Tony Blair, David Cameron, George Osborne and Nick Clegg still wouldn’t pay.
Ostentatiously high rates are beside the point. There wouldn’t be the slightest need for them if the enormously rich were not effectively exempt from tax anyway.
Ending that would bring in revenue beyond what were previously our wildest dreams. It would make it possible for the personal allowance to set permanently at national median earnings for full-time work (however much that happened to be at the given time), and for everyone to be guaranteed a minimum income of half that. And it would enable us to do these things on a flat rate of income with no further exemptions.
Just as there would still have to be child benefit payable to the mother (or the father in her complete absence), so there would still have to be the restored tax allowance for the father (or the mother in his complete absence).
But apart from that, one Social Security payment, called and delivering Social Security, and bringing everyone up to half median earnings for full-time work. And one tax allowance, of twice Social Security, i.e., of median earnings for full-time work.
Taxing your way out of debt is like standing in a bucket and trying to lift yourself up by the handle.
Winston Churchill
@Victor, NW Kent
Money is not real. It's just a symbolic way of trying to store wealth and to incentivise work. Your grand children will not give damn about fiscal policies now.
Let's be honest, politicians of all shades haven't a clue what to do. All of them loved the city bigwigs and wanted minimum regulation of the banking system. So if you think a David Cameron budget would be any different you are in cloud cuckoo land. Also, just heard one of the junior clerks moan about the 50p tax rate. Unbelievable, she only earns about 15k and has as much chance of paying the extra tax in her lifetime as WHU have of winning the Champions League - then again perception is everything
Well I guess we found out that Darling wasn't brave enough to be a hero (or resign).
The budget appeared to me to be a 'mark time' budget. A few deckchairs re-arranged but no-one starting to bail out the incoming water. Madness.
Did I hear the phrase "Zombie Government?" I can't bear the thought of 18 more months of non-government. If it does go on for so long the Labour party are going to be obliterated at the next General Election; do nothing budgets are not going to help them. Good job too, but its my Country I worry about.
The most cynical aspect of the 50% tax rate being, that Labour are seen to be taxing the rich, and when the stuff really hits the fan in the next few years, will be when the tories (assuming they are in government) will have to tax everyone AND cut public spending. Of course, Labour will sit on the sidelines throwing negative comments about Tory cuts when in reality, a future Tory government will of course be clearing up the financial incompetence of the overgrown militants purport to 'govern' this country. If governing is ruling by dictat, they succeed. However, most people like to be treated as individual minds, not children to be controlled and nannied. I truly dislike the underlying spite that goes alongside socialist governments. All modern labour governments have been incompetent overgrown students who inflict their misguided condescension and arrogance upon us all, and rely on people being too stupid to see when they are being hoodwinked.
Labour, surely the TRUE nasty party.
is there anywhere online i can watch cameron's budget response in full - rather than the intro or the transcript? if not, why not?
"Money is not real. It's just a symbolic way of trying to store wealth and to incentivise work."
Try to pay your mortgage with 'hope 'n' change' then.
Or are you blogging from Mum's spare room?
Vote: Should David Cameron oppose the 50% tax?
You are spot on Iain. You've caught my thoughts exactly. Darling chose to lick his political master's whip instead of being man enough to do something for the country. He isn't fit to bear the title Chancellor. He is a lickspittle, able only to do his master's bidding. Brown was, and still is, the Chancellor and he should be held to account for what he has done to the country. Darling will now share that responsibility and his name will also be a byword for financial infamy.
Excellent demolition by Cameron.
Like any budget the leader of the opposition is usually knocked off the news agenda but what DC has to say should be listened to today of all days.
PMQs were intersting - brown came across as silly and DC made a good joke about SpAds.
I think bearing in mind the new tax rise is coming in before the next election DC should call for a confidence motion to fully explore all the issues that have come up lately. Not likely to win I know but it would give DC equal air time. What do other people think.
Anonymous said...
Puzzle: I can afford a new car.
If I buy a clapped-out old banger for £50 can I then have £2000 off the new one?No. You need to have owned the old banger for more than 12 months.
I thought Cameron was excellent in his reply to the Budget. Hes so much more effective when angry. The difference in that and his lukewarm PMQ`s was very noticeable. Why doesn`t he do "angry" more often. Its easy to get angry with this shower after all.
So by taxing the rich more how many hundreds of years will it take for the rich to pay back the £606 billion Labour have borrowed?
wr = mingate
Re Peston:
"Why is the Treasury's borrowing need so much greater than was expected? Well, the cost of bailing out the banking system appears to have been greater than expected."
Expected by whom Robert? I seem to remember that there were very vocal criticisms of this Labour govt's forecasts a while back but they were dismissed as pessimistic politically motivated. And who were such "dismissers"? Well Labour and its "tools" in the media - aka Robert Peston among others ...
Let's put it in perspective. This tax rise is just a fraction of £6bn the government hopes to raise over the next three years. Also in this package will be the closure of tax loop holes and the increased duty of fags and booze.
By way of contrast Darling has taken a chainsaw to what remains of the social wage. £60bn in asset and property sales by 2012? £9bn/year in "efficiency savings"? Who's going to lose out here? The well off? I don't think so.
Yes, this is a class war budget. But it isn't against the rich and their pals.
They've lit the fuse and passed the bomb on to the tories.
We shouldn't forgive them for this; smears, lies and eye-popping fiscal fraud.
My sweet Jesus. The class warriors have pressed the scorched earth button.
Cameron should announce that the first act of the next Conservative Government will be to revoke - with retrospective effect - the Resettlement Grant and Ministers severence payments which losing MP's would be expecting as a further insult to the taxpayer.
