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ALISTAIR Darling is in dreamland if he seriously thinks his two headline-grabbing measures today — the one-year cut in VAT from 17.5 per cent to 15 per cent cent and higher rate tax for those earning more than £150,000 — will make the slightest difference.
The idea that a 2.5 per cent reduction will push people into spending more is ludicrous. Honestly, would you cross the street for a shop that said in its window “2.5 per cent off”? And that's before the retailers, restaurants and all the other myriad businesses have to change their receipts, menus and invoices.
Likewise, the 45p in the pound to be brought in during the next Parliament on the top earners. The increased levy will affect 400,000 people and raise £2 billion — a sum that barely registers against the Government's borrowing of £120 billion. Of course it enables him to say he's a tax-cutting, defender of low and middle income families, chancellor. As they sit behind him, Labour MPs cheer him to the rafters and wave at the party opposite. That's the point — this is cynical, gesture politics. And it's pathetic.
It's his boss, Gordon Brown, putting down a marker. For a decade under Tony Blair, Labour refused to clobber the big earners. It was anxious to be seen to have abandoned its traditional dogmas and to be genuinely inclusive, a friend to the rich as well as the poor. Brown, as chancellor, signed up to that policy too.
There was though, always the belief with Blair's glowering Downing Street neighbour that he was uncomfortable, that he still clung to the out-of-vogue ways. His pals on the Left wanted Labour to embrace a progressive tax system. The suspicion was that Brown, in private, sided with them but the starry-eyed fawner over celebrities and billionaire businessmen at Number Ten wouldn't listen.
The recession and the cost of implementing today's PBR package have given Brown the justification he needs. There's an element, too, of being seen to exact revenge on the City, of punishing the high-rollers in the banks who have exacerbated the country's plight with their greed and recklesness. Of course, the City will not account for all the 400,000 caught by the 45p rate but an awful lot of people will be affected — and Brown and his willing helper know that.
There's a feeling here of a Prime Minister and Chancellor actually enjoying themselves. They're having a good economic war and today, with the return of old Labour, it's just got a whole lot better.
Reader views (21)
Its not so much going back to the old - more like dropping the disguise they've used over the last couple of parliaments. Socialism isn't about adapting to the times. It is about rigid adherence to political dogma, changing the circumstances to fit the solution rather than the reverse.
- Rogan, Irving, 26/11/2008 00:15
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Official economic forecasts under this government have been hopelessly optimistic and there is every reason to believe that's true of yesterday's figures as well. Even the OECD and the IMF think so. There is a serious risk that the government won't be able to finance the deficit when this becomes apparent, which would be disastrous.
The only way out of the predicament we're in is to earn our way out. The problem is too much debt, and you don't cure that with more debt! We must make business more competitive, by reducing non-essential overheads, including those imposed by the government such as ID cards, unnecessary quangos, stupid bureaucracy such as the Criminal Records Bureau, and make it easier and cheaper to employ people. There is no indication that the government understands this - why on earth increase National Insurance, which is a tax on jobs, just when unemployment is about to be a serious problem?
The government must cut public spending in order to avoid the risk of public default as far as possible. Quite apart from the economics, if the private sector alone has to take all the pain of the redundancies which are coming, because Labour can't offend their public sector union paymasters, the resentment will be enormous and very destructive.
- Alfred T Mahan, New Forest, 25/11/2008 18:08
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The arrogance and high handedness of this very socialist government; 'We're targeting tax reductions at the poor because they are more likely to spend'. Some caring bunch of people socialists are! Fancy encouraging people in debt to spend more. This so called stimulus will do nothing apart from increase national debt. George Osborne is right. There will be a run on the £. What an obnoxious bunch old labour are. The country is in a mess and all they think about is themselves. I thought the idea of socialism was a lack of selfishness. The poor Tories are going to inherit a terrible situation when the country has an election - it will be virtually bust just because a man called Gordon has wanted to be the prime minister since he was six.
- David S., Ealing, 25/11/2008 13:38
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The PBR does nothing to address the recession caused by the GFC or to ameliorate the suffering of vulnerable people who will suffer because of it. Nor does government have the resources to do so. The recession will be reversed by measures taken to restructure the banking industry, key elements of which have yet to kick in. The PBR is simply cover for a ten year programme of tax hikes necessary to feed his model of government. Gordon Brown accepts the ceaseless expansion of government "services" the way we have all come to accept the ceaseless residual accrual of inflation, but it needs to challenged. It is no less pernicious to the economy, in the long term, than the toleration of an asset bubble.
- Blackstone Coke, London, 25/11/2008 11:43
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If any of the handout comes your way - save it. You will be needing every penny.
- Richard, london England, 24/11/2008 19:49
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Great grasp of the facts Matthew! Can you explain further how privatising water and gas companies led to the mortgage crisis...? BTW everyone the banks did lend irresponsibly, but who was borrowing? Oh it was you lot wasn't it. You can't try desperately to make your bit out of asset price inflation and then whinge when the bubble bursts. The government should just have picked the most viable banks to save and let the rest go, that's how a market economy is supposed to work. But the Marxists at No.10 could never pass up a chance to increase the size of the state......Pass my condolences to your children whilst they are still paying for Gordon's incompetence.
