Wednesday, June 23, 2010
A necessary measure
There is no denying the fact that yesterday's budget was difficult. It was difficult for the Liberal Democrats who never envisaged that their first taste of power at a UK level would be so tough, but above all it is difficult for the country and the many people who will have to tighten their belt so that we can get the country back on track after the last few disastrous years of Labour government.
The situation facing the new government was dire. It inherited a £155 billion deficit and debt of near £800bn, whilst the independent Office of Budget Responsibility recently revealed that the growth assumptions of the former Chancellor were over-optimistic and the structural deficit was £12 billion more than we had thought.
Labour are obviously spinning that the depression had nothing to do with them and there is no denying that it was an international phenomenon. However, it did not hit every country in the same way. In particular the high level of debt, which Vince Cable amongst others had been warning about, and the failure to properly regulate the banks left Britain vulnerable. Labour cannot escape responsibility for that.
It has also been pointed out that the rhetoric of the Liberal Democrats before the election is in marked contrast to their actions in government, particularly over the issue of early cuts and VAT. I cannot pretend that I am comfortable with that. If anything it flags up that we need to be much more circumspect in future election campaigns.
However, it is clear that we had no choice on both counts. Events in Europe meant that we had to act to protect Britain's creditworthiness. The state of the nation's finances and those subsequent events meant that the situation had changed between those election pronouncements and entering government. The VAT rise was one of the few options available to us to balance the books.
It is right of course that VAT is a regressive tax but it is less so than most sales taxes. It does not apply to food or children's clothes for example. It mostly applies to luxury goods and even where it does affect gas and electricity it is at a lower rate, 6% now I believe. It does of course also affect many other goods and services, which may not now be affordable to some people. That is regrettable.
This budget though did contain many good things and clearly showed the Liberal Democrats' moderating influence. These include:
I believe that most people understand the need for tough measures to get the economy under control and will accept that this budget is necessary. Our challenge now is to make it work.
The situation facing the new government was dire. It inherited a £155 billion deficit and debt of near £800bn, whilst the independent Office of Budget Responsibility recently revealed that the growth assumptions of the former Chancellor were over-optimistic and the structural deficit was £12 billion more than we had thought.
Labour are obviously spinning that the depression had nothing to do with them and there is no denying that it was an international phenomenon. However, it did not hit every country in the same way. In particular the high level of debt, which Vince Cable amongst others had been warning about, and the failure to properly regulate the banks left Britain vulnerable. Labour cannot escape responsibility for that.
It has also been pointed out that the rhetoric of the Liberal Democrats before the election is in marked contrast to their actions in government, particularly over the issue of early cuts and VAT. I cannot pretend that I am comfortable with that. If anything it flags up that we need to be much more circumspect in future election campaigns.
However, it is clear that we had no choice on both counts. Events in Europe meant that we had to act to protect Britain's creditworthiness. The state of the nation's finances and those subsequent events meant that the situation had changed between those election pronouncements and entering government. The VAT rise was one of the few options available to us to balance the books.
It is right of course that VAT is a regressive tax but it is less so than most sales taxes. It does not apply to food or children's clothes for example. It mostly applies to luxury goods and even where it does affect gas and electricity it is at a lower rate, 6% now I believe. It does of course also affect many other goods and services, which may not now be affordable to some people. That is regrettable.
This budget though did contain many good things and clearly showed the Liberal Democrats' moderating influence. These include:
- lifting the tax threshold to £7,475 a year. This will take 50,000 low earners in Wales out of tax altogether and will cut £200 off the tax bill of many others.
- restoring the earnings link for pensioners from next year when pensions will rise 2.5% or the rate of inflation, whichever is the highest.
- an extra £2 billion for the child element of tax credits. We remain commited to the pupil premium to better fund the education of disadvantaged children.
- A 10% increase in Capital Gains tax to 28% for higher rate taxpayers, 18% for basic rate payers.
- A bank levy which will raise £2.5 billion a year.
- a cut in corporation tax from 28% to 24% over four years. The small companies rate has been cut to 20%.
- A 10% capital gains tax rate for entrepeneurs extended to the first £5 million of qualifying gains.
- The number of employees for whom employers pay no National Insurance contribution will rise by 650,000.
- cutting National Insurance contributions for new Welsh businesses.
I believe that most people understand the need for tough measures to get the economy under control and will accept that this budget is necessary. Our challenge now is to make it work.
Comments:
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Good post and reassuring to read some cold realism from any quarter. I think on the whole this was a reasonable budget in the awful circumstances, although it will still hurt badly.
However, in the interests of strict accuracy, the coalition inherited a £155 billion deficit, not debt - the debt was creeping up to £800 billion.
However, in the interests of strict accuracy, the coalition inherited a £155 billion deficit, not debt - the debt was creeping up to £800 billion.
# posted by 
: 11:58 AM
: 11:58 AM
Unfortunately, this is going to affect the Lib Dems. Welsh unemployment is the highest in the UK, in addition to Wales's and more specifically the Welsh Assembly Government reliance on Public Sector Jobs, namely DVLA, Welsh Land Registry, Passport Office to name just a few. WAG took over the Welsh Development Agency which wasn't doing much and in my opinion, still isn't doing much!
What is being done, if anything to create private sector jobs? What is being done to promote tourism? What is being done to harvest wind and wave energy in Wales? What is being done to harvest all the hot air that being produced within the Sennedd?
What is being done, if anything to create private sector jobs? What is being done to promote tourism? What is being done to harvest wind and wave energy in Wales? What is being done to harvest all the hot air that being produced within the Sennedd?
# posted by : 12:17 PM
: 12:17 PM
anonymous: the WLDs aren't responsible for the lack of innovation in the bay, that's all down to the Nat-Socs.
# posted by : 5:03 PM
: 5:03 PM
On the contrary, I think that most people who voted Lib Dem or ever considered doing so as an means of opposing Tory VAT increases must be feeling very let down.
# posted by : 12:01 AM
: 12:01 AM
The point I'm making is that the Plaid-Labour Parish Councillors need to take responsibilty for the fact that Unemployment in Wales is as high as it is in the Principality. The highest rate in the UK.
They need to take responsibilty for Job & Wealth Creation. That take a level of intelegence and entrepreneurship. Sadly lacking in Wales I'm afraid.
When I left the university of Swansea back in 1988 I was told to get out of Wales if you expect to get a job, that was by a member of staff. There isn't any jobs for professionals in Wales, the situation hasn't changed in 2010.
How many jobs were promised with the Baglan Energy Park anywhere between 6,000 to 10,000 how many jobs have been created, very few, just public bodies taking advantage of cheap rental property in the Energy Park.
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They need to take responsibilty for Job & Wealth Creation. That take a level of intelegence and entrepreneurship. Sadly lacking in Wales I'm afraid.
When I left the university of Swansea back in 1988 I was told to get out of Wales if you expect to get a job, that was by a member of staff. There isn't any jobs for professionals in Wales, the situation hasn't changed in 2010.
How many jobs were promised with the Baglan Energy Park anywhere between 6,000 to 10,000 how many jobs have been created, very few, just public bodies taking advantage of cheap rental property in the Energy Park.
# posted by : 10:21 PM
: 10:21 PM<< Home
