Following politics can be really frustrating. Sure, it’s fascinating and intriging - but it can also be deeply frustrating.
Take yesterday’s Budget. George Osborne made his announcements and then, immediately afterwards, listening to Ed Miliband’s response, I was left wondering if he’d even listened to any of the announcements Osborne had just made. Miliband had clearly decided on his narrative in advance and chose to ignore the inconsistencies that didn’t fit within this narrative.
And no sooner had Osborne’s speech and Miliband’s response finished, it all spilt out of the House of Commons into the media and social networks. The interpretations were so polaraised. Osborne had - in an announcement that probably took up 1/500th of his speech - said that the highest rate of tax would drop from 50p to 45p. Going onto the BBC News site later, this part of the Budget was their headline. Apparently, this was the main and most important part of the Budget. It wasn’t.
Labour chose to interpret the Budget as being all about making things easier for the rich and harder for the poor. Whether this was factually acurate was, of course, irrelevant. It was about political point scoring. The fact that hundreds of thousands of people were brought out of paying tax at all was totally ignored. This is something that you’d of thought Labour would support. And, in reality, they do. But can they say this? No. It wouldn’t fit with their narrative on this whole Budget being about tax cuts for the rich. Politics!
There are two announcements that Osborne made yesterday that have stuck and made all the headlines: First, the drop from 50p to 45p for the highest rate earners (those who earn over £150,000). And, second, the so called ‘Granny tax’. These have been used to shape a narrative that says that the coalition (and in particular the Tories) are grabbing from the poor to support the rich.
And you know what, this is great for newspaper sales and website pageviews! But I hope the more discerning citizens will see beyond the media hype and political point scoring and realise that these changes are not nearly as dramatic as they are being made out to be.
How much will dropping the 50p top rate cost us? Next to nothing. There’s even a chance it might save money. Which raises the question of whether people’s wanting the 50p rate has anything at all about national interest, or if it’s simply a hating of anyone rich. Whilst some highest rate tax payers may end up better off, overall the wealthiest people in our nation (via various other means) are going to end up (as a whole, if not individually) contributing a greater amount to our economy than before.
And then there’s the Granny tax. Taking from pensioners seems to be a total no go for politicians. Why? Because pensioners vote. Keeping pensioners happy is often key to political success. But should pensioners be free from suffering from any of the cuts most of the rest of us have been facing?
I know it’s not popular, but I don’t believe in universal benefits. What’s the point in rich pensioners having free bus passes and help to pay their heating bills? It’s nothing but a waste of money. And this new Granny tax isn’t on all pensioners; it’s on the wealthier pensioners. (Note: pensioner doesn’t automatically equal poor.) As the IFS has now said, ‘this looks like a relatively modest tax increase on a group hitherto well sheltered’. And, in real terms, this will mean a loss of equivalent to just 0.25 per cent of income.
So, in essense, the two main stories from yesterday’s Budget are really non-stories. They are both pretty neutral changes that in the grand scheme of things aren’t that big a deal. Unless you’re only interested in a particular political narritive that doesn’t depend on factual accuracy!
This article isn’t written to suggest that I support everything in the Budget. It is simply to make the point that the people have jumped on two issues that are not actually that big a deal.
It has to be said that today’s Autumn statement by George Osborne was not one he will have wanted to make. There was a lot of bad news about the state of our economy and it’s painfully sluggish recovery. All of the borrowing figures for the next five years have increased and we will no longer clear the deficit by 2015 as promised with the original plan.
Inevitably, political persuasion will taint the way we interpret the state of the economy and Osborne’s response to it with this mini-budget. The government continue to lay the blame primarily at the feet of the last Labour government’s ‘reckless spending’ and on the Eurozone debt crisis. Labour claim that the slow down of economic growth and rising unemployment is all because the government is cutting ‘too far and too fast’.
So who’s right?
Much as Labour would like to assure us that their plan would definitely have avoided our having a flatlining economy and rising unemployment, the truth is that we will never know. But, if I’m honest, I’m very sceptical that Labour’s plan would have made anything better. In fact, I very much suspect the opposite. For one, Labour’s plan was based on hopelessly optimistic growth figures that we can be 100% sure would never have become a reality.
It is worth emphasising too that if Labour was in power, our approach to the economic crisis would be significantly different to what all the other major economies are doing. The leading countries all seem to be united in an approach that focuses on tackling the debt hard and fast. So Labour would be at odds with the rest of the world. That doesn’t mean they’re wrong of course, but it is worth mentioning that the support for Labour’s economic approach globally is very, very scarce.
The saddest thing of course with all of this is the impact it has on individuals and families. With all the gigantic numbers being thrown around on days like today, it is easy to forget the significant hits people and families are taking on their personal finances. It’s no fun for anyone having less money to spend in real terms due to stagnant salaries and rising costs. The cap at an increase of just 1% on public sector salaries at a time of 5% inflation is a painful salary cut. A cut that will no doubt be similar for private sector workers too.
Despite how painful it is right now, I do think that, on the whole, the government’s approach is essentially the right one. I don’t think that the way out of a crisis triggered by excessive spending and borrowing is to commit to more spending and borrowing. That said, it is worth emphasising that the plans of the Coalition government and the Labour party are not as far apart as both would like us to believe.
Whilst Labour never give their support to any of the cuts the government makes, the truth is that their plans would see them making cuts that amount to around 95% of what the government is cutting. So the view that some people hold that all of these cuts are ideological Tory attacks on hard working people is hopelessly naive. Most of these cuts would still be happening if Labour was in power.
And, not only are the parties closer than they might admit, the sad reality is that there are an awful lot of factors outside of our control. The Office for Budget Responsibility* (OBR) make clear that everything in their report today could be totally irrelevant if the Eurozone crisis doesn’t get resolved. The harsh truth is that there is not a huge amount anyone can do to magically turn the economy around.
It’s easy in opposition to pretend that your plan will sprinkle magic dust and make a dramatic difference. And it’s easy to critique the plans of the government when your own plans never have to face the cold, harsh world of economic reality. But, sadly, neither George Osborne nor Ed Balls can wave any wands that will dramatically change anything.
The truth we all have to face up to is that, regardless of who is in government, we’re in for a long, slow, painful recovery. And, who knows, maybe things will never get back to how they were. We live in a dramatically different world post 2008.
*Speaking of the OBR, both political parties always treat the reports by the OBR as if they were Scripture and use different sections to support their own stances. But, for time after time, the OBR’s forecasting has been way off the mark? Why should we trust them at all when their forecasting abilities are so clearly limited?