Wednesday, June 23, 2010

Osborne’s emergency budget accepts Labour’s larger state

The Conservative-Lib Dem emergency budget, presented yesterday by Chancellor of the Exchequer George Osborne, was meant to fix the fiscal nightmare created by Gordon Brown’s decade or so of profligacy. The man who borrowed and spent up large in the boom years, increasing public debt year on year, and then suddenly switched to a half-baked version of Keynesianism (whereby he does the same in the bad years, ignoring that Keynes did say that in boom years such debts should be paid down).

The fiscal position Britain is in is stark. It is NOT because of the government bailing out banks. By 2016 the UK public debt will be £1.3 trillion, that is even WITH the cuts in spending and increases in taxes from the emergency budget, being over 70% of GDP (and that does not include PFI and pension obligations which are not counted as debt). What Osborne has done is effectively halve the deficit – deficit being overspending – by 2015. He is making the problem grow at half the speed of Gordon Brown before the UK reaches a theoretical balanced budget by 2016.

How is he doing it? Well if you listen to some it sounds like he’s been tough on spending. He hasn’t. 23% of the reduction is by pilfering even more from British taxpayers than before. In other words, the Con-Dem administration is ACCEPTING that Gordon Brown was right to spend more. The argument is a matter of degree. As much as George Osborne is cutting spending, he isn’t cutting it back to remain within the relatively high tax envelope Britain has, he is raising taxes as well.

Most stark is that VAT is being increased from 17.5% to 20%. A significant hike which will choke off retail spending and hurt almost everyone. Perhaps it is the price for the inane British worship of the NHS, but it isn’t presented as that. A Bank Levy is being introduced, punishing all banks for the foolishness of some. Capital Gains Tax is increased as well. He is even investigating a “Financial Activities Tax” (or a tax to chase finance out of the UK to Switzerland). Hopefully that will go nowhere.

There is some modest good news on tax.

Some tax thresholds change, which lowers taxes on some smaller businesses and those on the lowest incomes. Company tax is being dropped by 1% a year every year for four years to reduce it to 24%. That in itself will be positive for business growth in the UK. Small companies will only pay 20%. A stark contrast to some! A proposed tax on phone lines is to go. Fuel, tobacco and alcohol taxes have not been increased. The minimum income threshold for income tax is being increased slightly. However, of course none of this offsets the hit on VAT.

On spending the picture is very mixed as well.

He announced an average of 20% spending cuts across departments (excluding health and overseas aid), which will be detailed later in the year. How that might affect core spending such as defence, justice and police will be curious, but the devil will be in the detail. Sadly he hasn’t simply decided to abolish departments to make that easier.

Public sector pay is frozen for two years, when it should be frozen until there is a surplus. Quite what business would increase pay when it is bleeding red ink (especially for people often unemployable elsewhere) is beyond me. Those earning less than £18,000 wont be subject to the pay freeze, but are all getting flat pay increases – regardless of performance (and Labour say the Tories hate the poor?).

The retirement age is to be raised to 66, but pensions have become another huge bribe. Future state pension increases will be linked to earnings, not inflation, producing a huge demographic based fiscal nightmare for the medium term. Nobody is telling pensioners they don’t get back what they put in, but what their children and grandchildren will be paying in taxes.

As welfare spending increased 45% in ten years, that had to be tackled too. Benefits are only to be increased according to consumer prices, not retail prices (a lower level). A host of tax credits will be wound back. The ridiculous £190 grant to pregnant women (which the last government said was to encourage them to eat healthy, when it typically was used to buy a TV, clothes or any other luxury item) is being abolished. Child benefit is frozen for three years, but absurdly is NOT being taken away from those on middle to higher incomes.

Housing benefit, which costs more than the police and tertiary education combined, is being scaled back by capping the total amount paid. Apparently some families with earnings of over £100,000 have been getting housing benefit legitimately!!

Privatisation is part of the picture too. The sale of the high speed rail line to the Channel Tunnel, the NATS (air traffic control system), the student loan debts and the Tote were announced. None of this is controversial.

Yet so much more could have been done to avoid any tax increases. Simply ensuring all benefits/tax credits were only available to those in the bottom quartile of earnings could have saved billions. There could have been a clear and decisive end to corporate welfare of all kinds. Finally, whilst it would have been politically unpalatable, the greatest gains could have come from raising student fees and charging for basic NHS services (say half the cost of doctor visits).

Yes, the Con-Dem government has avoided the UK facing the kind of run on its currency and public debt that the socialist countries of the Mediterranean are now facing. However, it has retained the dependency mentality of entitlement to benefits because you breed, health care on demand rationed by queuing and enormous bureaucracy and government always “being there” to help individuals, businesses and the like.

Gordon Brown’s big state is still there, most of the cuts are not cuts, but just stalling of the growth of the state. The fact that 23% of the deficit reduction plan comes from increasing taxes should tell you that this is a conservative government with a small “c”, it is not a government of smaller government and free markets.

Monday, June 21, 2010

Cuts are not painful

Britain's Chancellor of the Exchequer, George Osborne, is preparing the country for austerity, mk III.

