George Osborne – Guilty of Bad Administration as Well as Being Wrong

 

English: George Osborne MP, pictured speaking ...
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George Osborne – Incompetent as Well as Plain Wrong

More idiocy from the government on child benefit.

You will remember that George Osborne announced some time ago that child benefit would be scrapped for higher rate taxpayers. That was later clarified to mean that any family with at least one higher rate taxpayer would lose the benefit.

And that means all of the benefit. If you go over the higher rate tax threshold by a single pound you lose all your child benefit – which for a family with three children is £2,500 per year.

In other words, this would create a massive benefit trap with a huge spike in effective marginal tax rates to 2500%.

Others pointed out that a household with two earners each just below the threshold – with a household income of £80,000 – would get the benefit. Those with one earner earning just above – with a household income of say £45,000 – would not.

There has therefore been much talk of “fairness”, with the government saying it is not “fair” to give the benefit to the rich, while the Opposition say it is not “fair” to single-earner households.

Chris Leslie, for Labour, said:

We have repeatedly warned that the Government’s current plans to cut child benefit are unfair and highly bureaucratic.

Highly bureaucratic! That really is a bit rich coming from the party that invented the hugely bureaucratic and disastrous tax credit system. But in this case, he’s right – replacing a non-means tested benefit by a means tested one will be bureaucratic.

The amount of hypocrisy flying around from both sides on this is in fact quite stunning. The government talk as if giving taxpayers a bit back in child benefit is very generous of the government. The Opposition talk as if they understand the concept of efficiency, which they absolutely do not. It is hard to avoid the impression that none of them believe any of what they are saying.

But my especial contempt on this is reserved for George Osborne. This is, as I said, a ridiculous proposal in the first place. But even if you accept what he wants to do, there is a much better way to do it.

The tax credit system is an appalling mess. But it exists. So if Mr Osborne wants to means test child benefit, all he has to do is scrap it and add the same amount to the child tax credit.

Tax credits are already means tested, so no new bureaucracy to add. In fact, it would remove the small amount of bureaucracy that is currently needed to administer the child benefit system.

Tax credits are already based on household income rather than individual income, so no anomalies about two-earner versus one-earner households.

Tax credits are not cut off bang when you go above some arbitrary threshold. They are tapered, so as you earn more, the credits are gradually removed. So no benefit trap.

Perhaps Mr Osborne is worried about the political impact of looking like a socialist by accepting the principle of Gordon Brown’s tax credits. That would mean he is hoping to hide his acceptance of Mr Brown’s socialist ideas by messing around with child benefit instead. But even in this case, he could always call the new addition to the child tax credit the “child benefit addition” or something.

What’s not to like, then, from Mr Osborne’s point of view?

There are political objections to Mr Osborne’s plans to means test child benefit. Some (though not I) would even say that child support is wrong anyway and the State should not provide it.

But regardless of those political debates, Mr Osborne’s plans as they currently stand are simply a piece of crassly bad administration. His civil servants should be ashamed of their gross incompetence in putting them forward in that way.

And Mr Osborne should be ashamed of being stupid enough to listen to them.

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These Cretins Will Bankrupt Us All

Cropped-CMEC 1 009         Gordon Brown - World Economic Forum Annual Meeting Davos 2008

Spot the Difference

Images by Willwall via Wikimedia Commons and World Economic Forum via Flickr

 

The Telegraph website led yesterday with a depressing piece about the latest Tory plans for pretending to get to grips with Britain’s economic problems.

They could have come straight out of the textbook of Gordon Brown.

First up: they plan on pumping up the housing market by guaranteeing mortgages for first time buyers.

The mortgage guarantee, the first time such a scheme has been attempted in the UK, will result in lenders providing loans with significantly lower deposits than the 20 per cent or more that is typically demanded. The taxpayer, however, could be liable for losses in the event that a home is repossessed.

