It made the Omnishambles Budget of 2012 look coherent by comparison ’ taxing pasties in obese Britain made some sort of sense
George Osborne’s fourth Budget, even by his low standards, was his worst one yet. It made the Omnishambles Budget of 2012 look coherent by comparison – taxing pasties in obese Britain made some sort of sense, and the outcry that followed merely showed that too many people eat these junk food pies full, as we now learn, of horse-meat!
But the Budget last Wednesday showed that Smuggie-Toff George has got his sums hopelessly wrong for the last three years – the deficit this year will be £120 billion, growth is next to nothing, but the austerity goes on, as George steers this dysfunctional coalition government straight at the rocks.
What is clear is that when George took his axe to New Labour’s grotesque excesses in 2010, he didn’t have the strength to cut deep enough and quickly enough, apart from the armed forces, where he cut far too deeply. He left too many budgets as they were, and too many cuts were stuck in the post – with the result that he has lost his cherished AAA-rating, and now no recovery is in prospect before the next General Election, to be held in 2015 if the SS George manages to get there, that is.
By far the largest departmental budgets, out of a projected spend this year of £720 billion – up 5 per cent – are £251 billion for social welfare, now called social protection, and £137 billion on healthcare, compared with £40 billion on defence. Meanwhile debt interest – with record low interest rates – at £51 billion is more than the police and transport budgets combined: just wait until interest rates have to rise…
The social welfare budget, up 6 per cent, is the one that is really out of control. This is being addressed by the long-running Iain Duncan Smith review, which will probably be announced in the Queen’s Speech in the Autumn, with legislation coming before parliament shortly thereafter.
When it has been passed, that will be the effective end of this parliament, and the end surely of any need for the coalition to continue. It would make sense for the Conservatives to dump the Liberals overboard and govern as a minority for the last year before the election, and re-establish their identity, before UKIP grabs all their clothes.
Against this backcloth, what white rabbit did George pull out of his hat to get the economy going? Just like the government in Cyprus which has stolen depositors’ money from their bank accounts, having run out of money, George raided the taxpayer’s piggy bank for a massive cash and credit injection of £130 billion – to boost the housing market!
The ongoing Global Crunch, 2009-201?, had its origins in exactly such an arrangement: when the US governmental agencies, Fannie Mae and Freddie Mac, performed the role of a conduit of government money into the lower levels of the housing market, they managed to blow up Wall Street and its banks.
It was called the subprime crisis then, and Osborne’s plan to lend 20% of the value of an overpriced property, costing up to £600,000, to a first-time wannabe buyer who can’t afford the deposit, smacks of the next subprime crisis in the making, especially when interest rates inevitably have to rise.
<p> It is a dangerous medium-term gamble, as the normal cyclical correction from 2009 to bring over-blown house prices back to affordability, has been prevented by the excessive government debt forcing artificially-low interest rates across the whole economy. But it was Alan Greenspan’s policy, in 2004-2006 and beyond, of artificially low interest rates that was the real cause of the subprime crisis in the first place… Remember?