The April 2009 Budget

A Cheer for Alistair

Despite the fact that he doesn’t act on most of my recommendations, I like Alistair Darling. Crucially, he knows that ‘you cannot cut your way out of a recession’.

The measures the government has taken (fiscal and monetary) have not been bold enough. Nevertheless, it is likely that they will restrict the fall in output this year to around 4% (instead of 7 or 8%), and unemployment to around 3 million (instead of 4 or 5 million).

The Tory response is pathetic, dishonest and opportunist. Gordon Brown is right to call them ‘the do nothing Party’. They oppose government policies, without offering any of their own.

They are dishonest in blaming Gordon Brown, when the financial and economic mess we are in originated in the Thatcher years. New Labour’s mistake was to continue with the Thatcher policies (e g privatisation and low taxes for the rich).

Because they are the Opposition they cannot be blamed for opposing government policies. But their lack of any ideas of their own means they are not a credible alternative government.

Vince Cable and the Liberal Democrats are a different matter. They do have relevant policies, some of which Labour would do well to adopt (e g raising personal tax allowances to take the lower paid out of tax brackets).


A Missed Opportunity

However, sadly, the budget was a missed opportunity. The political context prevented the radical measures (requiring more spending) necessary for a speedy recovery.

Instead of apologising for the 50% tax on incomes over £150,000, it should have been accompanied by further measures: to raise revenue and to create a more equal society. For example:

(i) a wealth tax;
(ii) an increased capital gains tax;
(iii) a windfall tax on excessive profits;
(iv) a 55% tax rate on incomes over £200,000.

Such measures might, as vested interests claim, cause some to leave to reside in countries with lower tax rates. Why should we be concerned about this? The most likely to leave are the financiers who precipitated the current crisis.


Better Late Than Never

Such policies, along with cuts in expenditure (mainly on defence – e g Trident), must be matters for a late summer budget. The revenue raised must permit a credible strategy for repaying borrowing, and for further expenditure on:

(i) new jobs in the green energy sphere;
(ii) job support to keep people in work;
(iii) tax relief for the lower paid;
(iv) support for the housing market, especially first time buyers.

All of these measures require a political context which banishes any thought of returning to the capitalism which caused the crisis: instead, it must place the emphasis on creating a more equal, a more democratic and a more compassionate society.