Encouraging people to take out near 100% mortgages to buy houses in a weak market is encouraging them to take stupid risks, and is highly irresponsible. There are reasons why banks will not lend 95% of a home’s value. The main reason is that the banks think house prices may fall further.

But of course, pumping up that housing bubble is more important than responsibility.

Second up: they plan on giving £400 million of taxpayers’ money to property developers:

There are plans to “build for growth”, with property companies able to bid for public funding to finish developments that have stalled because of a lack of funding.

So if the banks won’t lend to a property developer, the government will. With taxpayer’s money. And if the banks won’t lend to potential first time buyers to buy those homes, why then the government will guarantee the loans. With taxpayer’s money.

I say with taxpayers’ money. What I really meant of course was “with borrowed money”. Because under this government, public spending is (unbelievably) well up, and they are still expecting to add well over £100 billion to the national debt this year.

There is, I’m afraid, more.

The government wants to get its dirty mitts on our pension funds too.

Treasury sources said talks had been conducted with pension fund managers for months. They are hoping to attract managers to invest in infrastructure schemes because they provide a better rate of return than government bonds.

One insider said: “Fund managers are sitting on tens of billions of pounds and they want to invest in something that gives them a good rate of return.”

So the government plans on letting them invest in infrastructure projects. As far as I can tell from the Telegraph article, this is a variation on Labour’s Private Finance Initiative, this time to build “power stations, wind turbines and roads”. The return for the pension funds will come from payments from the taxpayer, of course. This is really a way for the government to borrow from our pension funds without it going on the government’s books.

I guess there is a possibility that the Conservatives are deliberately destroying the British economy, in order to force us into the Euro. Senior Tory Lord Heseltine was yesterday telling us he still thinks Britain will scrap the pound one day.

The other possibility is that they are every bit as incompetent and useless as Gordon Brown ever was.

Take your pick. Or maybe the answer is both.

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David Cameron – Not Exactly Flying in the Polls

Rt Hon David Cameron MP speaking at the Conser...
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David Cameron – Not Even Liked, Let Alone Regarded as Competent

The Daily Telegraph reports the results of a survey by IPSOS MORI that show that Lady Thatcher is regarded as the most capable Prime Minister of recent decades.

She received 36% of the votes, well ahead of Tony Blair on 27%. No surprises there really.

More interesting is that David Cameron received just 10%, behind Gordon Brown on 11%.

And Mr Cameron trailed heavily amongst Conservative voters too:

Current Conservative voters overwhelmingly preferred Lady Thatcher, with two-thirds saying she was the most capable compared to one-fifth for Cameron.

But what about Mr Cameron’s likeability? After all, Lady Thatcher might have been regarded as competent, but did anyone actually like her?

The surprising answer is that on likeability, Lady Thatcher was indeed beaten by Tony Blair (by 26% to 22%), but David Cameron actually trailed even on this measure, on 17%.

So the voters regard David Cameron as less capable than Gordon Brown and less likeable than Lady Thatcher.

I wonder how long the Tories will take to realise that they are in power in spite of Mr Cameron and not because of him.

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Half a Cheer for George

Gordon Brown in 2007
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Gordon Brown Nationalised Northern Rock. Now It is to be Privatised.

The Chancellor has announced that Northern Rock is to be privatised. That’s certainly good news, and a little step in the right direction. Says the BBC:

The auction of Northern Rock is expected to raise about £1bn, which is less than the £1.4bn the government injected into the bank, although not all of it is to be sold.

The former mutual has been split into a “good bank”, containing customers’ savings and about 70 branches, and a “bad bank” containing the more toxic loans.

The former is set to be sold, while the latter will continue to be owned by the Treasury.

That doesn’t sound half bad, does it? They’re getting only £400 million less than they put into it. And they will still own those “toxic loans”. Maybe some of those are worth something. They might even make a profit overall!

But wait. That BBC article is grossly misleading.

