The Axeman Cometh

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Labour underestimated George Osborne. “Where’s George?’ went the cry, assuming that Osborne was somehow the dark and scary underbelly of the Conservative Party, the sight of which would repel swing voters. Far from being hidden away, however, George was planning the election. And ultimately, he delivered.

Back in 2007, when Gordon Brown was riding high in the polls, Osborne saw that the rise in house prices had made a new swathe of people worried about the impact of inheritance tax on the estate they hoped to hand down to their children. Though it became an easy spot for Labour to jab at, it was in fact such a clever ploy to offer to raise the threshold, that Brown demanded that Labour adopt it.

Then came last year’s ‘austerity’ speech – the ‘we’re all in it together’ number. Again, some voters will have rebelled at the notion of cuts and it allowed Labour to fight a spirited rearguard campaign, but the speech had a more important effect. Firstly, it divided the Labour Party and called their economic management into question (subtly changing the terms of debate from the black eye given to the Conservatives over the banking crisis). Secondly, it got the chattering classes and the media obsessed with the idea that Britain was going down the tube – good for column inches. Finally, it allowed the Conservatives to criticise Labour’s plans to raise more taxes and to portray themselves as the party of enterprise and growth.

So Osborne’s latest coup de theâtre is just that, a political rather than an economic ploy. He has played up to the capital markets, helped in his cause by the fervours of the Greek debt crisis, and focussed the political light on what he would like to characterise as wasteful, or reckless spending.

Of course there is waste in government, as in every walk of life. Yet the notion that you should suddenly cut back on all of the systems designed to improve efficiency – and that might as well include cab fares – is ludicrous. ID Cards will be scrapped, but the savings will be so minimal that they aren’t even mentioned in news bulletins.

Some of these cuts will make a difference, though. The decision to abolish Child Trust Funds makes a mockery of the ‘Great Ignored’ that Cameron claimed to be fighting this election for. Instead, the poorest will simply become the new ignored, just as they used to be the old ignored.

Many will call the decision to give capital grants of £500 (in two instalments) extravagant. Admittedly, there was a case for means-testing the trust fund to return it to its original purpose of fiscally educating and capitalising the most socially and economically disadvantaged. And that is why the cuts announced by Osborne really sting – it’s not so much the £6bn, which we were all expecting, but the decimal point. Those extra £200 millions would have made up nearly half the trust fund budget, but instead they were culled, without study, without consultation, and within two weeks of taking office.

David Laws justified the decision by saying that those currently enjoying the benefits (and none are yet old enough to actually access them) will be better served by not being loaded with debt. What excuse is that? What kind of Liberal doesn’t believe in ensuring a widely distributed stake in the future? A minor modification to the scheme – to transform it into a voucher for higher education, for example, could have had the same effect and excluded the Liberal-Conservative fear that these payments are not socially-useful. Their very nature was that their utility was for the individual to decide, and what could be more Liberal than that?

Pushed to the back pages – page 42 in Saturday’s Guardian and not even on the front page of the BBC News website – was an interesting story. Britain’s borrowing estimates have been revised down by more than Osborne has just announced in cuts; £6.4bn. Income, capital gains and Value Added taxes all brought in more than expected – people are still earning and spending, which is a more useful measure of confidence than this misplaced faith in speculators.

Even so, the die is cast; the decision to cut spending has been made. The manner in which it has been taken is wearying. Among the cuts were ten thousand pledged university places in the sciences and technological courses. Also unable the escape the axe was the strategic investment fund, which directs investment to businesses that will drive future growth.

This government has a mistaken faith in the market to provide economic growth in Britain. In fact, laissez faire will not do, just as planning did not in the Post-War years. Osborne’s economic premise is that tax cuts are economically more efficient than spending. In this he is joined by his Liberal colleagues, who in 2005 were considering proposing a flat tax for the UK.

Flat taxes have been successful in Eastern Europe, where wages tend to be lower than neighbours (unlike the UK, and particularly if immigration is restricted). Ireland, which was lauded a few years ago for its low taxes and booming economy, is now one of the countries teetering on the brink of the Eurozone debt crisis. Lower taxes in themselves will not save the British economy. Instead, we will rely as always on our infrastructure and ingenuity. The Boy George has certainly learnt to colour in between the lines, but he hasn’t yet attempted to join the dots.

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One comment

  1. Osborne’s cuts on the trust fund are horrific. I think of younger siblings that will see their older siblings get a cash payout that they are not entitled to, and I feel sorry for the parents who will have to fork out the same money for their other children if they wish to make it fair. Its a cowardly cut as when the first people begin to notice that its gone, Osbourne will no longer be in the firing line.

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