Mk 1 was the easy part, the 1% trimming of public spending to save £6.2 billion in the current year, essentially the spending the Conservatives had promised to cut. Was not much, but a taste of what was to come.

Mk 2 was last week. £2 billion worth of projects were cancelled, and another £8.5 billion deferred. Almost all of it spending approved in the dying years of the Brown regime. This included the absurd "investment" of £80 million that the government didn't have to "create" 200 jobs, although I doubt the average wage was close to £400,000 each!!

Mk 3 promises to be much much "worse" say the papers. Actually, it mostly wont be painful, if it weren't that 20% of the austerity will comprise of tax INCREASES in one form or another. Capital Gains Tax and VAT are likely targets, and it is they that will threaten the recovery, not the spending cuts.

There will be major cuts hopefully. Public sector pay is expected to at least be frozen if not cut, and public sector pensions are expected to face severe cuts because they are becoming unaffordable. Welfare benefits are likely to be frozen as well, with a scythe taken to the "middle class welfare" Labour built up to buy votes. One of the absurdities of the UK welfare state is how many recipients are on above average incomes. Hopefully it will be the end to that and more.

You see the Tories have stupidly ringfenced health and overseas aid spending for no cuts, which means it will be welfare and public sector pay that get hammered. Painful?

No. It isn't painful unless you think living within your means so you are lumbered with debt (or your children aren't) is painful. It is called being prudent. It isn't painful to stop stealing money from future generations. The UK public sector is already better paid that the private sector - yes you read right, the average income in the public sector is 2% higher than the private sector for similar jobs.

It isn't painful to wean people who are on average and above incomes from the state tit, so they actually bear the cost of raising their own children. It isn't painful for the private sector to no longer be shouldering the burden of competing against a bloated public sector staff.

Already the government is announcing new privatisations, the latest being the high speed railway between London and the Channel Tunnel.

It would be too much to hope for no tax cuts, or for the NHS to start charging for GP visits and face its own cuts, or for student fees to be at least 50% cost recovery, or for welfare to be time restricted (and only restricted to UK citizens!). However, it will be the start of rolling back the creeping (and bankrupting) state of New Labour.

Labour's lies about it are too easy to refute. It "threatens the recovery" if the state doesn't keep borrowing at record levels. Furthermore is the deceit that the deficit is about bailing out banks, when the truth is that the proportion of spending related to the banks is close to 2%. Labour is claiming it is ideologically led, as if overspending and growing the state by Labour wasn't.

The deficit is a legacy of Labour bribing voters with their kids' stolen future earnings, it was immoral then and is now. It is only moral for this government to end this as swiftly as it can, and start to confront the debt.

Note the difference with a certain government on the opposite side of the world.

Tuesday, June 15, 2010

Bloody Sunday reprise

30 January 1972 in (London)derry is a day that sadly will always be in infamy. A day that Catholics in Ulster will see, with much justification, as the day the British Army turned on those it was meant to protect, but also a day that many Protestants will see as a provocation by terrorists.

The report of the Saville Inquiry will be released today, and so i wont predict what it will say. However, I do have three points to make in advance.

1. For those who seek justice, seek convictions and imprisonment of British army officers who killed, it is worth bearing in mind how many IRA terrorists who also have killed before and since that day, who have been pardoned and released. Was that right? No. Does it mean the British soldiers who gunned down civilians deserve to not face justice? No. However what should happen?

2. Reflect on how utterly disgusting and repulsive it is that the Blair Administration seems to have given a blank cheque on time and money for this Inquiry. £191 million is so far beyond what even compensation for the victims and their families would be, that it shows once more what happens when governments treat those they are meant to serve with contempt. It should not take twelve years and £15 million a year to gather evidence, and come to conclusions. I don’t expect much self reflection from those who have profited indirectly from Bloody Sunday.

3. More important than all of this, consider how tribalism, this time flavoured with religious sectarianism, can completely disregard the rights of the individual. How mind numbingly stupid it is to label anyone Catholic or Protestant, when it is simply about "us and them", with the same mentality that has seen the blood of millions spilt. The same mentality as in Rwanda, Chechnya, Sri Lanka, Kashmir, Nazi Germany, former Yugoslavia and the list goes on, and on. The surrender of the individual to the group, the demonising of the "other" (outsiders), and glorification of the "group". It is only tragically funny when you consider how unlikely in most cases to find such people in Northern Ireland capable of holding cogent arguments about theology. The Northern Ireland peace process has NOT been about rigorously pushing individual rights,and reason to reject the knuckle-dragging mentality of religious sectarianism. Instead it has been about ending the fighting, keeping quiet and moving on, whilst British taxpayers have poured a fortune to prop up an economy on life support.

The malignant, evil philosophy that blends religious hatred (fired up by churches on both sides, seen most recently in the insane rants by Reverend Ian Paisley shouting "antichrist" at the previous Pope), tribalism and scape-goating has left Northern Ireland still full of many who think the poverty, desolation and decay of the region is due to what the "other side" did. Meanwhile, with a British government facing fiscal ruin, perhaps the chance exists for the 70% of the Northern Ireland economy "produced" from the state sector, to be paired back, and for the people of Ulster to start focusing on themselves, generating wealth and prosperity and treating each other as individuals, rather than members of communities that exist in their heads.