The “good bank” is called Northern Rock. The “bad bank” is called Northern Rock Asset Management, or NRAM. On 31st March the BBC itself reported Northern Rock’s financial results. In that article, it noted:

NRAM said it had repaid £1.1bn of its government loan over 2010, reducing its balance to £21.7bn.

£21.7 billion! Which is quite a bit more than £1.4 billion actually. But of course, it was lent by Gordon Brown’s government to Northern Rock Asset Management and not Northern Rock. How silly of me.

Getting the “good bank” off the government’s books for £1 billion is great. But the main part of the Northern Crock millstone is still hanging around the government’s neck.

And that’s before we even start on Lloyds Banking Group, 42% owned by the taxpayer, or Royal Bank of Scotland, over 80% taxpayer-owned. It would be nice to hear something from Mr Osborne along the lines that he expects to start selling Lloyds, at least, soon.

In the same speech, Mr Osborne announced that he is going to make the banks hold much more capital even than the new international rules say they have to, perhaps as much as 10% of their “risky assets”. (The new international rules say 7%.)

That will mean an even more extreme credit famine, because the banks will be forced to cut their lending further to protect that capital ratio. You can hear the squeak of stable door locks being closed and the thunder of hooves as the horses disappear over the hill.

During the unsustainable boom years, the banks were allowed to keep hardly any capital. Now that there is a credit famine, they are being forced to hold a much larger amount. The government has talked quite a lot about counter-cyclical rules, that would tighten up during booms and loosen during recessions. This qualifies whole-heartedly as pro-cyclical regulation.

Next time you hear the government claim that it is putting pressure on the banks to lend more, bear it in mind.

The final measure Mr Osborne announced is that retail arms of British banks must be protected from the investment banking arms. The idea, apparently, is that in a crisis the government would be able to step in and save the retail part, while letting the investment banking part fail.

Does anyone really believe the government would let that happen? The failure of a big investment bank would send shock waves through the financial system, just as the failure of Lehman Brothers did. In practice, I believe the government would step in to save the complete bank anyway.

Overall, then, only half a cheer for Mr Osborne. On second thoughts, only a quarter of a cheer. The significance of his announcements today is minimal.

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Miliband’s First Attempt to Apologise Falls Short

Sorry? What Do You Mean? It Wasn’t Our Fault! Nothing to Do With Us. Well, Maybe a Little.

The new Labour leader is finally getting away from the internal squabbles in his party. He has now got as far, supposedly, as “admitting” Labour’s role in the financial crisis.

Unfortunately his “admission” is a pretty weak one that basically amounts to admitting that Labour failed to stop the real culprits:

Let me say to the country directly; when you saw the worst financial crisis in a generation, I understand your anger that Labour hadn’t stood up to the old ways in the City which said deregulation was the answer.

When you wanted to make it possible for your kids to get on in life, I understand why you felt that we were stuck in old thinking about higher and higher levels of personal debt, including tuition fees.

And when you saw jobs disappear and economic security undermined, I understand your anger at a Labour government that claimed it could end boom and bust.

No mention, then, of the incompetent monetary policy that kept interest rates too low for years while the boom built up. No mention of the incompetence that then put them up too high and triggered the crunch.

No mention of the Labour government’s determination to cram ever more students through meaningless university “degrees” just to meet their target of 50 percent going to “uni”.

No mention of the fact that the Labour government was borrowing heavily throughout the boom. That not only had they not really stopped boom and bust, but that their incompetence actually made it more extreme.

No mention of Labour’s target-driven centralised approach to management of public services. No mention of their employment of millions extra in the public sector with no apparent improvement in services.

And that’s before we even get to the fact that there is no mention of Labour’s failures to raise school standards or of Labour’s failure to invest in our transport system or of Labour’s failure to have any kind of policy to ensure Britain’s energy security.

And definitely no mention of Labour’s obsession with internal security, with CCTV cameras watching our every move and plans for multiple national identity databases to record every aspect of our lives. Nor of Labour’s complete failure to control or manage immigration, or of their dragging our country into a disastrous adventure in the Middle East.

