The Institute for Fiscal Studies (IFS) has today painted a very gloomy picture on the state of UK finances in the years to come with a prediction that it will take 20 years for UK debt to return to pre crisis levels and that £20 billion worth of tax rises or spending cuts will be necessary to achieve the improvement in the public finances set out in the PBR.
This forecast is in effect confirmation of this campaign video released by the Conservatives two weeks ago in that future generations will be straddled with debt left behind behind by Gordon Brown and his incompetent Government. Despite the plethora of gloomy economic news including job losses and record numbers of house repossessions, Gordon Brown refuses to acknowledge that he hasn’t ended economic boom and bust, a point put to him at today’s PMQ’s by David Cameron.
The Labour Government is going to borrow a mind boggling £118 billion in 2009 to help it pay for the economic mess that it has got us into. That is the long and short of today’s pre-budget report. This figure is sufficient to understand the trouble our nation’s finances are in and why the promised stimulus was such a letdown and more worryingly, why Labour will significantly raise taxes in the coming years.
Everything else that the Chancellor announced pales into insignificance when compared to next year’s borrowing figure. Bearing in mind that borrowing figures for this year have had to be revised twice upwards by the Chancellor, the estimated borrowing figures cannot be accurately relied upon.The borrowing figures for the next five years are;
£78bn in 2008/09
£118bn in 2009/10
£105bn in 2010/11
£70bn in 2011/12
£54bn in 2012/13
The promised fiscal stimulus to stave off a deep recession was nowhere to be seen. A £20 billion giveaway including the cutting of VAT from 17.5% to 15% for 13 months was off set by a £40 billion tax rise including a 0.5% increase in national insurance contributions for employers and employees alike from April 2011 and a new 45% tax rate for those earning £150 000 or more.
Today we saw the return of Old Labour. The politics of taxing everyone as much as possible but taxing the rich until the pips squeak returned with a vengeance. Prudence, stability and other such sentiments espoused by the PM for so long were all binned for a tax and spend binge and it was shame that it fell to Alistair Darling to deliver the Pre-Budget Report and not Gordon Brown as it would have been pleasing to witness him contradicting everything he has said previously about the economy under his watch. The Chancellor blaming global problems for the state of the UK economy at each and every turn was frankly embarrassing.
George Osborne gave an excellent and perfectly pitched response by heavily focusing on the hypocrisy and sheer incompetence of this Government. It was a very hard hitting rebuttal of Labour’s and especially Gordon Brown’s profligacy and the reckless tax and spend policies that have left the economy in such a mess and the country facing a national debt of £1 trillion.
If the measures in the pre-Budget Report were what this Government thought would get the economy moving again, then it is badly mistaken. If it thought that these measures would win the next general election then it is surely living in cloud cuckoo land.