Misanthrope Girl

So, George Osborne has delivered this year’s budget – or, more accurately, confirmed the press leaks of the last few days. Quite frankly one wonders why he bothered standing up.

I think it is safe to skip rapidly over the growth forecasts provided by the OBR as the record of their gypsy fortune-tellers predictions is poor to say the least.

Equally, the less said about his wish for a balanced economy the better. Wishing for it is fine but I’d be happy if the government kept its paws out of the matter* as much as possible and left it up to the free market to sort out.

Borrowing

As he stated back in the Autumn, the government will continue to live beyond what it steals from the taxpayer past the end of this parliament (assuming it goes the distance). Indeed it doesn’t forecast a ‘balanced’ budget before 2017/18. In the mean time the National Debt is forecast to increase by £126bn (2012/13), £120bn, £98bn, £75bn, £52bn and £21bn (2016/17). That is a whopping £492bn – and all of which may, one day, have to be paid back.

I say one day because as we know the traditional way for government to deal with debt is to inflate it away and in 100 years time it is more than likely that that £492bn will be a lot closer to chump change than it is now. Gideon’s wheeze for delaying the inevitable for as long as possible is 100-year or perhaps even perpetual (i.e. non-repayable) gilts.**

Public Sector

Sadly there was no announcement of an immediate end of national pay bargaining. The Chancellor did though appear to thank the opposition for suggesting the end of national benefit rates – perhaps the only useful idea to emerge from Labour in a while. It would also make sense to make the NMW regionalised (assuming it is politically impossible at present to scrap it entirely).

Taxes

Let’s face it, the only thing anyone really cares about is how much the government is planning on stealing from them in direct taxation each year. The stupidity of it is how pathetically grateful we all get when we learn that it might not be as much as last year… without realising that they generally claw it back through indirect taxation instead.

The apparent good news for anyone earning less than £100k is that the government has decided it won’t start its thieving in the forthcoming tax year until you’ve earnt £8,105 – and next year is pushing that level up £9,205.

Obviously this is a good thing for anyone earning minimum wage sort of levels. Personally I think it would be better if no-one doing a 40hr week at NMW (which currently works out to £12,646.40) paid any tax but things seem to be moving in the right direction. The test will be what happens once the £10k level, as agreed at the start of the collation, is reached.

The likely option is that government of the day will starting treating it just like they do the the other tax thresholds and allow it to increase slower than wages, thus once again catching more people in the net.

What the Chancellor didn’t mention whilst he was crowing about the changes to the 0% band was that the £630 increase there is mirrored by pulling the 40% threshold down by £630, shrinking the 20% band by £1,260. This ensures that – for those under 65 – that the the 40% band still starts at anything over £42,475. This is the same tactic that the one-eyed Scottish idiot employed on a few occasions.

Together with the lack of change of the levels at which the tax free allowance is withdrawn and the highest rate of Income Tax is levied, the government is once again ensuring that, as wages rise, more people are dragged into the higher tax brackets.

Unlikely those of us who are earning to try to keep ourselves in drinking money, those who have reached pensionable age will find their 0% band frozen from 2013. If I am to guess, this is in order to equalise them with the rates for the under 65s in preparation for the merger of Income Tax and National Insurance – something which will also hit pensioners as they do not currently pay NI.

The positive sides of merging IT and NI should be
a) simplification of the tax code, and
b) give the population a better idea of what the basic rate of tax (excluding Employer’s NI) is.

With any luck, being told that the basic rate is actually over 30% (rather than the 20% they believe) may result in the sheeple demanding that it comes down…

For those on very high incomes, the semi-good news is that the highest rate of income tax is coming down. Not yet scrapped altogether (hopefully in a future budget) but being halved. Given the flagrant avoidance that took place before the 50% rate come into effect – and which will be duplicated now as people who can hold off until 2013 – this can only be a good thing. Will 45p in the pound (and the potential direction of travel) tempt those who haven’t yet upped sticks to stay though?

Excellent news for companies employees, shareholders and customers is that corporate tax is coming down even further with the aim of getting it to 22% from 2014. Not quite Ireland but better than France and Germany which may encourage those financial institutions who were thinking of leaving before a Tobin tax in introduced in those places. The increase in the bank levy may however put them off.

The so-called sin taxes generally slipped by without change to already announced increases except for the price a tobacco***. I imagine that the only people who were cheering this rise of inflation plus 5% (plus consultation on making tobacco-free cigarettes liable to excise duty) were the smugglers. As a non-smoker I would be open to the idea of bringing back duty-free smokes for people when re-entering the country…

Regulation

As trailed, Sunday trading laws are to be relaxed during the Olympics. Hopefully they will then be scrapped altogether as an anachronism.

Planning – perhaps the major reason for the cost of housing being so high – is being simplified. Supposedly the guidance is being cut to just 5% of its previous size although there is no word of whether part of this has been achieved by the use of single instead of double line spacing and a reduced font size.

We are also getting more ‘enterprise zones’. Why not just make the entire country one?

And Michael ‘Tarzan’ Heseltine is back. Has anyone checked him for knives?

Infrastructure

It would seem that the Government has finally realised that we do need more (or bigger) airports. Will Heathrow be getting that third runway after all? We might find out come the summer.

