Sunday Thoughts: old Labour solution, but will the consumers spend?

Monday, November 24th, 2008 - sunday thoughts

Sunday Thoughts on a Monday? What is going on? I was going to write something a bit different, but this on reflection now seems more appropriate…….

In an inevitable “new Labour” way, Gordon Brown has made good on his “it’s just Labour” comment at takeover. In a series of weekend leaks to the press (one wonders what the job description for a New Labour PR guru is? Talk as loudly and openly as Vera Duckworth would seem high from what has been seen), it is fairly easy even for my three year old niece who can write her name what the main emphasis will be in Alastair Darling’s budget – tax and spend.

The tax element is that VAT gets cut, while the rich get taxed more – over £150k, expect to pay 45% from the next election. The spend element is – well, as you were, with more going out on unemployment benefit and Job Seekers allowance.

The interesting thing that has struck me watching some of the street level interviews undertaken today (Monday) by various media outlets with us ordinary folk, is that the message is pretty clear: “It is not a lot of money, and as my job is not secure, after paying my higher energy bills I will save just in case I am made redundant.”

Are the government the only institute in this recession who is not cutting their cloth to match their lowered income, higher risk to it through potential redundancy and higher energy bills? Everyone else is, so why not the government?

I think most economists would argue that in a recession there is much a spending Government can do to soften the bottom and define the likely hood of an up turn. But could the Government cut their cloth, like the rest of us are now doing?

The bastion of the blue collar right, The Sun, today created an article from a Westminster financial oversight committee report, which lists civil servants who all earn over the new proposed 45% tax cut rate, and yet have failed in their jobs. Of the five highlighted, four have lost their jobs: Paul Gray (paid £257,891, resigned over Revenue and Customs lost child benefit data scandal); Dr Ken Boston (paid £330,000, who oversaw the SAT’s); John Tanner (paid £445,621, ex-CEO of the FSA who resigned over the Northern Rock crisis); Sir Callum McCarthy (paid £480,553 at the FSA); and Clive Briault (paid £883,711, including a £500,000 pay-off, when he resigned over the Northern Rock debacle). The report finds some The report also revealed that 387 civil servants earn more than £150,000 a year, of which 200 are paid more than Gordon Brown — who gets £187,000 for being PM.

Much of New Labour’s spending is good. The Thatcher government had cut too much, and the huge amount of money required to be invested in school, hospital and transport infrastructure is evidence of that. But I think some of the spending has become too proliferagate, through lack of simple value measurement and common sence. Gordon Brown talks about record spending levels, but it is not necessarily therefore record value to the tax payer. When the Westminster committee of MP’s describes John Tanner, then CEO of the FSA as “not asleep, but comatose” during the Northern Rock crisis, one has to wonder how far in reality New Labour spin versus reality actually places Downing Street from the British recession?

I hence hope that the cold seasonal wind being now felt in the weather, on the high street and in people’s expectations of their employment prospects; is met with a renewed view for taxation value at 10 Downing Street, and not more leaky PR press releases of recording spending.

Good Luck!

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