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The Spending Review

So this week we had the ConDem coalition’s spending review, their plan for pulling the UK out of the economic crisis, delivered by Chancellor George Osborne. For a start, I should say that I am no economist, which I’m sure will become abundantly clear, so I won’t try and go into detail on everything that was proposed, lest it be pulled apart by people far more clued-up than I. Instead, I will focus on a few points as I see them, my main bugbears. By all means, please correct me on points I may be ignorant on, though I should say I will be more appreciative of an objective view rather than any left or right wing rhetoric.

My first (and main) gripe is the change to child benefit. It was previously announced that it would be scrapped for anyone earning over £40k. No depth was given to this proposal initially, so I expected some to be provided during the spending review. It didn’t come. Just the same line, that anyone earning over £40k would have their child benefit scrapped. Nothing about household income, no plan to review it, just a one-line policy. There is a perfect example of who this is going to hit and how in my brother’s situation. Now, my brother is doing well for himself and he deserves to enjoy the fruits of his labour. He is ambitious and has the skills to meet those ambitions, however he has a toddler and another baby on the way and he works bloody hard to provide for his family. As it stands, with this change to benefits, he will have to sacrifice his aspirations in order to provide the best care he can. Why should he try and earn more when, if he does, he will be worse off without the benefits and, if he continued, the higher tax band? We are encouraging people to strive for mediocrity in order to survive, because of a policy which was written on the back of a fag packet. Honestly, it’s the kind of thing you would hear in a pub when the regulars put the world to rights, “‘Ere, Frank! ‘Ow would you sort the crisis out?” “Well I’d get rid of benefits for those earning over £40k!” “How would that work then?” “Uh… dunno” “Leave it to the politicians Frank, eh?”. Except this is what the politicians are coming up with!

My second gripe is the banks. They are the reason we are all in this mess and yet they are getting away scot-free. The world knows they are to blame (people may say there were other contributing factors but let’s be honest, these do not come close to those caused by the banks’ ineptitude), they make no real argument against it themselves but it won’t be them who cleans up the mess. Osborne stated during the review that they would come down hard on them but, as his disclaimer of not wanting them to up sticks and move from the UK suggests, it will be a token gesture if anything at all. As I said at the beginning, I’m probably being ignorant, but we should tax them and tax them hard. Tax all banks that were bailed out by the general public 50% of all recorded profits, after forensic accountants have been in to make sure what they are recording is correct. This, of course, will never happen. The government doesn’t want to scare them off. Forgive me for sounding naive, but surely we have international relations? Could other countries, who can also see that the banks are trying to get away with murder, refuse to accept them and force their hand? Of course, said countries would want the jobs it would create, but it would need those jobs because of the mess caused by the BANKS! Perhaps I’m hoping for some morals which have no place in a capitalist world. Instead, the government decides to slash public spending, sacrificing nearly half a million jobs and hoping the private sector picks up the pieces. So, in a nutshell, the banks cause the economic crisis and the government slashes public spending because it doesn’t want to drive away jobs in the banks which are needed to employ those coming from the public sector who find themselves in that position because we won’t punish the banks. Lunacy!

This leads on to my third and final gripe, a more specific one. The Vodafone tax bill. Now, as I understand it, Osbourne has written off a £6billion tax bill owed by Vodafone. One can only assume that this is because the government is scared of driving away jobs again. Either way, I fail to understand it. SIX BILLION! The country is on its knees and yet we can afford to write that off? It’s hardly pocket change. If you or I decided that we weren’t going to pay income tax for a few months, you think we’d get away with that? Not bloody likely. It’s punishing those trying to get us out of this mess, which wasn’t their fault to begin with, and rewarding those who are to blame.

This isn’t some kind of rant against the right wing by the way. Labour (although you could say they were right wing anyway, so maybe it is) played their part in this and they didn’t even offer anything constructive during the review. We had Alan Johnson, a man who has no clue how to be a Shadow Chancellor, skirting from one criticism to another, trying to pull apart the proposals without anything to give in return. I imagine Ed Miliband thought fresh eyes were needed, but now is not the time for it. When a country is in crisis it needs a plan, not someone learning the ropes. That being said, and as much as the Conservatives (let’s not continue with the idea that the Lib Dems have any kind of influence in affairs) bleat on about what they “inherited” from the previous government, punishing the people for their failures is not the way to go.

Once again, the public are going to shoulder the burden of responsibility for something not of their making. We’re going to pay, and we’re going to pay dearly.

  1. October 22, 2010 at 8:35 am

    I agree, though your use of the term ‘the banks’ I suppose is the reason they’re not being punished hard enough. There’s been no accountability for individuals or teams of people within specific banks… ‘the banks’ have become the scapegoat term for an attitude of greed and gambling. The fact very few individuals have admitted guilt is endemic of the blame culture of this country – they’ll blame the US mortgage market for starters.

