Wednesday, April 22, 2009

Today's Dishonest Budget

I'd been planning a lie-in this morning at the Randolph in Oxford, but Rhodri from Post Cynta rang me late yesterday afternoon inviting me to share with Gary Owen my thoughts on the budget. The BBC laid on a taxi to collect me at 7.30 and convey me to the studios of BBC Oxford. Incidentally, I had to find my own way back, and it cost me £6.50 - if you happen to read this Rhodri! But to what I wanted to see in the budget. Firstly I was hoping for honesty about the financial hole that the UK has been dropped in. And secondly, I wanted the Chancellor to outline 'a credible plan' outlining how the UK economy was to brought back under some sort of control.

Now it would not do justice to my response to the budget, simply to say that it failed to satisfy my hopes. I believe that today's budget was so awful that it demonstrated the unfitness of both Alistair Darling and Gordon Brown to hold the offices that they hold. The borrowing figures were worse than any one could have expected - £175 billion in 2009/10. More money is being borrowed in the next two years than has been borrowed in every other budget in history added together. A total of £700 billion is to be borrowed over the next five years. No, its not a typo - it really is £700 billion. And incredible as these figures are, they are based on a rapid and huge recovery in the British economy, beginning in this financial year, and growing by 1.25 next year. It is then expected that the British economy will grow by a whopping 3.5% every year thereafter - almost double trend growth. Darling and Brown (plus the lackeys who parrot whatever instruction that the Prime Minister issues to them) may be the only humans on this planet who believe this. Today, the International Monetary Fund made it clear that its opinion is as different from the Labour Government's as a carrot is from a discus.

So it's not a credible budget. To be honest I hadn't expected it to be - neither credible nor honest. And there was no credible plan. To be blunt, I thought the budget was a disgrace. I'm not going to comment much on the new 50% tax rate, except that its introduction has nothing to do with raising revenue, and everything to do with squalid posturing for political purposes. Its purpose is to divert attention from the horror of today's budget.

The elephant in the room that's being ignored is cutting the size of the state. Alistair Darling did make a start today by reducing the rate of increase they had been previously been promising. Its clear that there is going to be significant reductions in public spending by the Treasury - and this will flow down to all tiers of Government. First indications are that the National Assembly for Wales will have to operate on a lot less money, and will pass a lot of this on to local government. Just because there's a reluctance to talk about precisely where cuts will be made, it doesn't mean that they are not going to have to be made. I do think that the public are ready to accept cuts in public spending. But its going to be a tough time for all politicians over the next few years.


B Griffiths said...

I agree 100% with you Glyn - a disaster budget from a disaster government.

Brown and Darling haven't raised the red flag, it's the white flag their flying now.

I don't envy David Cameron when he takes over next year which seems increasingly likely, he is the man who has got to deal with the mess Labour have left behind, poor guy.

John B said...


You have called for a 'root & branch' examinaination of all local govt. expenditure. This crisis means that such an analysis ahs to be carried out across ALL levels of govt. and inevitably will result in a savage cut in the public sector. Presonnel have to be reduced and each job that remains must be totally focussed on the core requirements of citizens not service to political dogmas.

James Dowden said...

So how *did* you manage to get back from Oxford for just £6.50? I'm certainly enjoying the irony of the juxtaposition of that and the Budget!

Jeff Jones said...

