‘Isn’t it the case that Labour’s borrowing bombshell will soon become a tax bombshell? And let’s be clear about what that means. Borrowing £30 billion now will mean an income tax bill for the average earner of nearly £1,500 later.Everyone knows the prime minister is planning a Christmas tax giveaway, but tax cuts should be for life, not just for Christmas. We need real tax cuts not tax cons.’
(David Cameron in the commons responding to Gordon Brown)
Whether Gordon Brown calls it a ‘fiscal stimulus’ or simply ‘additional borrowing’ the taxpayer will have to pay it back with interest in due course. But our PM doesn’t care as long as it gives him a chance of winning the next election.
Any wonder that the public regards politicians with contempt? The Chief protagonist of political lies has to be our Prime Minister himself. I
am was of the view that we shouldn’t refer to the PM of our country and others who hold high office as liars – not in public at least. It isn’t very British and a it’s more than a tad disrespectful. But having heard Gordon Brown recently as he pretends to have the solution to the worlds economic woes, I find it very difficult adhering to this belief.
Recently our PM has been telling bare faced lies which he is undoubtedly aware of. Take his big foreign policy speech on 10 November 2008 and his press conference on 11 November, in which he repeats the lie that borrowing has been kept under control by his Government and is currently at 37% of GDP. This has been repeated by other Labour politicians such as the Chancellor and John McFall MP, Chairman of the Treasury Committee who recently appeared on Newsnight.
Brown adds that when he took over as Chancellor in 1997 borrowing was 44% and now it is 37%. Why does he say this? To allow him the chance to say especially on the world stage that (1) he has been prudent in reducing the UK’s debt when times were good, and (2) that by borrowing to cut taxes and increase spending now, he will not be putting the country’s finances at risk as alleged by the Tories.
The truth is somewhat different. In 1997 when Brown took over at Number 11, borrowing was 43.4% as the country was moving out of a recession. This has conveniently been rounded up to 44% by Brown. According to the ONS figures borrowing in September 2008 was 43.4% and not the 37% Brown is claiming. Brown arrives at 37% by removing the debt of Northern Rock which should still leave him with a figure of 37.9% – but he deceivingly rounds this figure down as opposed to rounding it up as he does with the borrowing figure under the Tories.
Not including the Northern Rock debt is simply ridiculous as the taxpayer is responsible for this and which is confirmed by the ONS. If we add in what Brooks Newmark MP has listed in his excellent pamphlet for the CPS then the debt becomes worryingly huge.
John Major in a recent article for The Times sums up his deceit succinctly:
‘When Mr Brown claims that national debt is lower than many such countries, he is being less than candid. He knows he is excluding long-term liabilities such as £100 billion of private finance debt, our unfunded public sector pensions and the debts of Network Rail and Bradford & Bingley. Once these are taken into account, our true debt is nearly three times higher – at a shocking £76,000 for every household. The figures the Government uses to reject the charge of financial incontinence are as bogus as a fourpenny bit.’
Gordon Brown is therefore telling bare faced lies when he repeats that current debt is only 37%. If he continues to borrow in trying to get the economy out of the impending recession, he risks doing lasting damage to the country’s finances which we will all have to pay for and which will send Sterling down even lower than the 30% it has devalued recently.
Cheerfully stating on the world stage that a fiscal stimulus is required and borrowing must go up in a recession isn’t sensible or responsible for the UK economy in its current state. This course of action has come far too late to save the economy from experiencing a deep and severe recession. But as a result of his reckless borrowing and spending policies, he sees this as the only way out of the economic strait jacket he finds himself in and which gives him any chance of saving Sterling from collapsing even further.
Our PM may be enjoying himself in all this economic gloom, but his days as PM are surely numbered.
Lord Lawson of Blaby: “My Lords, at the heart of this debate lie two questions: how did we get into this mess and, now that we are in it, what should we do about it? I will deal briefly with both.
Part of the answer to the first question is the inescapable working of the economic cycle, which, as Keynes pointed out in the 1930s, is in large measure a creature of the credit cycle. What has greatly magnified the credit cycle since his day is the massive growth of consumer credit of all kinds. The present Prime Minister’s constant boast—even as late as his Budget Statement last year, when the extent of the housing bubble should have been evident even to him—that he had abolished the cycle and put a permanent end to boom and bust, showed not merely astonishing economic ignorance, but it made things worse; for, to the extent that people believed him, and I suspect that many did, it reinforced the unwarranted over-optimism of borrowers and lenders alike. It was an invitation to be imprudent.”
And Lord Lawson concludes by saying
I believe that any plausible, discretionary fiscal loosening would, at best, be of trivial use now while adding to the problems that already lie further ahead on this front. In short, the right answer—in so far as there is one, for the worst recession since the war is now unavoidable—is sizeable interest rate cuts now and, above all, proper banking supervision to prevent a recurrence on anything like this scale in future. And, of course, there should be no more nonsense about the end of boom and bust.
David Cameron this morning set out the Conservative party’s proposals for dealing with rising unemployment by giving employers a £2500 tax cut in the national insurance they pay for each person they recruit who has been jobless for three months. The effect of this proposal would create 350 000 new jobs and be worth £2.6 billion to employers and is funded out of the money that would otherwise be spent on unemployment benefits.
This is a funded tax cut that helps businesses and equally important gets those people unemployed for a short period back into work. Cameron has understood that short term unemployment very quickly turns to medium then long term unemployment with the inevitable effect that skills acquired are lost and the attractiveness of that employee to potential employers diminishing with time.
I mentioned here that it was likely the Chancellor was going to cut taxes using additional borrowing to fund the cuts. Gordon Brown has indicated today that details of tax cuts will be set out in the pre-budget report within the next few days with some analysts predicting a 1p cut in income tax. And there are also rumours that David Cameron will set out his position on tax cuts on Tuesday.
While both parties will pledge tax cuts, there is a marked difference in how they will be funded. Labour recklessly wants to increase borrowing to fund tax cuts which will mean exposing the economy to greater risks in future, as well as large tax rises once we are out of a recession. Brown probably doesn’t care about either. He wants to win the next election at all costs and any short term measure that helps him to do this will be pursued. If he loses the next election, he leaves the Tories straddled with huge debt. If he wins, he’ll stand down during the next term so he won’t be held to account later by the electorate.
The Conservative Party would seek to reduce taxes by making savings elsewhere which I suspect Brown would do if he wasn’t so far behind in the polls. Pursuing a policy of borrowing more money which has got the economy into such a mess is foolish to say the least. This will leave us with the ‘Tory Cuts v Labour Spending’ argument of the previous two elections. The argument then worked in Labour’s favour but it certainly won’t next time as people realise that it’s Labour and specifically Gordon Brown that has got us into this mess with reckless profligacy and a huge waste of public money.