Annoyingly (but not surprisingly) the Government will continue to waste money on ‘green’ energy but in better news looks to be reversing the hit it gave the North Sea oil and gas industry last year.

Conclusion

One thing that this is not is a Libertarian budget. Government spending is still going up and Peter, let alone Paul, is being robbed to pay Peter.

To the laywoman (i.e. me) it appears to be yet another budget that just tinkers with things whilst fleecing the public for more money – a speciality which Gordon Brown perfected. There is however some future potential in it if some things (the IT and NI merger, national pay bargaining) do happen. To mis-quote that school report line no-one ever wanted to see: “could do a damn sight better”.

Given that an orgy of stupidity has been in progress in and around St. Paul’s Cathedral for just over two weeks now it is somewhat surprising that it has taken the Church of England’s CEO, a man given to saying foolish things, this long to open his mouth and insert his foot.

However presented once more with the pulpit of the MSM (in this case in the shape of the Financial Times) from which to preach, the Archbishop of Canterbury has gratefully seized the opportunity to do just that and did, yesterday morn, issue a sermon.

If his article was full of waffle about what has been going on at the Cathedral then we could – and would – quite happily have ignored him. However as he couldn’t help but slip in his opinions on matters temporal, viz banking and economics, he once again needs to be taken to task.

There is help to be had from a bold statement on our financial situation emerging last week from the Vatican. This document, from the Pontifical Council for Justice and Peace, is entitled ‘Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority‘. It contains, along with some sharp critical analysis a rather utopian vision of global governance and regulation. But, more importantly, it offers three quite specific recommendations that seek not to change everything at once but simply to minimize the damage of certain current practices and assumptions in the immediate future.

Ah, so it turns out that Williams hasn’t had an original idea (perish the thought) and is instead taking his lead from the Vatican. That is, surely, more then enough reason to have Brenda, as Chairman of the Board, send him to the Tower so that he might consider the error of his ways…

His future, or lack there of, aside what are the papist ideas which he wishes us to consider?

One is something we have now heard clearly from many sources – a plea now endorsed by the Vickers Commission that routine banking business should be clearly separated operationally from speculative transactions. The rolling-up of individual and small-scale savings into high-risk and high-return adventures in the virtual economy is one of the more obvious danger areas in the light of recent years. Early Government action in this area is needed.

Remind me, how much did the ‘casino’ arm of Northern Rock lose? How much did the retail arm of Lehman Brothers lose?

A second plea is for the recapitalization of banks with public money to be accompanied by obligations on the banks to help re-invigorate the real economy.

No and no. No bank should have been propped up by the poor bloody tax payer, being instead allowed to fail. Savers would have been fine up to the tune of £35,000 and investors, as is the case with any failed business, would have lost out. However what’s done is done there (sadly) but why should these newly acquired state assets be forced to lend money? You can’t re-capitalise them, thus allowing them to rebuild their balance sheets, yet expect them to lend money to all and sundry once again.

But the third suggestion is probably the most far-reaching. The Vatican statement strongly backs the proposal of a Financial Transaction Tax – a ‘Tobin Tax’ or, popularly, a ‘Robin Hood Tax’ in the form in which it has been talked about most recently. This means a comparatively small rate of tax (0.05%) being levied on share, bond, and currency transactions and their derivatives, with the resulting funds being designated for investment and development in the ‘real’ economy, domestically and internationally. The modest rate of taxation conceals the high levels of return that could be expected (some $410bn globally on one estimate).

I don’t know where the Archbishop is getting those figures from but even if we give him the benefit of the doubt and say that it isn’t a retired tax accountant from Wandsworth, that $410 billion is a rather high number. Using the 2010 GDP figures we can see calculate that the $410bn figure is 0.65% of the total, which is somewhat above the theoretical 0.05% tax rate given.

Thankfully, via Clifford Chance, who have looked at the EU’s own analysis, we have some more realistic figures available to us:

The Commission paper estimates the tax itself would raise €16bn to €43bn, but the figure is very dependent upon the degree of dislocation, and previous reports suggest the Commission’s original estimate was €10bn. Revenues would be shared between Member States and the EU (partly reducing national contributions).

The Commission does not however estimate the reductions in receipts from other taxes. Stamp duty revenues are currently quite significant – £4bn in the UK alone. Add to this reduced corporation and personal tax receipts – the Commission’s impact assessment anticipates a reduction in economic output of almost 1.8% – and it seems likely the revenue effect of the FTT will be negative.

The FTT is therefore perhaps the first tax in history which is being proposed in the knowledge it will reduce tax revenues.

A tax that loses use money? That’ll scupper any chance of more money for government ‘investment’ then, won’t it?

Other commentators such as Charles Orton-Jones and Tim Worstall also agree, pointing out the cost of this will be passed on to you and I as customers, employees and shareholders as well as the potential loss of jobs (and thus tax revenues) if banks, hedge funds and other such financial companies decide to relocate to less hostile climates.

In conclusion I therefore repeat to the silly old fool the advice I gave him back in April

May I kindly suggest to the Archbishop that he sticks to his job and doesn’t stick his head above the parapet again unless he has actually thought about what it is that he is saying?

in the hope that this time he will take it? However as I doubt he will I look forward to filleting his twaddle the next time he decides to place his foot in his mouth.