UK Budget: Osborne spins as economy sinks

‘It is taking longer than anyone hoped but we must hold to the right track... by setting free the aspirations of the nation, we will get there,’ so we were reassured by Chancellor of the Exchequer George Osborne. ‘It is a budget for an aspiration nation...a budget for people who aspire to work hard and get on’, said the heir to the Baronetcy of Ballintaylor, County Tipperary, whose personal fortune in 2010 was put at £4.6m. An ‘aspiration nation’: it is as if Osborne imagines himself presiding over a country full of property developers and estate agents. No doubt such are the intended beneficiaries of the March 2013 Budget.

‘How bad are public finances?’ asks the Financial Times, giving the answer: ‘On almost any measure they are terrible and have got substantially worse’ (21 March 2013). In 2010 the Chancellor said the government would begin to reduce public sector net debt as a proportion of the national income (GDP) by 2014-15. Thus the government went about its cuts and austerity drive. The result: public sector net debt is now forecast to reach 85.6% of GDP in 2016-17 (almost £25,000 for every person in the United Kingdom) when it stood at 57.2% of GDP in September 2010. By the next General Election in 2015 this government will have borrowed almost £250bn more than it said it would in 2010 – enough to pay for the NHS for two years and more!

Borrowing increases as revenues fall; revenues are consistently below the Office for Budget Responsibility (OBR) forecasts. The Coalition government formed the OBR in 2010 ‘to provide independent and authoritative analysis of the UK’s public finances’. On the day of the Budget the OBR adjusted its forecast for 2013’s GDP down to 0.6% and for 2014 down from 2% to 1.8%. This ‘authoritative’ body has consistently over-estimated tax receipts, under-estimated government borrowing and over-estimated GDP growth – and has had to repeatedly revise its predictions.

Headlining the Budget was the Help to Buy scheme, targeted at middle class voters and presumably at key electoral constituencies in the south of England. From 2014 for three years the government will provide up to £12bn in mortgage guarantees, sufficient to cover £130bn in new mortgages. Lenders will receive a partial guarantee on mortgages offered to people who buy homes worth up to £600,000 with a deposit of between 5% and 20% of the property value. Typically, the buyer will put down a 5% deposit, the government 20% and the commercial lender the rest. This is presented as helping first-time buyers who cannot afford a large deposit onto the property ladder. However, there is nothing to stop existing homeowners from taking part in the scheme to bring their mortgage payments down or using it to buy second homes. People are being encouraged to mortgage themselves up to the hilt to buy properties that will rise even more in price because of this scheme.

While this government rails against the previous Labour government for leaving it with so much debt to clear up, it is both increasing government debt and intends to drown those still able to borrow with mortgage repayments.

Osborne announced an increase in the discount on right-to-buy council properties in London from £75,000 to £100,000, accelerating the social cleansing of the city. ‘A generous new tax regime’ will ensure that shale gas is ‘part of the future and we will make it happen’. Corporation tax on company profits is to come down from 23% to 20% in 2015; ‘The lowest business tax of any major economy in the world.’ The 1% cap on public sector pay increases is to be maintained. From 2014 the first £10,000 of earning will be tax free. It is an indication of low wages in Britain that some three million workers will no longer have to pay any income tax as a result.

The government says that 75% of its welfare cuts are still to come. The chancellor described the welfare system in Britain as ‘bloated’. It is as if Britain had revived the medieval tradition of appointing a Lord of Misrule to govern us and had chosen the most malevolent spirit in the land. We must show them the errors of their ways.

Trevor Rayne

Fight Racism! Fight Imperialism! 232 April/May 2013