Credit where it is due - Andrew Moffatt has produced this and I urge you to read all of the blog.
The Truth of mismanagement
By Andrew Moffatt, BNP Economics Department -- The chief beneficiaries and causes behind the 2.5 percent VAT increase announced yesterday are the foreign aid budget and the EU.
Andrew Moffatt“The inequitable tax rise, designed to raise £13 billion from hard-pressed consumers, was deliberately omitted in the Conservative Party’s s manifesto pledge two months ago and it was opposed by the Lib-Dems during the election.
In other words, at a time of unparalleled austerity in the wake of Labour’s gross mismanagement of the economy, the Conservative Party has once again subordinated the British electorate to overseas interests.
VAT is inequitable because the poorest are hit the hardest. Thus, those who do not pay income tax are clobbered with VAT on their essential spending. In particular, the elderly are victims.
The elderly have already suffered a second harsh winter of global cooling which inflicted a toll of some 40,000 fatalities in the past year alone.
Whereas the Government should have focused on assisting the most deserving and vulnerable in the UK, it has instead seen fit to increase its donations to developing countries such as India, which is sufficiently wealthy to finance its own space programme.
Meanwhile, the EU is absorbing £15 billion per annum in British taxpayers’ subsidies, with our net payments due to rise by some £2 billion this year.
A recent paper by the Taxpayers’ Alliance estimated that the total cost to the UK of the EU, which included its regulatory burden, at £2,000 per man, woman and child, per annum.
The extent of Britain’s subservience to the EU may be discovered on page 3 of the HM Budget forecast, which merits special mention:
The Economic and Fiscal Strategy Report and the Financial Statement and Budget Report contains the Government’s assessment of the medium-term economic and budgetary position. They set out the Government’s tax and spending plans, including those for public investment, in the context of its overall approach to social, economic and environmental objectives. After approval for the purposes of Section 5 the European Communities (Amendment) Act 1993, these reports will form the basis of submissions to the European Commission under Article 99 (ex Article 103)and Article 104(ex Article 104c) of the Treaty establishing the European Community.
In other words, undisclosed to the public, the British Government’s budgetary programme is subject to the requirements and approval of the unelected Commissioners of an alien potentate — the European Union.
Another casualty of the VAT hike will be the motorist, who will pay an additional 2.5% on fuel when the tax rise takes effect in January 2011. This comes on top of recent rises, caused by the collapse in the value of Sterling against the US Dollar, in which oil is priced.
Finally, middle class families will be thumped by the withdrawal and restriction of benefits and credits to those on middle incomes.
We have long warned the middle classes that the Conservative Party is fundamentally disloyal to its core supporters.
Government Debt
The forecast for public borrowing for 2010/11 is £149 billion, or 10.1 percent of GDP. Despite the measures undertaken by the ConDem government in yesterday’s budget, the nation’s net debt is estimated to sit at 70 percent of GDP by 2013/14.
This compares with less than 40% some five years ago.
In our recent budget manifesto and during the 2010 election, the British National Party identified a number of key areas where taxpayers’ monies were unnecessarily employed and where significant savings could be made.
Our desire was to re-deploy these funds in more worthy areas and to reduce public borrowing, which crowds out private endeavour and investment. Amongst them, we specified the following:
1. Climate Change: £18 billion per annum, mainly via disguised levies in energy bills.
2 The multicultural society: £13 billion per annum.
3 The EU: £15 billion per annum.
4 Overseas Aid: £9 billion per annum.
5 The unnecessary Afghan War: £3-5 billion per annum.
6 £10 billion of spending cuts on wasteful bureaucracy.
The amount of unnecessary expenditure within these above categories amounts to some £70 billion per annum.
By contrast, the Emergency Budget, just unveiled, has identified £40 billion of cuts and tax rises over the life of the current Parliament.
In conjunction with the cuts already identified by the previous administration, this suggests a fiscal squeeze of some £96 billion by June 2015, assuming the Government lasts this long.
Let us therefore assume that the current Chancellor has already identified £10 billion per annum in wasteful expenditure in his calculations.
His total saving over the duration of office is a little under £20 billion per annum of the £96 billion earmarked throughout the term.
This contrasts with our savings of some £350 billion. With the exception of elements within point 6 above, however, none of these commitments we have identified will be touched.
That is because the politically-correct ConDem administration is as committed to globalisation, international governance and the extirpation of the nation state as Labour was, before it.
Such undeclared ambitions do not come cheaply.
Credit Where It Is Due
We would not wish to be curmudgeonly in our justified condemnation of the politically-correct George Osborne and his Lib-Dem side-kicks.
We applaud the re-establishment of the link between the state pension and earnings, although this falls well below the level of £150 per week which we advocated reaching by the end of the current parliamentary term in 2015.
Similarly, we applaud the rise of the basic rate threshold to £7475 before income tax is paid. We would like to see this raised further: low tax thresholds penalise the low paid, undermine the incentive to work and create needless bureaucracy in the form of the complicated tax credits system.
In our manifesto, we argued for a basic threshold of £12000 for all, which would require some re-balancing of the rates at which tax is paid.
We concur with many of the areas currently targeted for spending cuts.
That includes the Regional Development Agencies (RDAs), which have absorbed over £20bn in taxpayers’ funds since 1999. Unbelievably, these self-serving bodies have earmarked 62 percent of their funds towards the public sector, not including over £3m to the trades unions.
