Monday, 24 March 2014

Osborne: an idiot in the Lawson mould?

To listen to the cheerleaders, Gideon's Budget last week was a triumph that transformed Britain's prospects - reversing a century's worth of decline, national immolation and the impacts of the transgressive state.  A bad Budget is always given this amount of acclaim before its perpetrator is found out.

The Chancellor's economic cretinism is now directed internally at the right - attempting to buy off the UKIP defectors while positioning himself for a leadership election in the wake of Hamster Cheeks's none-too-soon departure.  The rest of the nation and the economy are collateral damage in a tragedy of the Tory making.

There have been two criminally-insane Budgets in recent Tory history.  Barber's dash for growth in 1973 coincided with an increase in external inflationary pressures, starting with overall commodity price rises and then capped by the oil crisis following the Arab-Israeli conflict and OPEC flexing its muscles.  The last gasp of Keynesianism was the equivalent of pouring petrol onto a fire, and much of the rest of the decade saw Labour desperately trying to damp down the flames.  Yet Barber's incompetence can at least partly be mitigated by the global crisis against which he took action - a defence which is not permitted to anyone from another party.

However, the closest analogue to Osborne's Folly is Lawson's budget of 1988, which unleashed tax cuts at the top at the same time as providing a feeding frenzy in the property market - abolishing double tax relief on joint mortgages created a property bubble which then burst with spectacular effect - introducing the period of stagflation that overshadowed the first half of the 1990s.  Lawson, now a ridiculous figure of climate change denial and venomous prejudice, presided over a period of allegedly triumphant growth followed by a debt hangover that took a decade to fix - at the same time deregulating the City to create the first stages of the corporate welfare state that persists to this day.

Gideon clearly has nothing beyond political tactics to offer - and Labour should be ashamed of their backing of his pension changes.  There is nothing right with the current annuity system, which allows parasitic fund managers to cream off fat commissions for supposed expertise - much of which could be emulated by sticking a pin into the race cards at Ladbroke's - but the proposal to allow unfettered release of pension equity risks pensioner poverty if too great a risk is allowed, and the creation of another class of welfare dependents whose improvidence or short-term greed means that their funding runs out before they shuffle off their mortal coils.

Reform - and allowing alternative investment vehicles - would have made sense.  Abolition is the short-term equivalent of economic amphetamines - and rather than encouraging current savers to ensure they make suitable provision for their old age it creates the potential for yet another intergenerational transfer when misguided avarice, stupidity or bad luck pauperises a group of improvident old people.  As they tend to vote, their plight will be listened to with sympathy while the remainder of the taxpaying public bail them out.

The real parallel with Lawson is the total irresponsibility with regard to the property market.  Lawson allowed four months of feeding frenzy which created a bubble.  Osborne, being a resourceful chinless no-mark, decided that a direct bung to the areas where the wealth illusion is propped up by property price inflation (mainly Tory- or UKIP-leading) would be too obvious even for the current bunch of canting fools.  Instead, the pension changes are being played for all they're worth as a means of further pumping up the buy-to-let market - driving up prices yet further and therefore creating both perceived wealth for the lucky beneficiaries and further transfers of income from the relatively poor to the rich.  Tory behaviour at its most obvious.

Encouraging further speculation in an already-disfunctional market is a recipe for disaster.  While in the short-term tax receipts will go up through stamp duty and (if these new Rachmans are not clever) through tax on rental income, this is not a fool-proof mechanism for ensuring the economy is sound and sustainable.  Hardly surprising - yet anything that encourages the further concentration of money wealth in property further transfers power to the already-lucky, while the rest of the population is still reeling from the pillage of bankers, global deregulation and the pursuit of austerity as a means of cowing the proletariat.

The Tories are now, blatantly, trying to play out to the old, rich and the aspirational but innumerate who assume that the new £15,000 ISA allowance will benefit them - although the number of people who can save that amount are those least in need of incentivisation.  This is the Daily Mail fallacy writ large - with a touch of totally-cynical populism on sin taxes such as beer and whisky (note that the duty freeze - called for for several years - only occurs in the year of Scotland's independence referendum) as well as a reduction in bingo duty.  Murdoch's Scum hailed it as a Budget designed for their readers - which is enough of an indictment to stand on its own,

Osborne could have done much more to reform taxes and allowances - and to encourage productive growth.  Instead his audience was neither the country at large nor those already squeezed and marginalised by the combination of the necessary rebalancing of public finances (which Labour would have had to move towards) and the contempt and disdain exhibited by the crony Conservatives.  Where it comes to the election next year, the impact of this Budget will be seen to have been perverse, and will hopefully result in a much more balanced assessment of Osborne/s record before two fingers are raised via the ballot box.

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