How appropriate that Alistair Darling delivered his disastrous budget just hours after we heard about the death of the 1970s union leader Jack Jones. Since 1997, Labour has brilliantly distanced itself from its record in government during that unhappy decade. Yesterday changed all that.
HM Treasury has a dreadful record at forecasting the future performance of the British economy. But it's rare for every commentator to dismiss a chancellor's forecasts before he's even sat down. By common consent, Darling's assertion that Britain will bounce back from recession by the end of the year is a fantasy forecast.
The new 50p top rate of tax got most of the headlines, but it's hard to see it as anything other than gesture politics. It may make Labour activists feel better, but it's unlikely to raise serious money. We learned long ago that the rich find punitive taxes easy to avoid - that's why they employ expensive accountants. But you don't have to wealthy or Conservative to feel uncomfortable about the state taking more than half someone's marginal income.
Both Labour and Tory governments have long been dishonest about tax. Almost 30 years ago, the new Thatcher government's first budget all but doubled VAT to fund lower income tax. This switch from direct to indirect taxation has continued to this day, helping Labour (until recently) claim not to have raised taxes. Yet indirect taxes are inherently unfair as they represent a greater proportional burden on the less well off. The other con is National Insurance. Labour has increased NI rates, which are just another tax on income. Far better to merge the two, and to switch more of the burden from indirect taxation.
Darling struggled horribly in his interview with Evan Davies on Radio 4's Today programme this morning. He simply could not answer the question whether public spending will be frozen in real terms over the coming year. Davies pressed him rather cleverly whether he'd criticise his successor as chancellor for increasing taxes to plug the huge hole in public finances. Darling floundered, repeating his key messages without coming close to answering the question. Tellingly, Today chose to follow the interview with a repeat of the famous 1937 broadcast of the Spithead naval review by the drunken Tommy Woodroffe 'for light relief'!
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