After a decade of reckless spending, the government’s kitty is bare and its debts are mounting. In November, Alastair Darling said the economy would shrink just 2%, but predicted, Micawber-style, that it would turn up in mid-2009. Well, the economists’ consensus is that it actually shrank 3.7%, and that it’s hardly going to turn up this year at all.
Unemployment’s already 2 million, heading for 3.2 million. That’s a lot more people drawing benefits and not paying taxes. And there’s those expensive bank bailouts to pay for. So the Chancellor is borrowing wildly. Again, the economists’ consensus is that he borrowed £160 billion in 2008-09 and will need another £167 billion this year. That’s a whopping £100 billion more than he anticipated in November. It’s borrowing on a scale not seen since World War II. Then, we were fighting a war. Now, we’re just borrowing to pay off our debts.
The Institute for Fiscal Studies says the national debt could climb to 73% of GDP – 84% if you add the bank bailouts. That’s scary (scarier still if you include the future costs of nuclear decommissioning, PFI schools and hospitals, and civil servants’ gold-plated pensions).
Getting out of debt like that will take years – even if spending is cut back. But with places like Derbyshire putting their council tax up 8.7% and Whitehall’s generous budgets being set until 2011, there’s scant chance of that.
Still, after June 2010 it will be the Tories’ problem, so expect Darling to announce giveaways and gimmicks (like electric cars) now, and large tax rises that bite after the election. But what we really need is to slash regulation and tax on the people who, unlike politicians, can really create jobs – investors and employers.
Dr Eamonn Butler is Director of the Adam Smith Institute and author of The Rotten State of Britain.
Published in the Spectator here
Email sent to the Treasury
I am writing to express my extreme concern that you wish to raise the price of drinks in the Budget, by increasing tax on alcohol.
During these economic times an extra tax on those who are dealing with increased prices, from basic necessities to those nonessential items, is the wrong answer.
Furthermore, given the potential jobs which can be targeted by an alcohol tax hike, it is appalling to think that the government wishes to place nearly 75,000 jobs at risk for a profit from this particular tax. In fact, your own Angela Eagle has stated that the government sees this tax increase as a "revenue stream", however there are more wise approaches to the budget which should be addressed. These approaches can include, but are certainly not limited to: public workers and government taking pay cuts, as many citizens have been forced to do; or correcting the unfair welfare state and requiring individuals work for part of their welfare - saving Britain money whilst preventing the loss of jobs to foreign workers. Following the smoking ban, which has already hurt the British pub institution, increasing taxes on alcohol will further drive the knife into the local pubs and lead to more closing on a daily basis.
I ask you to protect ordinary people like myself, who are already struggling with rising prices in this downturn. Also, I would ask for your support in protecting businesses in Britain, many of which may suffer unnecessarily if drink prices are raised further.
All of us are aware that there are a small minority who misuse alcohol but it is not fair if all of us are punished.
I ask you to put pressure on other Government departments to ensure that existing laws to crack down on problem drinkers are enforced. This is far better than pushing through a blanket measure that will only sting ordinary drinkers and do nothing to tackle alcohol misuse.
I look forward to your reply.
Thank you for your email.
The alcohol duty increases announced at Budget 2008 and in the Pre-Budget Report were not designed to tackle problem drinking but they will play their part in ensuring we can continue to fund the Government’s spending priorities.
Alcohol duty is an important revenue stream for the Government and there are currently no plans to change what was announced in the Budget and Pre-Budget Report 2008, though as with all taxes, alcohol duty rates will be kept under review.
Your email also mentions enforcement of current policies to deal with irresponsible drinkers. Whilst the vast majority of people consume alcohol responsibly there are undoubtedly some individuals who cause problems. The Government takes the problems associated with alcohol misuse seriously and has an important role to play: in making sure people are able to make informed choices, and encouraging drinkers to drink responsibly; in making sure businesses sell alcohol responsibly; and in making clear that individual choice is never an excuse for causing harm and distress to others, and that the police, local authorities, and others have the powers to stop this and are encouraged to use them.
H M Treasury