In their place, we would have used the savings to reduce by four pence the small business rate of tax, thus promoting creativity, employment and expansion amongst small companies.
Ominously, we note that the Government is merely to replace the RDAs with another body, which suggests any changes will be merely cosmetic.
The ConDem coalition will not abolish the regions and the attendant infrastructure, because these are decreed by the EU.
In consequence we suspect the new bodies in place of the RDAs, announced by the Government, will amount to no more than an exercise of smoke and mirrors; simply, the Conservatives cannot be trusted.
We agree with the Government’s plan to support the regions in terms of infrastructure spending and employment incentives for business. It is clear, however, that this manoeuvre is designed to buy votes in those areas where the Conservatives remain despised and hold minor representation.
Omissions
Departmental spending cuts will not be identified until 20th October.
The NHS has been excluded and yet, as we have previously reflected, the Strategic Health Authorities absorb £4bn in taxpayers’ funds when, instead of funding this overgrown bureaucracy, the monies could be better spent on front-line health care.
The Government has also failed to scrap entirely the plans to levy a higher rate of National Insurance Contributions on employees, a veritable tax on jobs, when it takes effect in 2011.
The Government has failed to increase the budget for science and technology. Despite our historical prowess in both, our country has long fallen markedly behind our competitors.
Science and technology fuel the inventions and industry of tomorrow and, therefore, the wealth and economic base of future generations.
The Banking Sector
The Government’s austerity package is due not merely to Labour’s gross mismanagement of the economy and the priority to fund the EU and the overseas aid budget.
It is also due to the distasteful excesses in parts of the banking industry. Such financial debauchery was caused by speculators and ‘wide boys’ who risked the monies of others’ to attract colossal bonuses.
This type of practice was described by the Chairman of the FSA as ‘economically useless.’
The cost of such reckless financial speculation, encouraged by the bonus culture, will be paid for with limited growth and economic stagnation.
It will also be paid for by unemployment.
We highlighted several areas in our recent manifesto to address these issues. We note with dismay that a reform of the banking sector has been kicked into the long grass by means of an ‘enquiry.’
In the meantime, in this budget, no measures were taken to curb the bonus culture, which employs the money of others in the interest of speculation designed to reap massive bonuses.
The gung-ho attitude of bankers has been a cause for economic instability and it needs to be addressed.
Public Sector Pay Restraint v the Private Sector
The Government has earmarked the public sector for pay restraint, doubtless with a view to placing it more on a par with the reality which appertains within the private sector.
Certainly, the cold wind of austerity has been lapping around the private sector since the banking crisis developed more than two years ago.
One area, more or less untouched, however, has been the absence of pay restraint amongst the directors of many public companies. When shareholders experience reduced dividends; when earnings per share fall; when companies announce wage reductions; then clearly it is unreasonable that a significant number of company directors and chief executive officers should continue to reap bonuses at the expense of their employees and shareholders.
Good leaders set an example. Too many directors are now recipients of massive bonuses for doing what they are hired to do by their shareholders. A recent CEO of Shell cast serious misgivings on the bonus culture.
We do not question the worth of good managers. But we do draw attention to the current directors’ pay round, which has become a mirror image of the trades unions pay round in the late ‘70s.
We do not yet have an answer to this but we believe the solution lies in better corporate governance and the ability of ordinary shareholders to vote, specifically, on the remuneration of the directors hired to manage the company’s fortunes.
Presently, matters have moved out of hand at a number of companies, where directors are paid an eye-watering multiple of over a hundred times the rate of the average remuneration of the ordinary employee.
Spending Cuts, Tax Rises, Borrowing and the Economy
The Government has yet to identify exactly how cuts will be applied but the intention is for the relevant state departments to cut expenditure by 25 percent.
This will create a wave of redundancies and a severe decline to front line services.
By next Spring, we predict there will be severe hardship and a sharp fall in spending across the economy as VAT rises take effect.
In the wake of the global debt crisis, similar fiscal restraint amongst the G20 will create an additional diminution in money supply and a reduction in demand.
In these circumstances, we believe the Government’s forecasts of 2.3% growth for 2011 to be woefully unrealistic and unattainable. Indeed, there is a real chance of renewed slump.
Repairing the Economy
In essence, there are three means to address the global debt crisis, the leading cause of the current economic malaise:
1. Inflate the money supply and reduce the real value of debt.
2. Repay the debt.
3. Grow the economy and reduce the burden of debt.
Usually, these means are combined in some measure or other. We do not approve of inflation because it penalises savings and thrift.
In our manifesto, however, we set out our plans to reinvigorate the British economy.
Our intentions remain unaltered. Amongst them, our pledge to secede from the European Union will remove a constraint upon our economy which has raised the general tax burden and applied an unprecedented burden of regulation upon industry and commerce.
Our undertaking to introduce selective tariffs on the imports from developing countries will create an economic boom for years into the future as the economy adapts to produce what it presently imports.
Allied measures intended to reinvigorate British manufacturing, science and technology will ensure that Britain is returned to its historical lead in these fields.
By contrast, the ideals of globalisation advocated by the present administration and its predecessors will result in the continued pillaging of British manufacturing and, ultimately, an environment where we produce nothing.
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