Budget row may be the tipping point for Brown

A furious spin battle is going on right now that may decide whether Gordon Brown’s main plank for the election holds up or shatters in pieces. At first glance, the spectacularly disloyal leak that the Treasury wanted to go much further and raise Vat rather than national insurance has the smack of a government losing control. Brown promptly denied any split but he would say that wouldn’t he? The challenge to his credibility at such a time seems deeply wounding, made worse by the rod Brown made for his own back , his pledge, set in law in the Queen’s Speech, to halve the deficit in four years. This allows the Institute for Fiscal Studies’ to work out the fiscal options in the three years following the last Darling budget – if the election doesn’t come first -and for hypercritics like Fraser Nelson to expose what they believe is the emperor’s nakedness.

Brown may be on the ropes but as the architect of three election victories, he’s not on the canvas yet. He obviously knows that the NHS’s “ring fence” is already full of holes and that cuts of up to 20% in unprotected areas are intolerable. So he’s pinning his hopes on the belief that the pressures are containable. The UK’s credit rating – “resilient” though not “resistant” like France’s and Germany’s – is holding up. And he’s got a fillip from Sarkozy over a Tobin tax to rein in the bankers. Contrary to what the Times seems to believe this is less about financial regulation than a straight political hit against bankers’ bonuses, about which the Economist, note, is relaxed. So why might Brown’s plank hold up? Well, perhaps the banks will oblige – but can they repay and lend the same time? Then again, repayment can last half a century and more. Britain’s second world war debt was fully repaid only in 2002, as David Blunkett recalled this morning. But that ignores the four year straight jacket. Nick Robinson has a more immediate explanation.

The NIC rise will do the trick! Over to you, Dave.

  • igor

    The markets are deciding for him.

    Gilts fell yesterday> foreign investors are pricing in the inflation risk in the UK and don’t like what they see – an unbalanced budget from an unbalanced Government

  • DC

    I don’t agree with your analysis for once Brian. The government were faced with a genuine dilemma and to be frank I think Brown won the argument of what was a slightly better option.

    It was basically done to show a debate going on in the Labour camp while in the Tory one nowt has been said or offered.

  • igor

    DC

    Brown is exposed as a cynical hack politician who is putting what he hopes will be party political advantage over the interest of the economy. What ‘debate’ went on in Labour? anyone who debates is sacked to gets a Nokia embedded in their ear.

    Browns only ‘hope’ is that the promises he has made are so full of holes as to be almost meaningless. They are also driven by the protection of the budgets of his coterie of supporters rather than real economic considerations.

    This is a party and governmnet that is slowly disintegrating before our eyes.

  • DC

    Yes Brown is a party political hack whereas the Tory Party is certainly not.

    The Tories will come to power admitting the Thaterchite neo-liberal economic structure in Britain was and is still broken. The Tory Party will fixed finance so as it will not require socialisation again to the tune of $850 billion.

    Because that will take the New out of New Labour, eh igor?

  • Greenflag

    ‘while in the Tory one nowt has been said or offered.’

    Mum’s the word bigtime until such time as and if the Cameroonians are ensconced at 10 Downing St . And then the gloves will be off to reveal some very sharp claws indeed . Shure it was always the way.
    What can they possibly do that previous Tory governments haven’t attempted ?

  • DC

    Isn’t it the case that the Thatcherite structural implements of monetarism and that of low interest rates and supply side bias have all combined terribly bringing the UK’s economic house down?

    How can people apportion blame to one man called Brown in particular whenever it appears that the value of money once at stake can now be revealed as £850 billion pounds, which is the estimated amount of public money that will be used up in plugging the City of London’s financial services sector?

    Seriously don’t people realise the systemic might of the financial services sector, its PR and legal team, it was so strong and such a force that Labour had to put New into its name to get a shot at governing as the Murdoch press wouldn’t let it be any other way; but now alas there is an opportunity to say that structurally the neo-liberalism as practised by financial marketeers is actually too costly. Therefore the management of the economy must change. Following that train of thought, the Tory Party is not best placed to see that change through. Cameron comes from a family of stock brokers.

