Thursday, 19 March 2015

Budget fun

The most stomach churning part of yesterday's Budget speech was the Indian Bicycle Marketing at the beginning, suggesting that Labour was the party of high spending and deficits.

The official version reports it thusly:

We’ll also redeem the last remaining undated British Government bonds in circulation. We’ll have paid off the debts incurred in the South Sea Bubble, the First World War, the debt issued by Henry Pelham, George Goschen and William Gladstone.

Osborne actually added a reckless ad lib at this stage, from The Telegraph's live reporting:

"We will pay off debts occurred in the South Sea Bubble, the Second World War, those incurred by Pelham, Gladstone. Those raised by Gordon Brown will take a little longer to pay off."

Which, as Matthew Holehouse points out, is bold, given this government has racked up more [National Debt] than Gordon.

This paints Labour into a nice corner; they can't pillory the Tories for overspending because that's supposed to be their policy.

Those who have absolutely no policies on such lofty matters are free of the constraints of IBM and can get a bit closer to the truth:

"Ukip leader Nigel Farage branded Mr Osborne's statement the "long-grass economic plan", saying: "This Government has evidently failed in its promise to the British people to eradicate the deficit and whilst it took Labour 13 years to double the debt this Government has done it in five."

There are different ways of looking at this, handy charts and tables at Economics Help.
The only bit of good news in the Budget was that Osborne has cranked up the Bank Asset Tax a bit, even though he's doing it wrong:

“This is a three-fold increase in the bank levy in just four years and once again is anti-competitive for our own UK banks. It will hit UK headquartered banks hardest as it’s a tax on their entire global balance sheets, whereas foreign banks in the UK are only taxed on their UK liabilities,” said EY’s Anna Anthony.

“The constant tinkering with the tax regime for banks in the UK is unhelpful, and in the long-term unsustainable – the industry will definitely be looking for a commitment to a more certain tax environment in the future.”

The Bank Asset Tax is a splendid tax and does not make banks 'uncompetitive' as banks are the very essence of a cartel; but ideally it would only be applied to domestic bank assets or liabilities. Then every country can choose its own rate independently.


Lola said...

PPI. Hmm. THis is a gold mine for politicians, bureaucrats and the press. but, none of them will admit or acknowledge that the retail lending sector was in about 2002/3 told to sell PPI by....the FSA and Tony Blair.

Mark Wadsworth said...

L, I will take your word for it, but that is a side issue and not central to the concept of taxing 'rent' (via a bank asset tax) rather than 'earned income'.

And banks can 'earn' income and create wealth - by channelling proper savings into proper businesses, by running the payments system, cash machines etc - which ought to be lightly taxed.

DBC Reed said...

Banks don't channel savings into proper businesses. They create new money and channel it into real estate. That being the case: nationalise the lot. You would think they would lobby for a land value tax, to keep them honest but no chance.BTW Max Keiser has narrowed down his critique to concentrate on fiat money being created >then being used to inflate real estate values.He is stealing our act minus the key bits about the banks and the need for LVT to save the banks sorry rent-boy arses for capitalism.

Anonymous said...

Yes Lola nothing to do with PPI being extremely profitable, far more so than home or motor insurance... but in any case were they 'told' by the FSA and Blair to sell it regardless of it's appropriateness eg; to the self employed who could not claim or to people who already held insurance or to tell people their loam would be conditional on accepting PPI when it wasn't?

Bayard said...

"Banks don't channel savings into proper businesses."

Nor do they need to. If you want to grow your business, the last thing you need is a bloody bank. The idea that bank lending is essential for business is a pernicious myth, started and fostered by the banks themselves, I expect. It's very easy for a bank to suck all the profits out of a business in interest, something, I suppose, that the banks are hoping we will all forget ,now that interest rates are near zero. Loans on land is about the only thing that we do need banks for.

"nationalise the lot"

No, don't do that! If the banks are companies owned by the state, then all the money they make and then some will end up in the pockets of the senior management and the banks will make a loss. If you wish to bring the banks into state ownership, the answer is to make them an arm of the state, with all employees employed directly by the state and make banking a state monopoly.

Mark Wadsworth said...

B: "The idea that bank lending is essential for business is a pernicious myth"

Fair point. But if some people 'save' money, then that money has got to go somewhere, it can be lent to other people to spend or it can be lent to businesses.