If Damian Mcbride was guilty as charged of telling lies then he has just been surpassed by Alistair Darling's whoppers on future economic growth from 2010 onwards. These in no way chart an economy coming out of recession, these are "BOOM" figures indicative of an over-heated economy, not one getting up of its knees.
The thing is he knows these are fantasy and he knows, we know they are fantasy (aplogies to Dan Hannan). That he chose to use them just the same means like his predecessor he has nothing but contempt for the Country and its people.
@ JuliaM said...
"Money is not real. It's just a symbolic way of trying to store wealth and to incentivise work."
Try to pay your mortgage with 'hope 'n' change' then.
Or are you blogging from Mum's spare room?Oh so well put Julia. Obviously this a perfect example of the educationally challenged output of the ZaNuLab state school system, completely clueless about the real world.
Question
What is the difference between Labour's forecasts and reality?
Answer
The IMF
>>Your grand children will not give damn about fiscal policies now...<<
Tell that to the great great grandchildren of Argentina's economic wonder years. Their economy was ruined for generations thanks to irresponsible fiscal policies.
Yes, a complete damp squib of a budget: mainly pointless measures that either won't work or will have so little effect as to make no difference anyway. And borrowing figures that will be making my eyes water for weeks.
This is surely now Labour's last chance and they have totally blown it. All the calls from people like Toynbee for them to be radical and show their mettle and this is what we get.
I am usually quite measured in my response to the ebbs and flows of political life but I am also angry like you Iain. I am so sick of Brown and this rotten regime. Do we really have to put up with them for another year?
Just a thought Iain, but if Blair was still Prime Minister, where do you think we would be now?
The top rate of tax is now 66% when you take into account NI, and occurs for those earning between £100k and £112k.
http://alexmasterley.blogspot.com/2009/04/top-rate-of-tax-is-now-66.html
We needed a radical budget, we got a political budget. A budget which did not deliver, a chancellor that failed in its obligation to the british people. We needed massive public spending cuts, on the scale of 5-10% at least, (temporary pay cuts for higher paid public sector employees and drastic cuts in parliamentary allowances.
Britain plc is essentially a business, that is near bankruptcy, measures should have been taken now to improve the situation, very radical and unpopular measures in the interests of Britain plc's future not just political games.
Very worrying
An important point is that most of the children living in poverty live in households headed by women, and if we don't work on ensuring those women have a reasonable income we can't get the children out of poverty. The Women's Budget Group points out "Within the entire budget document the word women is mentioned only twice". This government's own innovation of the Gender Duty is being ignored in Treasury as elsewhere. Why does DarlingBrown never invest in building infrastructure in the sorts of things that women do?
And when this country needs all the brains and good workers it can get, it just doesn't look at people who lack that important (and brain-cell-packed?) piece of flesh between their legs. Even the money for training for under-25s uses an age cutoff that has been widely discredited because it excludes many young mothers who could enthusiastically take up such opportunities when their children are a little older.
OK, giving pension credits to carers is a useful step, and greatly to be welcomed as an acknowledgement of the huge contribution that family carers make to the economy and to quality of life. (Maybe they did listen to the WBG on this one.) But there is too little actively for those living in poverty and too much against.
Anyone else suspect most of this was written mainly in number 10 as opposed to number 11?"
Oh For heavens sake Bob!!
Are you, only NOW, realising that the chancellor -or indeed anyone else in Beans "cabinet" -are anything else but puppets of bean??
I have heard and read elsewhere that gilt sales this year are actually set for £262 billion.
That is just this year. And that is assuming revenues hold up and that spending is curbed.
Former Prime Minister's also get a special allowance. Scrap it for the current incumbent.
Off Topic Iain:
Shame you didn't win the Orwell prize for blogging this year.
But - there is no shame in losing to a blogger like Nightjack and I am certain that you will win this award in the very near future.
This is the old "If I can't have you, no one can" scenario. Labour know they are unelectable so they are poisoning the well. The budget is only for destroying any chance the next Tory government might have of healing this financial sickness Labour policies have exacerbated. Labour is hoping that the Tory government will then fall and they will return to power more quickly than would happen otherwise. It is purely a political budget and will put this country back 40 years.
Prof Willem Buiter writes: 'Alistair Darling is a good chancellor of the exchequer. He has presented a Budget that does essentially nothing - a good budget, given the dreadful economic circumstances. The global economic environment is the least hospitable since 1945 and a dozen years of specific British policy mistakes have left the British economy more vulnerable than almost any other to the financial crisis . . .'
http://blogs.ft.com/maverecon/2009/04/darling-is-doing-his-best-to-clean-up-browns-mess/#more-1440
Jackr 5.36 pm: you will find both text and video at http://www.theyworkforyou.com/
The link to Cameron's reply is here.
Astronomical levels of borrowing!
Perhaps someone can help me?
Who do "we" borrow this money from? What are the interest rates? Does this "money" actually exist? Who really benefits from the interest payments that will clearly be massive?
Just asking!
I believe the „Abwrackprämie“, or wreck premium of 2,000 Quid for cars to be scrapped after 10 years is a bit on the crazy side. OK, so it keeps the dealers happy, but it doesn’t help UK manufacturers hardly at all. In Germany the scheme is already 50% oversubscribed and while Volkswagen and Opel have been sustained, other none German manufacturers have done even better.
Sales Jan – March.
Suzuki +110%
Hyundai + 149%
Fiat +100%
Skoda +50%
Anyway, who reckons a car is clapped out after 10 years? Our second car is an Opel Vectra circa 2002 and there’s nowt wrong with it (touch wood!). Here in Austria the “Abwrackprämie“ is only for cars exceeding 14 years and the premium is €1,500. There are a lot of takers, but it’s not oversubscribed!
I don't earn 150k pa but I'm now so pissed off I'm going to join the Tory Party in Croydon. Utter tossers this Government.
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