    I also say ‘the banks’ is too generic because, for example Barclays didn’t receive a penny of tax payer’s money and have turned a decent profit throughout the recession. If I were them, I’d be more inclined to leave the UK if there’s an industry wide levy being introduced, hitting them hard for doing nothing wrong. So I’m interested when they flesh out the details of the levy as to whether it only applies to those who’ve received our money.

    As you say, why not force them to stay by some means or other – it can’t happen in a free market economy – other countries as you rightly say will welcome them with open arms – plus the fact the banks have an enormous sway in the value of UK held assets through their speculative trading – let alone the value of the pound itself – if you piss them off enough, they could quite easily bugger off and participate in killing our economy for good. Seems shit to pussy foot around them, but that’s the world we live in.

    As for Vodafone – this gives some good detail – http://www.thisismoney.co.uk/news/article.html?in_article_id=514832&in_page_id=2 – they did come to an arrangement, but to the paltry tune of £3m. Fairly unbelievable, but it’s yet another case of playing the system to avoid tax – look at Philip Green paying his Monaco based wife £1bn to avoid paying UK tax on it. When you’ve got that much money, it seems somewhat disingenuous at the least to not ‘thank’ the country that enabled you to generate that wealth. But there you go, it appears that those that can, mostly do. My accountant for example owns 50 or so properties and plans to live in Monaco for 5 years when it comes to selling them, in order to pocket all of the estimated £4m equity he’s sat on, rather than giving at least 20% of it away in tax. When you know someone who’s doing it, you can’t help but think “Why not, fuck ’em!”… but clearly that’s the problem!

    Sorry about the ramble – maybe I should have blogged too… but I felt, perhaps like you, it has got me otherwise interested in something I haven’t paid much attention to in the past.

    All in all, the country needs to encourage wealth creation. The private sector is now expected to make up the shortfall in jobs and contributions to the economy over and above the public cuts in the next 4/5 years. The government have announced a small amount of incentives for this to happen – sightly lower corporation tax rates and some relief for National Insurance for new businesses and whatnot – but as soon as the wealthy get there, they look for the best way to reduce their tax burden. Take your accounts to any accountant and they will try their best to do this (legally, and without going to extremes like offshore!) – it’s what they do. Maybe that industry needs reforming in itself.

  2. October 22, 2010 at 4:44 pm

    Not agreeing on the child benefit thing. A whopping £20.30 a week… Hardly need to work yourself to the bone to try and earn that amount back, do you?! Especially when you’re already earning over £769 a week (£40k / 52). That’s a rather low 2.6% drop in income. Not the end of he world.

    • October 22, 2010 at 4:53 pm

      £769pw before tax and NI. Knock that off and it’s significantly less, especially if you’re in the higher earning tax bracket.

  3. October 22, 2010 at 4:45 pm

    To clarify: when I say “you’re earning over £769” I don’t mean you, personally. When a person is earning over £769 🙂

  4. Lizzie barnett
    October 22, 2010 at 5:05 pm

    In my opinion you are partially right. The reason the banks and large companies are getting away with these thefts is because of ideology. This government in particular are in paradise with the opportunity to paralyse the poorer in society to pay for the rich. What is more, they have the advantage of being able to use ‘Labour mess they were left with’ to blame everything upon, and tragically the public are buying it like drugged up zombies. This country had actually made huge social leaps since the Thatcher years, and although far from perfect , it was better. Now the fruit of Thatchers loins have matured and her ideology is being put into practice beyond her wildest dreams. I fear for ordinary people and their families, and what the future holds. Apologies for disjointed nature of comments, tapping on iPod with constant interuptions. Good blog though, people are at least starting to question which may be a start….

  5. Ronnie
    October 22, 2010 at 5:46 pm

    I agree with the child benefit scrappage for higher rate taxpayers. I don’t understand why the Govt should support what is a lifestyle choice? I fully endorse benefits for those with children who have hit hard times financially but subsidising the rich?

    If ‘you’ have made a choice to bring children into the world, ‘you’, and not us, should support them. If on those salaries you can’t afford to make up that shortfall, give something up, economise! If the loss of child benefit means you can’t feed your kids, get a 2nd job! Get rid of Sky, don’t go to the pub, stop smoking, don’t buy that morning coffee from Starbucks, sell the PS3. But don’t keep a tight hold of your lifestyle trappings and expect the rest of us to put food in your kids mouths! Save the money for those who can’t earn a good salary for whatever reason. They need it, ‘you’ don’t!

    • October 22, 2010 at 6:21 pm

      Personally, I think people should be helped as much as possible if they choose to have children. It’s a gruelling and expensive thing to do, while ensuring the future of our species, however selfish their reasons may be. And I say that as a childless man myself.

      I do think the benefit system needed to be looked at though considering the economic climate, however the way it has been proposed is ridiculous.

  6. Lizzie barnett
    October 22, 2010 at 6:40 pm

    Without children, there is no future workforce to look after childless individuals as they age. It is about being part of a society, we all need supporting at some point in life, either in a small way or large. No man is an island, or woman for that matter.

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