All public sector organisations in the light of yesterday's budget have to take a long hard look at where they spend their money over the next 10 years. The days of so called painless efficiency cuts are gone. Politicians now have to make difficult choices about their priorities and this raises the question in Wales of have we got the politicians prepared to do this. The Assembly further complicates matters because it will try to protect services it directly controls. Local government and local councillors will face some really difficult choices both in the short term leading up to 2012 and afterwards.Yesterday the unions rejected the employers 0.5% pay offer. Hardly surprising given that MPs have just got 2.3%. But there are other pressures that local government faces which have to be financed over the next few years even before yesterday's bleak news.Many still have to find the money for equal pay and all the pension funds will need to topped up. The decision yesterday to slash infrastruture projects also probably makes it more likely that many councils will also face fines in 2013 when they fail to reach the recycling targets. Councillors have to start being honest with the people they represent and also demand that officers now stop postponing decisions and produce reports which set out the reality facing each Council. All Councils in Wales for example should aim for a major report to the full Council before the summer setting out the reality. Too many unfortunately seem to go to sleep after they have set the budget and wait until the settlement before even thinking about decisions. They can start by admitting that the Beecham agenda of back office savings just will not deliver what is required in the timescale. It looks to me ,for example, that the largest cooperation project in South East Wales is rapidly going nowhere fast.Both the Assembly and local government need to start thinking about radical new approaches to the delivery of public services and even what services the public sector should actually be delivering. The real danger is that many will take the easy options when it comes to difficult decisions which is to try to postpone what is required until after 2012,take money from balances or just cut across the board.

Unknown said...

The only way Britain can avoid bankruptcy is to make 25% cuts in public spending (current spending) everywhere - It can be done by cutting out the unneccesary non-jobs which are everywhere and focussing on core delivery only. Cuts should be spread evenly and there should be no sacred cows - Then used the money saved to spend on capital projects with the proviso that they must generate local jobs - for example build a high speed rail network with the condition that trains must be built in UK.

But yesterdays do-nothing budget will bring the IMF in soon

Glyn Davies said...

BG - Its crucial that people understand the state that the country is in before the election. Governing Britain over the next few years is goiung to be a very difficult task - but it was the same in 1979, the last time that the Labour Party left office. This time its going to be even worse.

John B - I do think this is true. This sort of approach has been talked about in the past - but this time talk will not be enough. There simply will not be any money.

James - That was the taxi fare back from the BBC Oxford studio to the Randolph! After a quickish breakfast, we drove home fairly quickly because I'd also been invited to be the Tory spokesman on Taro Post.

Jeff - From previous posts of mine and comments of yours, I think we agree about this. Whenever I see a promise from Government at any level (or opposition) that costs a lot of money, I ask myself how is going to be paid for. Even good investments must increasingly have a short payback time. I don't think promises of freebies is going to work anymore.

Penddu - Not sure that I agree with this approach. I think governemnt at all levels will have to stop doing some things completely - rather than 'accross the board' cuts. And we're not talking about anything like 25% reductions. At present its about reducing the rate of increase, though I do think that this will not be sustainable.

DC calling said...

Sorry if I'm repeating a question that someone else might have raised (tied up working hard at the coal-face) - what impact will the budget have on the credit rating/worthiness of the UK (which obviously includes Wales etc.)?

If the international rating status goes down a notch this will look worse than Br-omine/Ba-rium bad (play on "Breaking Bad" - a gutsy black-humour TV drama involving a character playing the part of a chemistry teacher with cancer).

Anyways/Milliways, where there's a moody there's a credit rating.

Will the UK maintain a triple A rating (or its functional equivalent)?

We've heard about 'investing' in the UK's future (spending to cover Labour's disastrous 'management' of the UK economy - and most seem to appreciate that this will impact on Welsh finances) - but will the UK Treasury be able to borrow funds at reasonable interest rates?

Wales can outsmart the drop off in its money allocation from Whitehall, but it will mean taking steps to build the Welsh economy.

Sadly, I hear the Patent Office in Newport is planning to layoff around 10% of its workforce.

Reason: patent filing rates are dropping off.

Patent filing rates of Wales's top institutions is woefully low compared to foreign institutions; Wales's top university is now lagging behind a university in a former third world state in terms of patent filings.

How can Wales have a knowledge based economy with such a dramatic on-going failure to protect Welsh IP?

"Like what she wrote" - it is not rocket science to work out where the Welsh economy will be after another ten years of Welsh Assembly 'leadership'.

At the bottom of the regional GVA pile, at the bottom of the UK economic league table and further behind former third world states.

The Welsh economy will be 'beached' - based on a line from "SCREAMERS" - movie based on a sci-fi story written by Phillip K. Dick.

DC guy said...

Sorry ... "Patent filing rates of Wales's top institutions is woefully low" ... " ... are woefully low". Sorry, "I'm bad".