    Thatcherite approaches, so it would seem, were too New Right and back in the 70s old Labour too Old Left. It isn’t a case of turning the clock back, as that wont do.

    If today it were just a matter of style, Cameron would indeed be able to beat Brown on style alone; but, unfortunately there’s a thing called this £850 billion deficit resulting from the “New” bit of Labour following on from Conservative policy of low interest rates, stable prices and an economy built around a financial system and centre prone to fits of false highs and chronic seizures when going low.

    Creating an almost homogeneous economic credit culture in Britain, a credit culture in which debt is encouraged so as finance can be serviced via the UK public and its debt, generally speaking in a localised UK sense.

    There is little commitment to a Keynesian policy of sorts, not even a little slither that favours producer interests through stimulating other economic sectors; this has been discounted and ignored almost totally under the Tories. And indeed carried on under New Labour. Mandelson is mentioning it again re innovative industries etc, but he’s too late for that and he already had mentioned and highlighted the problems in the Blair Revolution (1996), yet he did nothing about it.

    Isn’t it funny that people look at it as Darling’s deficit or Brown’s fault whenever the entire financial system in Britain and Ireland too it would seem was built around consumer booms, financed by to a large degree by foreign capital, worked on in particular by financial business arms in the City of London. Ultimately making it easier to borrow to consume than borrow to produce, given those systemic high short-term returns.

    Germany may have lost the war but it certainly maintains a degree of respect through actually producing things and also doing a bit of finance. A better mixed economy and attitude to trade in Europe and with Russia. It’s called having to stick up for yourself and building a structurally sound society. Both UK and Ireland are too in hock to the USA promoting a tendency to go there and look for financial help and alliances when things get difficult.

    Isn’t it ironic that the key tenet of capitalism is competition yet the very system of neo-liberal Thatcherite thought seems to be without a competitor itself, at the moment. No competitor despite there being an £850 billion deficit created as a result of following blindly Thatcherite economic policy.

  • DC

    Keywords: ‘Scapegoat Brown’ or ‘Shut Up’.

  • You guys who blog at Slugger are becoming a disgrace, at a time when it looks like the Tories might gain power, Slugger is giving David Cameron a free ride. Slugger has become part of the problem, you lot are behaving in exactly the same way big media did with Tony Blair prior to the 1997 election.

    You are more interested in the crums which may fall from the table and not upsetting the Tories than giving your readers an idea of what to expect from Cameron, what he stands for, and who stand behind him. Instead all you are interested in is tittle tattle about a chancellor and PM disagreeing with each other, shock horror, hold the front page.

    Well done DC for speaking the truth, we get very little of that here these days.

    What I find so despicable is time and a again those who blog here tell us the tories are a shoe in, yet the very same people daily pour excreta over Brown whilst cheering Cameron on as if there is no need to peep under his carpet.

    We have had one blue eyed wonder boy governing the UK, and he cost upwards of a million people their lives, slugger seems determined to help ease yet another into the big house. Shame on the lot of you.

  • Reader

    DC: How can people apportion blame to one man called Brown in particular whenever it appears that the value of money once at stake can now be revealed as £850 billion pounds, which is the estimated amount of public money that will be used up in plugging the City of London’s financial services sector?
    It was bubble money, it didn’t really exist, the banks lent it out on the basis that it would come back with a bit of real money as interest. Now the bubble has burst, the banks have to re-absorb the loans and not pay them out again – the billions of pounds fed into the system are to soften up that process or there would be no credit available at all.
    Gordon ‘no more boom and bust’ Brown fed and watered the bubble because he could tax it. Then he pissed that tax away. Now he is borrowing to fund ongoing expenditure that he seems incapable of cutting.
    So, damned right I blame Brown.

  • Reader

    Mickhall: We have had one blue eyed wonder boy governing the UK, and he cost upwards of a million people their lives, slugger seems determined to help ease yet another into the big house.
    Do you absolve Gordon Brown of all responsibility for all of that?

  • igor

    Mick

    We know you want a Socialist Nirvana – well I am afraid it ain’t going to work and will only lead to more misery. The best way to resolve the problems of the UK right now are to take the fiscal measures to restore confidence in the pound, pay down the debt and generate real jobs.

