Budget Statement

Margot responds to Budget Statement in Letter to Wolverhampton Express & Star.

Dear Sir,

People should not allow the international financial crisis to obscure the responsibility the Labour government has for the economic circumstances that prompted yesterday’s budget statement.

This government’s record during the years of economic growth that started during Ken Clarke’s time as Chancellor has contributed massively to the mire in which we now find ourselves. Prior to 1997 Britain had the best funded pension system in Europe, the Bank of England functioned as lender of last resort and was unquestioned in it’s role as regulator, and savings were almost 10% of household income.

Gordon Brown’s five billion stealth tax on pension funds led directly to the impoverishment of our pensions (although not if you work in the public sector where the average pension provision is ten times that of the private sector). His replacement of an effective single regulator with the byzantine tri-partite system of regulation by the Bank of England, the Treasury and the new Financial Services Authority, meant that when the crisis came no one was accountable. Savings were undermined by the replacement of tax free incentives to save that existed under the last Conservative government with far more restrictive and less attractive products as well as the obsession with means tested benefits which deter saving. The result being the complete collapse of savings to a less than zero per cent of household income.

The other major failing of Government policy that has led to the mind blowing levels of borrowing announced yesterday (more than 50% of GDP) has of course been uncontrolled public spending. Two things have been wrong with public expenditure since 2000. First it has simply been too high. During years of growth budgets should be run at surplus so that reserves are built up to draw on during leaner years. The government was reckless then as it is now and reserves were not added to during the good years. Secondly we did not get value from the money spent. For example, money has been thrown at endless NHS reorganisations needing more and more managers, Quangos and government consultants, the GP contract which led to the taxpayer and patient paying way over the odds for services that should have been routine, and the police, great to have more of them on the one hand, but the additional numbers have been rendered ineffective by the huge increase in red tape, health and safety whilst their priorities have been distorted by political correctness.

There are two areas that have been starved of resources by Labour, where we could have done with more spending. Prison building and border control. But of course the government needed the inflow of immigrants to provide cheap labour that, along with debt, fuelled the unsustainable boom that became government policy. It is easy for the government now to talk about controlling immigration, they are merely shutting the door after the horse has bolted.

For the first time the impending tax rises that will be levied in 2010 and beyond to pay for yesterday’s budget are out in the open. After years of raising taxes on us by stealth the government has been forced to be transparent by the spectre of a collapse in sterling were international investors to lack certainty over how the gamble was to be paid for.

I have no doubt that the budget gamble will make Britain’s economic position worse in the long term whilst having a very limited, if any, positive effect on the hardship facing individuals and businesses in the immediate future. The VAT reduction is a tiny drop in the ocean compared with the big discounts shops are already having to offer to attract custom. The total tax reductions are dwarfed by the ultimate liability that will hit taxpayers in two years time and are unlikely to influence current spending. And that is because individuals and families know that we will have to go through a period of belt tightening to get through the next couple of years. That means spending less and saving where we can. How long before the government wakes up to that reality?

Yours sincerely

Margot James