We're borrowers and we're very naughty

The Chancellor’s ‘unprecedented’ pre-budget speech today is all about building stronger foundations, making the economy fairer and cutting the public debt. Repeat after me, building stronger foundations, making . . . well, maybe I won’t repeat the mantra as Rachel Reeves did it for us several times. But what does it all mean? Almost certainly a crafty couple of dodges on income tax such as extending the tax allowance freeze and increasing income tax (balanced for ‘working people’ with a cut in National Insurance). Smaller revenue items like alcohol duty will bring in bits and pieces (stock up now), but I am willing to bet that fuel duty will be left untouched, although Vehicle Excise Duty will go up. More of that on the new monster cars, I say.

Apparently the deficit this year is around £25 billion and Rachel tells us that £1 in every £10 of government income is spent on merely servicing the debt. But do ordinary people have to pay the price and cover the whole gap? How come Reeves did not once mention wealth inequality, a rather better defined term than the word ‘fairness.?’ Must we be fair to billionaires? An alternative to her taxing ordinary people, workers or pensioners is available, and was succinctly summed up in a letter to the Yorkshire Post on Saturday, referencing non-HM Treasury economist, Richard Murphy’s suggestions that ‘aligning capital gains tax with income tax, adding VAT to finance, taxing investment income like wages, stopping paying interest on bailouts to banks from 2008—could raise £78bn a year’ (letter from Simon Honey). The Treasury is too much in hock to orthodox City thinking to countenance anything so productive - and reasonable.

As Rachel blathered on, she said (and this is how speeches are written these days):

‘For a long time, commentators have talked about Britain’s ‘productivity puzzle’.  

But it’s not a puzzle.  

The causes of our economic underperformance are well understood. 

The chronic stop-go cycle of public investment has left us with roads full of potholes, high energy prices and unstable conditions for vital business investment in skills and technology…
 
…and long-term failure to invest in our regions has built growth on a narrow base - with some parts of the country forging ahead while others fall behind. 

[political redaction]’

I’ve mentioned in a previous blog how London and the South East under HM Treasury ’Cost Benefit Analysis’ rules determine where it is deemed public investment will produce the biggest return, very much to the North’s detriment. So one thing to look out for in the Budget is whether Reeves will actually reform how CBA rules will work in the future. If she doesn’t mention the subject, we will know once again that she’s talking crap—and that the Treasury rules.  (Or maybe that’s what, in the transcript, ‘political redaction’ refers to.)