    The real scandal of Nu Labour was the way that taxes have been forced up to pay for ‘investment’ in public services that have produced next to nothing in improved productivity or results.

    English education is crap. The Army is sent to war without enough men or supplies. The NHS has a lot of good new centres of excellenet and a lot of disgraceful hovels of hospitals that are filthy. This week alone we have some GPs refusing to give children flu vaccinations because under their new contract it might impact adversely on their bonuses by stopping them meeting other targets.

    What a socialist utopia Brown has created.

    As for Cameron, at this stage we don’t know how he will turn out but most of us are working on the basis that it can’t be worse that we have now.

  • DC

    I blamed Brown over leadership of his party re the expenses but the financial system was rigged structurally. What you’re saying is that Brown didn’t manage the economy right, but thing is with Bank of England independence and regulatory autonomy as a result of light-touch Thatcherite policy the system was always going to be left in other hands, it was and still is up to its old tricks. It ain’t called the neo-liberal free market for nothing you know.

    If you blame Brown then it is pointless voting for Cameron as he wont change the regulation, or recast the financial social order at all either.

    He’s an interesting post from CiF:

    Banks seem to be lending at 22 month highs for mortgages around 4% variable. Yet they are paying 0.05% on deposits (ie 500 pounds per million deposited.) So 10,000 mortgages of 100,000 pounds is one billion pounds loaned and earns (without set up fees etc) 40 million pounds interest per annum, yet costs 500,000 on interest paid on deposits.

    That would be like a high street retailer (which is all the banks are after all) such as WHSmiths, buying books for a pound and selling them for 80 pounds.

    Maybe it is the markup that banks are allowed to charge that requires some regulation and not just a one off (vote grabbing?) bonus tax.

    China must be laughing. For there’s a country that doesn’t put up with individuals taking all they can exploit nor does it put up with a media the like of which Murdoch runs, one protecting fiercely those *vested interests*.

    Since the 70s and the parliamentary sovereignty abused under Thatcher the whole financial system is rigged to the hilt for dizzying highs and noxious financial lows.

    And under Brown’s watch there was a boom but no bust as of yet because he deployed a counter-cyclical deficit spend to plug it, which, of course, Cameron will have to go to town on.

  • DC

    The real scandal of Nu Labour was the way that taxes have been forced up to pay for ‘investment’ in public services that have produced next to nothing in improved productivity or results.

    And the real scandal for Cameron is that unless he rebuilds a real economy other than servicing finance there wont be proper growth based on production.

    And you can tinker all you want with the flow of money but if there’s nothing there other the City of London then that’s the best you can hope for.

    Because you seem a bit blinkered Igor, I will give you a sample of Keynesian stimulus German style, yes it is wasteful in money but hey it’s creating something long-term.

    Just click on the pics (should be simple enough for you):

    Ideas 1: http://www.spiegel.de/fotostrecke/fotostrecke-49640.html

    Or try Swedish ideas:

    http://www.spiegel.de/fotostrecke/fotostrecke-49651-2.html

  • Reader

    DC: What you’re saying is that Brown didn’t manage the economy right, but thing is with Bank of England independence and regulatory autonomy as a result of light-touch Thatcherite policy the system was always going to be left in other hands, it was and still is up to its old tricks.
    The first thing Brown did when he got into the treasury was to give the BoE the power to set interest rates with the sole defined objective of controlling inflation. Then he rejigged the rest of the regulatory authorities. Then he started fiddling with the definition of the inflation rate to keep interest rates low and credit booming, then he broke his own rules on borrowing. Not he has thrown his own rulebook out of the window.
    Even if he had done nothing, he would have been to blame for his omissions; but in fact he was hands on throughout the last 12 years. That’s hardly your ‘light-touch Thatcherite policy’

  • Reader,

    It is not a question of absolving Brown from responsibility, or not questioning his current policies, that is how governments should be held to account. My complaint was about the double standards here on Slugger O’Toole and I might add it is indicative of this blog. Just as Mick F and those other bloggers have consistently refused to hold Cameron to account, they have done the same with the DUP, we have had endless blogs castigating SF, especially Gerry Adams, yet Peter Robinson has ‘almost’ had a free ride.

