21 Nov 2012

Osborne Problem in Two Sentences

From today's Guardian:
UK government monthly borrowing rises more than expected to £8.6bn.

Fall in corporation tax receipts hits George Osborne's chances of meeting his deficit reduction targets for this year.
Or more succinctly, as the  IMF has been saying since this time last year, the government's approach to managing the economy is causing tax revenues to shrink exacerbating the government's problem.

You have no idea how much it pains me to agree with the IMF. But there is it. However the article also contains this:
A Treasury spokesman said: "The economy is healing, but it still faces many challenges..."
Now the first part of this statement is just bullshit. The economy is not healing, it is actively haemorrhaging still. Which is why government borrowing is rising still.

Remember the falling unemployment figures? Puzzling. But here we see the truth - business might be creating a lot of part-time jobs, but it is paying less tax. This either means that everyone is doing better at exploiting tax loopholes, or that they are making less profit. Only the government can do anything about the former, and despite the fact that they are long on rhetoric on this subject, to date there is not even a substantive proposal for tax reform, despite all the other reforms pursued by this so-called "Conservative" government.

One of the chief reasons revenues continue to fall is that demand is low, and one of the chief reasons demand is low is that debt repayment is soaking up a huge proportion of GDP. When debt is 492% of GDP (according to Robert Peston) what are the payments on it likely to be - I've asked many economists to offer a guess and they uniformly ignore me. Perhaps the answer doesn't bear thinking about?

A conservative is someone who seeks to preserve the status quo. The so called Conservative element of the coalition government is strongly reformists and has been shaking up the establishment from top to bottom to no great purpose. The Conservatives have morphed into the NeoLiberal Party.

No comments:

Post a Comment

Keep is seemly & on-topic. Thanks.