Friday, 18 March 2016

Osborne's Political Budget

It was difficult to find any enthusiasm for Osborne's latest budget. Like most of his measures and actions, it was characterised by politics rather than economics. The only difference is the short-term political objective he seeks to achieve in each case, despite his continual wittering on about the so called long-term economic plan, which in reality does not exist. This time, the political objectives were to bolster the hopes of Tories in the upcoming elections, and to try to not give any grounds for further dissent in Tory ranks ahead of the EU referendum.

So, Osborne made great play of trying to suggest that voters in various locations were being rewarded for having elected Tory administrations, by having assorted investments in capital projects undertaken in their area. In the US, this kind of corruption is called “pork barrel politics”, and it leads to all kinds of wasteful expenditure of resources, simply to garner votes. It should really provoke outrage from the various bodies charged with overseeing such investment, not to mention with voters in all those other areas, whose taxes are being used to provide handouts to Tory voters. But, what it is intended to do, is to suggest to these other voters, “if you vote in Tory administrations, you too could benefit from this kind of corruption.”

In similar vein,when announcing policies for investment in Scotland and Wales, Osborne made great play of saying that he had reached these decisions after the case had been put to him by the Tory leaders in these areas. The same thing applied to the decisions in relation to London, to bring forward the date when it could retain all of its revenues, and so on. So much for the idea of rebalancing, or the northern powerhouse, when the already lopsided economic resources, are to be made even more lopsided, by stopping the wealth of the city flowing out to the rest of the economy. And that is before HS2, sucks labour and resources from the rest of the country to meet the insatiable needs of the capital.

But that approach applied throughout Osborne's Budget. One of the central aspects of a capitalist economy, and for a free and open market is that the state establishes a level playing field, via common laws, taxes and benefits throughout. It should, according to bourgeois political theory, remove arbitrariness. Well, its clear, on the above basis, that Osborne did not achieve that. Instead, his measures were designed on the completely arbitrary basis of overtly supporting Tory supporters.

The same thing applied with other measures. Reminiscent of the Omnishambles budget of a few years ago, the arbitrary nature of Osborne's Sugar Tax, as with previously his Pasty Tax, has already been revealed. On the one hand, sugary soft drinks get taxed, whilst equally sugary whole juice drinks, doughnuts and confections do not! Moreover, Osborne has continued his policy, started a few years ago, of “helicopter money” dropped from on high, to the better off, and potential Tory supporters.

In the past, that took the form of the “Help To Buy” scam, and other means of keeping the property market bubble inflated. Now even those measures have run their course, in trying to prevent the bubble from bursting. So, now Osborne has proposed that those who are already in the fortunate position of having disposable income, should be given even more money by other taxpayers. Anyone below the age of forty can now put £4,000 away into a lifetime ISA, and be given another £1,000 of free helicopter money by the taxpayer. They can pay in until they can keep getting this free taxpayer money until they are 50.

As was pointed out by Ian King, on Sky's “Ian King Live”, that means that someone like him, with three kids, could either give or lend £4,000 a year to each of them, to save, and be given in total £3,000 a year by the taxpayer. There didn't appear to be any minimum age for subscribing to this lifetime ISA, so, in theory, he could obtain, £150,000 of free taxpayer funding, plus whatever interest was made on the savings, all of which would also be tax free!

In similar vein was the decision to exempt a large number of small businesses from Business Rates. The immediate cost of that, as with the previously announced measures, to force councils to pay for the cost of the government expropriating Housing Association properties, with its “Right to Buy” scam, falls not on the government, but on Local Authorities. But, the longer term effect is to place that burden instead on to the larger, more efficient businesses, who enjoy no such arbitrary largesse. In so doing, Osborne once again acts to damage the economy, in order simply to hand money to his political supporters. In the same vein, was his failure to take any further action in relation to the banks, along with the lowering of Capital Gains Tax.

As I've said previously, if Osborne really wanted to boost the real economy, he would scrap Corporation Tax, as a tax on profits, and instead impose much heavier dividend, income and capital gains taxes, so as to encourage the use of profits for capital accumulation and discourage their use as revenues. But, Osborne is not interested in the real economy. Like the class of money-lending capitalists, whose interests the Tories serve, he is only interested in furthering the personal interests of the owners of that money-capital, even where that conflicts with the interests of the real economy, and need for productive investment.

By boosting the interests of the money lenders, and with arbitrary measures that favour the class of small capitalists that make up the base of Tory members and supporters, Osborne actively damages the economy, because these measures act to subsidise that unproductive small capital, by diverting resources to it from the more efficient, more profitable bigger capital. It leads to a damaging and reactionary misallocation of capital. Its one of the reasons that the UK economy suffers from such low, and falling productivity. Both France and Germany produce as much in four days, as the UK produces in five!  At the same time, the policy encourages the diversion of money-capital into financial and property speculation, rather than productive investment. That means both that surplus value is increasingly leached away into this unproductive activity, and that, at the same time, the reduction in productive investment undermines the potential to grow the mass of profit in the first place.

Osborne's Budget was damaging and reactionary in economic terms, but his real goal was political, and short term. It was political not just in trying to boost Tory fortunes in the upcoming elections, but in trying to minimise the widening chasm within Tory ranks, as the contending material class interests it represents, rip it apart as the EU referendum campaign progresses. Those fractures, have already led to the potential for a rebellion over the cuts to disability benefits.

Osborne will come to be seen, in a few years time, as one of the worst Chancellor's on record. Even before taking office, his silly scaremongering over the state of the UK economy, undermined the strong economic growth that was beginning to take hold. His first Budget exacerbated that process, and turned what was a near 4% annualised growth, in the quarter when he took office, into negative growth. However the GDP figures, over that period, may be revised, the fact is that Osborne took a strongly growing economy in 2010, and turned it into an austerity driven recession, and low growth that lasted until 2014.

It is only because Osborne reversed course, in relation to the austerity, as I suggested, in 2010, he would have to do, and began increasing capital spending, and because he has, once more, fuelled a debt driven, sugar rush bubble, in the property market, mostly in London, that the economy has shown some signs of life since 2014. But sugar rushes always result in a subsequent crash. The economy that Osborne has built, like a sugar filled soft drink, is all froth and no substance.

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