    The latest non story at the top of this thread is indicative of what I mean, this on a day when the MPs expenses scandal has reemerged with David Cameron having been caught out at the very least of playing fast and loose over his expenses and of acting as a total hypocrite.

    ——————————————–

    From todays Guardian.

    David Cameron was charging more than £1,000 a month in mortgage interest payments at the same time that he was calling for the system of MPs’ expenses and allowance to be radically reformed.

    The Tory leader’s expenses, released this morning, show that on 12 May this year he submitted £1,081 for mortgage interest on his Witney constituency home for that month.

    Just two days before submitting the claim – after the Daily Telegraph had exposed a series of wrongdoings by MPs – Cameron had apologised for the system of MPs’ expenses.

    “We have to acknowledge just how bad this is,” he said on 10 May. “The public are really angry and we have to start by saying, ‘Look, this system that we have, that we used, that we operated, that we took part in – it was wrong and we are sorry about that’.”

    The following day – Monday 11 May – Cameron’s expenses were published by the Telegraph. These showed that he had claimed a total of £82,450 on his second home allowance over five years. He agreed to pay back £680 he had claimed for repairs to his constituency home, including the cost of clearing wisteria.

    Cameron faced little criticism over his expenses because his claims were completely within the rules. But Sir Christopher Kelly, who was charged with recommending reforms, has said that mortgage claims should be phased out and that MPs should charge for rented accommodation instead.

    Cameron also:

    • Claimed £1,198.57 for oil for the stove at his Witney home on top of monthly utility bills averaging £180 a month. The Tory leader claimed £867.57 for burning oil in October 2008, with a further claim in February 2009 for £331 for his second home. He also secured a 10% reduction in council tax on the property from his local council, though the value of the property meant he was still claiming back £196 a month for the band G tax.

    • Made use of one of the £10,000 communications allowance which has been strongly criticised by the Tories. This allows MPs to charge for websites and sending out leaflets as long as they publicise their work as constituency MPs and are not political.

    In 2007-08 Cameron claimed £1,656.76 for maintaining his website and £456.25 for taking out advertisements in local Witney newsletters.

    In a speech on cutting the costs of politics in September this year, Cameron said of the communications allowance: “It may sound newfangled, but let me tell you: it’s nothing less than old-fashioned, state-sanctioned propaganda.

    More here
    http://www.guardian.co.uk/politics/2009/dec/10/david-cameron-mps-expenses
    ———————————-

  • “We know you want a Socialist Nirvana”

    Igor

    Well that really put me in my place and answered the issues I raised, is that really the only level of debate you can reach. Instead of splattering worthless cold war slogans about socialism and UK hospitals being hovels, you might like to come into the real world.

    If you had actually had any experienced of third world Hospitals, many of which can accurately be described as hovels you would not have the effrontery to call NHS hospitals such. Is there shortcomings and maladministration in the NHS yes, I recently experienced these shortcomings and wrote about them here.

    http://www.organizedrage.com/2009/11/when-i-recently-visited-my-mother-in.html

    But for christ sake get things into perspective, the NHS is still the greatest institution the UK has, and for all Blue Labours mistakes Browns shortcomings, and Blairs crimes, the NHS under their watch has seen real improvements and thank the f—- for that, as under the previous Tory government we saw the deliberate neglect of the NHS.

    By the way I have no wish for any political Nivarda, socialist or otherwise, that road leads to hell. All I ask is politicians do not leave the country worse than when they entered office; and over the last four decades neither Labour or Tory governments have managed to achieve this modest benchmark.

  • Reader

    DC quoting CiF: Yet they are paying 0.05% on deposits
    What sort of halfwit invests at .05%?

  • DC

    Reader, unless you’re pumping in 10k or so over 5 years then the answer to your question is the halfwit of the masses that are confronted with a shitty financial system.

    £850 billion deficit didn’t all go on health and education.

  • Reader

    DC: Reader, unless you’re pumping in 10k or so over 5 years…
    There’s plenty else here to choose from:
    http://www.money.co.uk/savings-accounts.htm