The Con-Dem government Budget comes in the midst of sluggish growth, growing inflation, rising unemployment and increasing household debt. The government’s own Office of Budget Responsibility, which initially forecast a decline in household debt now believes that household debt will increase over the next five years by 14% - an additional £500 billion – and the inevitable rise in the interest rate will only add further to the misery. Keynesian economist Robert Skidelsky writes that “the recovery has stalled even before [Osborne’s] cuts have started”. The Con-Dems will cut the debt by increasing taxes for the majority of us while simultaneously cutting social services. As tax expert Richard Murphy says, “the groundwork for the next crash is being laid out in the government’s own plans as borrowing becomes the only way people can feed and house themselves and their families. Irresponsible lending will follow, and we all know where that leads”. Mervyn King, former Governor of the Bank of England agrees: When asked whether there could be a repeat of the financial crisis, Mr King says: “Yes. The problem is still there. The search for yield goes on. Imbalances are beginning to grow again.”
So when David Cameron hails this Budget as “the most pro-growth for a generation” we have to ask growth for whom?
The Budget has abolished a whole raft of laws in relation to small business regulations at a cost of £350 million to the exchequer. It has also introduced other business-friendly measures. 21 new
Enterprise zones have been established which will have special incentives for business including zero rates and enhanced capital allowance. Evidence from the USA, where Enterprise Zones have been extensively developed, indicates that they fail to bring employment and prosperity to run-down areas. For example, Governor Jerry Brown of California wants to remove the enterprise zones in that state precisely because they have failed to deliver.
Corporation tax is to be reduced by 2% in April and then by 1% each year until the end of this parliament, when it will stand at 23%, 16% lower than the USA and the lowest in the G7. In reality, tax dodges mean that Corporations rarely pay the full rate and measures in the Budget allow corporations legally to shift large amounts of their profit offshore and pay just 5.75% tax on them.
Meanwhile, for the little people direct taxes such as National Insurance contributions will be linked to the Consumer Price Index rather than to the higher rate Retail Price Index. This follows the decision last June to link pensions and benefits to the CPI. This seemingly dry and technical measure will result in the government taking a massive £27.6 billion out of our pockets over the course of this Parliament. On top of this winter fuel allowance will be cut by £100 for people over 80 and by £50 for other pensioners.
What all this means is that the class war announced by Osborne and Co last year continues. All of this applies to Northern Ireland and on top of this the politicians of the Stormont Coalition in league with the Tories hope to turn NI into a tax haven. People voting in the forthcoming elections should think carefully before putting their preference, whether 1, 2 or 3, against a name.
Issued: 29th March 2011