- Mark, London, 24/11/2008 19:35
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This is gesture politics; if Darling really meant business he would have (a) brought back the 10p band, and (b)brought the new tax bands in at £65000 and so clobber a few MP's. Any price reduction due to a reduction in VAT will be insignificant in comparison to the retailers' reductions.
- Jeremiah, London, 24/11/2008 19:28
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These are the tax rises we know about. But the government's barmy Renewables Obligations have hit food prices and will hit our electricity bills for years to come - call it a stealth tax.
And wait until the green taxes start rolling in, the casino economics of carbon permit rationing and auctions will shoot up our energy costs. Not good for our economy any more than our cooling planet!
It is amazing that the Tory 'opposition' are blind to all of this.
- Jools, London, 24/11/2008 18:55
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It's Brown who is spot on. At least he is doing something to try and get us out of the mess the banking system has got us into. Tory voters to a man. Blackhurst comments show him what he is an old Tory apologist, and the central office bloggers are out in support.
- Kerry, Purley, 24/11/2008 16:38
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Absolutely spot on.Brown is absolutely pathetic.If he is seriously worried about jobs, he should slash Employers National Insurance Contributions, as well as Corporation Tax. This would encourage employment and reinvestment.We are returning to 1970's politics, but without a Thatcher in sight.
- Rr, London, 24/11/2008 14:29
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Did Brown really create this crisis? Only to a limited extent. The deregulation of the banking industry started under Thatcher and it made the Treasury huge amounts of money. Nobody could have predicted that the bankers here and in the USA would have behaved so irresponsibly and greedily and brought an entire industry to its knees. The wealthy bankers should shut up and be grateful that the government is coughing up to bail them out. The 45% is a small step in the right direction to recoup the taxpayers' money now being thrown at saving an entire industry and our economy. How about taxing them even more? Why can't we have a 'wealth tax' on rich peoples' savings, property and assets like they do in France?
- Matthew, London UK, 24/11/2008 14:25
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The newly emerged Old Labour has sealed the fate of the UK beyond any doubt. Welcome back to the 1970s, an era full of industrial strife, gloom and class war. Well done Gordon - time for you to disappear back to Fife and let someone else guide the economy back to where it should be.
- Ian, Toronto, Canada, 24/11/2008 14:20
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I think I'm on your side, Chris - but did those 'big earners' latterly act responsibly? (I don't mean 'charitably', or 'Greenie-conscious', I mean with an awareness of wider 'my-word-is-my-bond' financial ethics). My own experience was that they excelled in subtle self-deception. And now, the Whirlwind. Not sure Cons-Mob would ensure that the pain due got delivered.
- Steve, SW18, 24/11/2008 14:17
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Ironic for a govt who is broke and needs to borrow from "rich" foreigners just to pay its bills to act in this way. Who wants to continue loaning this person/govt money? The UK may find later this year that very few will loan him the money he needs (and he has zero savings to fall back on) and if they do loan it will be on their terms and interest rates. The UK is entering a very dark and impoverished period....
- Kr, Florence ITALY, 24/11/2008 14:10
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What contribution does Mr. Blackhurst's picture offer to the text?
- Jacek Gabrielczyk, London, UK, 24/11/2008 13:31
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Pretty obvious that The Standard pays dear old Chris more than £150,000 and he does not want to put his hand in his pocket.
- Colin, barking essex, 24/11/2008 13:20
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"That's the point — this is cynical, gesture politics. And it's pathetic."
Perhaps it's meant as a test for Cameron? Will he go into the next election, saying that he would "reduce" (i.e. not increase) taxes on the highest paid?
- Richard Hancock, Bracknell, UK, 24/11/2008 13:02
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We now have a unelected Prime Minister being controlled by the unelected Mandelson to spin and obfuscate their way to the next election. They are controlling Darling and making him do their bidding whilst all the time trashing the economy. Great ! just what this country now needs a class war to scare everyone with ambition.
- Micheal, London, 24/11/2008 12:40
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Whenever the Tories take over (hopefully, next year), they may have to call in the IMF to help this state in the same way as Mrs Thatcher did after James Callaghan's disastrous years at the end of the 1970s. Unfortunately, the IMF is already highly stretched. Brown's 2.5% VAT reduction is ludicrous next to window displays of 30% off, and the 45% is going to make some of the bigger companies veer toward places like Ireland. Better if Brown had reduced NI contributions, giving both employers and employees more in their pockets -- and much simpler to implement than a VAT reduction. We are now seeing the mask coming off Labour, but as usual it's happening between elections and with lots of time for severe damage to be done before the steadier hands take over. Call your election in 2009, Gordon; things will be a lot worse for Labour come 2010.
- Phil Jones, London UK, 24/11/2008 12:37
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Well now we know which country those with ambitions to open new businesses and improve their lives will look to when the recession is over. And at 45% tax rate for high end earners, it won't be the UK.
Well done Gordon, and welcome back, people, to the 1970's politics of envy and class war.
- Stephen Rothbart, Prague, Czech Republic, 24/11/2008 12:05
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How many of those City high-earners have been making contributions to Labour all this time? And will that now stop?
- Freddy, London, 24/11/2008 11:12
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