Thursday, June 10, 2010

Dutch elections, victory for freedom

The elections in the Netherlands have produced two substantial winners and two losers. However, I will let you count the number of times in the media YOU see how one of the winners is portrayed.

The first winner is the new leading party, the VVD (People's Party for Freedom and Democracy) which is a party of economic and social liberalism. It is similar in mould to how ACT (NZ) presents itself. It believes in free markets, welfare only for Dutch citizens, and reductions in taxes. It appears to have gained nine seats, increasing vote from 14.7% to 20.4%.

The second winner, is the new third party, the one that will get the most publicity, the PVV (Party for Freedom). It is led by Geert Wilders, a man who the British government sought to ban because he opposes Islam. The PVV believes in substantial tax cuts and reductions in the welfare state, the abolition of the minimum wage, is sceptical about the European Union, and believes only immigrants who embrace Dutch humanist and Judeo-Christian values should be admitted. Wilders is radically opposed to Islam, which means he is portrayed in much media as being "far right nationalist". However, like the late Pim Fortuyn, Wilders is no fascist. He simply vehemently defends the social liberalism and tolerance for individual diversity that the Netherlands hold dear AGAINST those who wish to destroy it. On top of that, he would implement a radical programme to cut the role of the state. It has gained 15 seats, rising from 5.9% to 15.5% of the vote.

So between those two, 36% of Dutch voters supported scaling back the size of government.

The losers were:

The CDA (Christian Democrat Appeal), a centrist conservative party. It believes in reducing state spending, but also tougher controls on drugs, prostitution, abortion and euthanasia. It supports decentralised control of schools and hospitals, and wider European integration. It is the party of the outgoing Prime Minister, Jan Balkenende. It lost 20 seats, to drop from 26.5% to 13.7% of the vote.

The SP (Socialist Party), which believes in the welfare state, state health and education, and opposes privatisation and globalisation. It was originally a Maoist Party during the height of the Cultural Revolution. It lost 10 seats, dropping from 16.6% to 9.9% of the vote.

It would seem Dutch voters rejected conservatism in favour of small government, and the financial crisis has also seen them turning from Marxism.

Other results were modest losses for the centre-left Labour Party (from 21.2% to 19.6% of the vote), and the centrist (conservative socially, economically leftwing) Christian Union (from 4% to 3.3%).

There were also gains for the Democratic 66 Party (an unusual blend of liberalising labour markets, supporting tax cuts and market reforms to healthcare and education, combined with environmentalism, radical social liberalism and a federal Europe) which soared from 2% to 6.9% (arguably another party that believes in less government) and the Greenleft party (which is an unsurprising mix of environmentalism, former communists and believers in big government socialism) which went from 4.6% to 6.6%.

So capitalism is hardly under attack in the Netherlands when the main parties that gained support believe in more free market policies, with the only leftwing party making any gains hardly making up for the losses from other leftwing parties.

Blogging disrupted

Just to note my blogging regularity has been disrupted because of:

1. Being overseas twice in the last few weeks (with glacial speeds available);
2. Moving home;
3. Two and a half weeks to get a phone line installed to carry broadband (and no, there is no cable TV option, as Virgin Media hasn't cabled my street).

So whilst I wait another 7 working days to get POTS (Plain Old Telephone Service), after which I can get broadband, service is not going to be regular. No, I'm not getting it from BT, not only because it is an expensive and poor quality deal, but also because since BT has lobbied hard to destroy BSkyB's property rights in programming (which were built up commercially against two government owned competitors, and three government licensed ones) I figured I no longer needed to give a damn about BT's property rights on local phone lines.

Meanwhile, the British media has been focused on:
- Gunman who went on a shooting spree (but few have asked whether others having guns might have stopped him earlier);

- The Gulf of Mexico oil leak, Obama's xenophobic attack on BP to make up for his own impotence on the issue, and BP's own incompetence;

- The World Cup (which sadly is unlikely to see a New Zealand-North Korea final, as much as it would upset millions) is hyping up England and South Africa;

- The next stage of austerity, as the Con-Dem government "warms" up the British public for spending cuts perhaps ten times that already agreed (whilst the public continues to remain ignorant about what cuts actually MUST mean, such as cutting the welfare state and increasing university fees). Much good is being said about focusing on the role of the state. Few yet understand how drastic and urgent the cuts have to be, and sadly it will also include tax rises;

- The ultra-tedious contest for leadership of the British Envy, Spendthrift and Spin Labour Party, now no longer including a relative unknown who said Margaret Thatcher should have been assassinated in the 1980s. Most recently it now include Diane Abbott, who is notable for being a black woman. One of the contenders, Ed Miliband, said it showed the diversity of the Labour Party. It was pointed out to him that two of the contenders share the same mother (his brother David Miliband is also standing), and of course another man called Ed is standing as well.