Budget 2010-2011; A Fresh Start for Britain

23 Jun

Photo credit: http://parliament.gov.uk

“A Fresh Start for Britain” was a slogan used by Nick Clegg in early 2009 to draw support to his party, whose conference was coming up in weeks. I believe, that after today’s emergency budget, they have delivered on that promise.

With debt reaching 62% of the GDP (£903bn), and an unsustainable budget deficit, cuts were inevitable. The only question that remained, was when? While I quite agree with Nobel-prize winning economist and New York Times columnist Paul Krugman, that it would be the smarter decision to spend now, and cut later, a certain element of the budget process has and will prevent Britain from slipping into a double-dip recession: the genius that is George Osborne.

Before we can look at the impact the cuts will have on the economy, let us first determine what spending cuts would hurt the economy as a whole. Red_Nick, a Labour supporter Twitterer, attempted to make the point that no matter where the spending cuts come from, they will have a negative impact on the economy. Well I disagree with that. If you were to cut spending within governmental departments, without cutting pay, or cutting the workforce, I do not see it as likely that it will effect the private sector, which is the driving-force of any economy. The only cuts that would directly hurt the economy, as of this year, would be to divest from promises made by the previous government to banks and businesses. Below are some of the smart cuts, tax increases, and tax decreases/tax eliminations Osborne made.

1) Reducing the main corporation tax from 28% to 25%, and to 24% by 2014. This will enable businesses to have a newfound incentive to hire people. Similar to President Obama’s “Hire Act,” this move will create hundreds of thousands of jobs.

2) An increase from 17.5% to 20% in the VAT. While no one likes an increase in taxes on the working class, especially in a recovery, this was inevitable. Even Labour refused to rule it out in their 2010 manifesto. This new tax increase will raise £12bn for the government this year alone, and therefore more cuts have been avoided.

3) Public sector pay freeze. If I had to choose one new policy as the smartest move in the emergency budget, it would be this. Not because it would save a lot of money, but because it is the easiest money to save. First, there is no moral dilemma here since the most vulnerable will not be hit (only for those earning more than £21,000. And teachers are not impacted until next year). George Osborne is correct to say it is unfair that people who did nothing wrong but do their job and live their lives to pay for the mess (that American bankers made) that was made. However, when times are tough, we all need to tighten our budgets. Second, this is a two year freeze. So even with inflation, this should not bankrupt families.

4) As a result of the above cuts and many more factors, the budget deficit Britain faces will practically be history by 2015

The negative impact of the budget:

Welfare cuts. Even though these were limited, and inevitable, I believe they should have waited another two years. These cuts will hurt families, and worst of all, they have little time to prepare for them.

Labour’s folly: Overall, the budget the House of Commons will be voting on soon, is the 2014 would-be Labour budget.  And I think they should be god-damn honest about it. While I would have preferred the some of the cuts made to be deferred, they needed to be made. Some have argued Labour could not have helped, but that is wrong. While Britain is a parliamentary democracy and the ropes of partisanship are tighter than in places like the United States, where it is almost needed to have a super-majority of The United States Senate to even allow a vote on an issue (note: I don’t believe that system is perfect by any means). But I do not think this is the case when no single party or ideology has a majority. The Conservatives were already having to negotiating with the Liberal Democrats, which is a very diverse party ideologically anyway. There are some in there that are more conservative than the Tories, and some more socialist than John McDonnell. Labour could have easily offered a compromise without much political consequence, but they didn’t. Today was opposing for the sake of opposition, similar to those of the US Republican Party.  Some said the Tories would laugh them away. But I don’t think so. I have sent messages to various Tory MPs, asking them if they would laugh away an honest attempt by Labour to make a good budget, better. I highly doubt the answer will be “Of course hahahha”. And just because in the past partisanship reigned, does not mean in extraordinary circumstances it should too. Remember, David Cameron backed the original Brown bank bailouts. This is an extraordinary circumstance as well.

So in all, I urge MPs to cast a “Yes” vote on this harsh, but equally as important budget. Don’t get me wrong. I still, and will continue to support the Labour Party. Though I am disappointed, to say the least, by their ignorance.


2 Responses to “Budget 2010-2011; A Fresh Start for Britain”

  1. Abe June 23, 2010 at 4:38 am #

    Just to clarify. I don’t beleive Osborne’s 2% bank tax would be considered a “divestment”.

  2. Abe June 23, 2010 at 3:38 pm #

    Oh and one more thing. I know the HIRE Act was made specifically to create jobs, and Osborne’s tax cuts were not. However, they both will do the same thing. If you are a business owner in Britain, and wanted to hire and expand but could not afford to do so, this will help.


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