Jim Sillars: The devil will be in the detail
By the time you read this you will have watched the TV pundits argue, listened to the politicians spin, see people interviewed about how they personally are affected by the Budget announced by George Osborne. We shall know whether all those leaks about the 50p tax, the tycoon tax, the mansion tax, the regionalisation of public sector wages etc etc have proved true.
But, Osborne’s Budget speech, over which everyone will be arguing, isn’t the Budget. The Chancellor’s speech is pure politics, crafted to capture the headlines in the six o’clock news bulletins and tomorrow’s newspapers.
Last year it was a “Budget for growth” that would “put fuel into the tank of the British economy” and get growth of 1.7 per cent. We all know about the “fuel into the tank” of the lorry, and the family car do we not, a full 12 months on from that boast. As for that growth forecast, missed by a mile.
No, the real Budget comes in two stages, neither of which you will be aware of. First, the one only tax and financial experts can make head or tail of, is contained in the red book and a huge pile of documents inches thick in technical language, which the Chancellor makes sure are issued only after he sits down.
The true assessment of the Budget only comes when the experts have dug into these, and find all the crucial details that the Chancellor’s speech is designed to hide. It was in those documents that Gordon Brown made changes to Advanced Corporation Tax in his first budget. Never heard of it? You have felt the pain of its consequences. It was the £5 billion raid on pension funds that has led to their destruction.
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No-one seeing the budget reports that night about the price of beer of fags was aware of the ACT disaster that had been unleashed upon their pensions. Brown got great headlines, while underneath it all the sums didn’t add up, the debt mountain was growing and the inevitable recession fell upon us.
It will be this coming weekend’s papers that will tell the true tale of what really is in that first Budget stage. Of course, if Andrew Neil and all the other TV and radio frontmen and women told you, today, that they couldn’t really say what the Budget contained, they wouldn’t look so smart, and you would ask why you pay a TV licence. So, they will fill time and space with the spin doctors from the parties, and still those big thick documents will be waiting on people digesting them over the next three or four days.
The second stage is when those thick documents are translated into legislation. To give effect to the full detail of the real Budget, there has to be a Finance Bill in the House of Commons. That goes through committee and gets its final form around July. That is the stage when the accountants and the PR people representing big companies, small companies, the banks, the financial institutions, get to work lobbying the Government for changes they want – to water down what they don’t like, or to get concessions they do like.
The lobbying is intense. It is doubtful if any but a handful of Evening News readers will see the Finance Act that emerges. There will be very little reporting on television or in the newspapers of the committee debates, votes and how successful that lobbying has been. You can be sure that the high- value estate agents in London will be in there arguing against big charges on the people who buy their multi-million pound properties.
One pre-Budget leak is worth a look if he does in fact reduce the 50p top tax rate. The Sunday Telegraph Business Section contains the headline: “Business believes 50p tax rate is a major ‘deterrent to growth.’” The report starts: “Business fears over the 50p top rate of income tax have grown in the past year, a survey of some of Britain’s biggest companies has shown.” Let’s do a little bit of logic chopping. We are told that the 50p isn’t working, because it is bringing in far less than the Treasury thought it would. If it is bringing in far less, then the rich obviously are not paying it, so where is the problem?
As for the argument by “Britain’s biggest companies” that the 50p is a deterrent to growth, that is a lie. The biggest factor in no-growth is the lack of investment. If you do not have investment in new plant, new machinery, new distribution networks, you do not get economic growth. Investment comes first, growth follows.
Do you know how much cash those big companies have lying in banks? £70 billion. When asked why they are not investing that cash, their answer to economists is that they cannot see any prospect of growth, knowing full well that it is their decisions not to invest that is the reason for no or little growth. What we suffer from is a strike, not of people, but of capital.