Pre-Budget Report Pre-Thoughts

If the ideas being trailed in today's press are as far as Labour are going to go in this afternoon's Pre-Budget Report, then it looks to be a very damp squib.

The two main suggestions are an emergency cut in VAT and a new high level of income tax after the next election.

I find it strange to agree with John Redwood, but his comments about the fruitlessness of the VAT change were, in my opinion, spot on.

The intention is supposedly to increase consumer confidence and get people to spend, but with the actual price cut being only around 2%, I cannot see how that will happen.

For example, an £11.99 CD or DVD will be around 25p cheaper. A £40 pair of jeans will have a pound off the current price tag - but with sales offering 20% off already, I cannot see what incentive this will offer, even if high street retailers decide to pass on the savings rather than just make a little extra profit for themselves.

It is only when you reach significant sums of money - £500 for a smart new television that the savings become noticeable, and, by then, who cares?

Plaid have already suggested a serious VAT cut from 17.5% to 5% on labour-intensive industries that would cheapen costs of necessary work such as housing renovations and make the price comparatively attractive - more than 10% cheaper than at the moment.

But if the government wants to make a real difference then they should be putting money in people's pockets and give them the chance to spend it.

For a not-dis-similar figure to the cost of the proposed VAT cut, the government could cut the amount of income tax paid by standard rate tax-payers and let that money filter through into the real economy, helping low-earning families and taking a good few people out of the tax trap altogether.

The headline-grabber this morning, though, is the proposed new rate of income tax for high earners - postponed until after the election.

Let's not pretend that this is anything to do with the current crisis - this is party politicking par excellence, a line in the sand that if the Tories dare to cross will see them hammered by Labour as being the party of the mega-rich.

The amount of money that will be raised by this is minimal. People who earn more than £150,000 per annum already have excellent and expensive accountants who are experts in tax planning and avoidance, so without additional compliance measures this is little more than a gesture.

If Labour were serious about this as a tax-raising scheme to balance a hopelessly overblown Budget, it would be set at 50%, rather than the middle of nowhere 45%, it would start at £100,000, and it would be introduced in the next financial year.

But they're not serious - they just want the Tories to say it's bad so that in spite of leading us into the recession they can claim that they are the party of the people, and the Conservatives the party of the Toffs.

Brown and Darling are fiddling while our economy burns.

Or will there be a surprise this afternoon?

The Cost of Irresponsibility?

I wrote a short piece on Monday about the announcement of the UK's national debt figures for September 2008.

Since then, the Centre for Policy Studies have published a brief report by Conservative MP Brooks Newmark estimating that the cost of what's 'hidden' from the national debt figures - relating to unfunded public pensions liabilities, the full cost of PFI projects, Network Rail's debt and Bradford & Bingley's nationalisation - is much higher than the official figures.

They estimate that this figure is as high as £1,854bn, three times the official figures announced on Monday, or, including the further £500bn that's been promised for bank bailouts, £2,354bn.

In addition to Monday's figures, this has been broken down as being:

* £1,071bn on public pensions using the discount rate from the risk-free yield on index-linked government debt (as the government is not at risk of default),
* £30bn for Bradford & Bingley (using the justification that by being the second nationalisation in a year it is, by definition, not a 'one-off'),
* £20bn for Network Rail which the government would have to pay if the company failed; and
* £100bn for PFI projects - not including the ever-present risk of failure of PFI (this is a Tory pamphlet, so they don't want to suggest that private finance might be a bad thing!)

Including the banking bailout, this amounts to 161% of the UK GDP or £96,475 per household.

Perhaps Gordon shouldn't have been quite so quick to start pulling up figures about our GDP debt compared to other countries

Yesterday it was childcare, today it's laptops...

Gordon Brown signed up to yet another part of the Plaid Cymru 2007 manifesto today with his announcement on providing children with free computer hardware and software to assist their learning and ensure there is no 'digital divide' between the haves and have-nots.

This follows on from London Labour's stealing of our clothes on housing (England) and childcare (Wales - see p.22, col.2).

I wonder what next? Perhaps it could be taking devolution to its logical conclusion...Well, if it's good enough for Northern Ireland....

Brown's Nursery Rhymes

Gordon Brown made the 'eye-catching promise' over the weekend that children would be given free nursery places from the age of two onwards.

But from the social policy side, it's hardly a radical proposal - the One Wales Government is already committed to free part-time nursery places for 2 year olds in greatest need as part of our commitment to reducing child poverty, so yet another example of Brown filching a policy from a more progressive government.

The difference is that while we consider this an important aim as part of the One Wales agreement, Brown is unwilling to commit to a time or a figure for supporting this plan in England - and with it the financial spin off that results from the Barnett Formula, money that would come in handy not just for us to introduce our plans for nursery places, but also to provide support for the Foundation Phase of education introduced this year.

There's a worry at the back of my mind, though.

As we've seen from Budget after Budget, what Brown gives in one hand, he takes with the other, and having been reading James Purnell's welfare to work plans, you can only wonder how much time would elapse between free nursery places for two year olds in England and a new, radical idea from the Department from Work and Pensions to 'convince' their parents to head back to work, now that they don't have to look after their children.

Makes you think, doesn't it? And with this government's record, you wouldn't rule it out either, would you?

Well...if we thought for a minute they'd still be there to put these plans into action.