We are told that on Friday there will be the budget-that-isn’t-a-budget – it’s a ‘fiscal event’. This is not mere semantics: by not officially using the word ‘budget’ the government is able to evade the scrutiny that their plans would otherwise receive from the Office of Budget Responsibility (OBR). This is undoubtedly a sneaky subterfuge and is causing quite a stink in parliament but to be honest it doesn’t worry me unduly as the OBR is such a useless, stupid and discredited organisation, whose reports are always wrong – and I do literally mean always – that it would be better to just shut them down permanently.
So let’s focus on what will be in this budget (I believe in calling a spade a spade) and more importantly what should be in it. We know that the new chancellor Kwarteng will deliver Truss’s two campaign promises: (i) he will reverse April’s increase in national insurance, reducing this from 13.25% back down to 12%; and (ii) he will announce that the increase in corporation tax planned for next year (from 19% to 25%) will not now take place after all. In order to make these changes he will also change the fiscal rules to allow the government to borrow more. These changes are fine – but much too limited and quite insufficient to either help people suffering from the cost of living crisis or to get businesses to grow and boost the economy.
The cut in national insurance is justified because increasing this was yet another of Boris’s broken promises, having pledged in the manifesto not to increase taxes. A manifesto is a party’s contract with the voters and it is morally right that this should be adhered to. Besides, cutting taxes is also a good thing in itself, as it increases peoples’ living standards. And retaining corporation tax at 19% will keep Britain fairly competitive for inward investment. The huge success Ireland has had in attracting companies (especially from the US) to move there by having a corporation tax rate of only 12.5% is proof that this policy works. But these two measures are simply not enough. The national insurance cut mainly benefits those on higher earnings, not those on low incomes who are suffering the most, and while low corporation tax rates may attract a few foreign companies to open new offices or factories here, they do not by themselves encourage new investment by existing companies (which is what we really need!).
So what more should Truss and Kwarteng do? Firstly, they need to increase the personal allowance – the amount you can earn before you start to pay income tax. Currently this is £12,570, but I would like to see it increased to at least £20,000. The proof that the current rate is too low is the fact that you start to pay tax as soon as you earn more than £6.05/hr (assuming you work the ‘standard’ 40 hours per week), which is far less than the minimum wage of £9.50/hr (for adults). To have to pay tax when you are earning less than the minimum considered necessary is clearly absurd!
Given that adults working full-time (40 hrs/wk) on the minimum wage of £9.50/hr earn £19,740 a year, my proposal to increase the personal allowance to at least £20,000 makes perfect sense (ideally the chancellor would increase this even more, but £20K is the minimum acceptable). Raising the personal allowance benefits all workers, but proportionately it benefits those on lower wages the most – the very ones that need the most help! That is why this is a much better option than simply cutting the basic rate of tax, which appears to be the only policy the brain-dead Tories seem to know.
What many people don’t realise is that except for the ultra-high earners, people in Britain are getting poorer than those in the rest of Europe. Back in 2005 the median disposable income in Britain (adjusted for purchasing power) was around €17,000 – higher than that of Germany’s €16,000. But by 2010 the median income here had fallen below that of Germany, France and other European countries including Ireland, the Netherlands and Belgium! By 2018, UK incomes were just 9% higher than they were in 2005, compared with 40% higher in Germany – and right now real wages (ie. after taking inflation into account) are actually falling! We desperately need an increase in personal allowances so that people can start to become better off.
Consider this: between 1961 and 2004 the incomes of working households grew by an average 2.3% a year. But between 2004 and 2019 that growth slowed to just 0.7% – and the average incomes of the poorest fifth of the population did not increase at all. So what on earth happened in 2004 to put a stop to our growing household wealth? The accession of eastern European countries into the EU and the decision by Labour to let them all come to Britain, that’s what. Between 2004 and 2020 Germany’s population increased by less than 1 million; in the same period ours increased by over 7 million – without counting the millions here illegally! In 2017 there was more Polish in the UK than Brits in the entire EU. Mass, low-skilled immigration makes us poorer, that is an undeniable fact.
The government likes to trumpet the claim that unemployment is the lowest it has been since 1974, but this is a statistical trick – and you know what they say about lies, damned lies and statistics! Our unemployment rate is low only because increasing numbers of people are dropping out of the labour market altogether. In other words, it’s not that more people are in a job, it’s that fewer people are seeking work: the rate of economic inactivity has hit a six-year high of 21.7%, with an ever-increasing number either taking early retirement or claiming long-term sickness benefits. Low pay and high taxes mean that people just don’t want to work.
What we need is a growing economy with an increasing number of well-paid jobs. The government understands the problem but not the solution. It’s pointless of Kwarteng to declare that he wants economic growth to increase to 2.5% (from the present rate of under 1.5%) – how’s he going to achieve this? Truss admits that the UK has had low growth because of low capital investment – how’s she going to fix this? We hear suggestions of silly gimmicks like new ‘investment zones’ which will achieve nothing. The other, even worse option, is that the government will choose the cynical trick of increasing GDP by simply increasing the population even more with low-skilled immigrants. Yes, a larger population normally results in a higher GDP, but not a higher GDP per capita! It is only GDP per capita that really matters and the fact that Kwarteng has been too stupid to specify this is cause for serious concern.
So what will Kwarteng announce on Friday? Most chancellors love to put forward a whole smorgasbord of new policies to show how imaginative and original they are, but in reality it just proves their stupidity. When it comes to economic initiatives, less is more. Chancellors need to concentrate their resources into just one or two initiatives, to maximise their effect. So what I want to see is just two measures: (i) a large increase in the personal allowance; and (ii) a super-deduction for businesses to encourage new investment. Of course I’ll be disappointed. Kwarteng is just a stupid Tory whose understanding of economics is no better than that of a slug. He wasn’t appointed on merit but simply because he’s a friend of Truss. Britain deserves better. Britain needs better. Britain needs a patriotic, nationalist government. Britain needs the British Democrats.
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