Not even any mention of the feud that was at the heart of that Labour government, between Tony Blair’s “New Labour” faction and Gordon Brown’s “Old Labour”. No mention either of Labour’s habit of hounding mercilessly anyone who dared speak against them.

In fact, no apology at all really, or any sign of any awareness of the extent of the failure of the Labour government.

D- young Ed. Must try harder.

The Budget: Labour’s Shame

George Osborne Starts to Clear Up Labour’s Mess

The budget attacks Labour’s deficit more aggressively than the outgoing government were planning. In addition to Labour’s plans, there are tax increases and an additional 5 percent cut in departmental spending (apart from Health and International Aid). Labour figures have lined up to criticise it. But it bears emphasising once again just how serious is the crisis that Labour landed us in.

In order to show how “responsible” Labour were with the economy, Gordon Brown, as Chancellor of the Exchequer, had a “golden rule”. That stated that over the economic cycle, the government would only borrow to invest. It also stated that public sector net debt would remain below 40 percent of the economy.

The Labour government struggled to keep to that rule even before the credit crunch, and had to keep revising the rule slightly to stay within it. Then they completely abandoned the rule when the credit crunch struck in 2008.

The Coalition is planning to eliminate the structural deficit within four years. So even with this budget, it will be four years before the government stops borrowing more money.

And what about the overall debt level? The Budget Report reveals that the debt is already around 55 percent of GDP, and heading sharply upward. This budget tackles Labour’s debt crisis pretty hard. So when will the national debt go back down below 40 percent?

You can’t tell exactly from the Budget Report, for the simple reason that the forecast in the document “only” goes forward as far as the year 2030. And it is going to take longer than that before the national debt drops below that 40 percent figure. And that’s with the measures in this budget.

Aggressive though this budget is in tackling Labour’s financial mess, it is the bare minimum we need to get our country back on its feet. The pain that the budget will cause has been made necessary by Labour’s incompetence and financial mismanagement. We are all paying for Labour’s mistakes, and it is clear to everyone yet again that you can’t trust Labour on the economy.

Harriet Harman – Acting Leader of Britain’s Discredited Labour Party

Harriet Harman shouldn’t be attacking the budget. She should be hanging her head in shame.

Bye, Gordon

“That is good”, said the fish. “He has gone away. Yes.
But your mother will come. She will find this big mess!
And this mess is so big and so deep and so tall
We cannot pick it up, there is no way at all.”

The Cat in the Hat
Dr Zeuss

Gordon Brown has announced that he is stepping down as party leader.

And not before time. Many people wanted him to go last year. And that was just the people in his own party.

Enoch Powell said that all political careers end in failure. Gordon Brown has been no exception. And he started as he meant to go on.

With Prudence. For a Purpose. And the purpose was to pour other people’s money into failing and unreformed public services.

From his tax raid on Britain’s rock solid pension funds, to his flogging of Britain’s gold at the bottom of the market; from his borrowing boom that gave Britain the illusion of prosperity, to his hundreds of stealth tax rises; from his botched and stupid tax credit system to his extension of pensions means testing; this politician has been a walking disaster.

He started as Chancellor with failure, masked by Tony Blair’s skilful spinning and presentation; and ended in failure, with a drubbing in his only election as leader and an unseemly scramble to cling onto power with Liberal support.

He leaves our country poorer (the first Prime Minister to do so for many decades); in fact, he leaves a mess that will tax the best efforts of politicians to clear it up, for many decades to come.

I wish him very well in his retirement; I hope he will take the opportunity to spend much more time with his lovely wife (who never deserved the sneering she got from the press) and his children. I hope he will write his memoirs, and even manage to find a publisher who might print a few hundred copies. And I hope they don’t get remaindered too quickly.

And I earnestly hope that his contribution to British politics from now on will be very, extremely, vanishingly small.