I have warned, successively, that the Budget forecasts on tax revenue growth were ludicrously high both for this year and for several to come. I also suggested that the OBR was discredited by endorsing them. As the table below shows, I did the maths to show why that had to be the case (it wasn't hard to do). And now, as the FT reports:
Britain's economic recovery has generated far less tax revenue than forecast, raising the prospect of even deeper spending cuts after the general election to balance the budget.
The latest blow to the public finances was an admission from the Office of Budget Responsibility on Monday that income tax receipts — the biggest single source of government revenue — are likely to fall short of government targets this year, despite record levels of employment.
I could just declare that as 1 to me and 0 to Robert Chote at the office for Budget Responsibility, but that would be petty when the issue is so important.
Three immediate issues follow from this. The first is that the quality of Treasury forecasting is dire. No one in their right minds could have believed the levels of growth forecast in March 2014 as shown in this table, the data for which is taken straight from the March 2014 budget with my extrapolation of growth rates added:
It wasn't just growth in tax revenues that was forecast, it was growth way beyond any underlying level of economic increase in activity that was suggested was going to happen this year, and that was always utterly implausible.
Second, we have to consider the possibility that the Treasury just lied when putting forward these growth projections. They are so ridiculous that has to be the best possible explanation for them.
And we have to the consider that the OBR may have been complicit in this - because if it was truly independent it should have been flagging up how unlikely this revenue growth was in March, and not now.
And what does it all mean? This list can be almost as long as you like. I'll keep it shortish.
First, the budget deficit this year will be bigger than forecast.
Second, as the rate of income tax growth forecast for this year continues virtually unabated according to this schedule for years to come, all future years are also wildly overstated so that likely budget deficits in those years are also wildly understated by George Osborne.
Third, that means that all Osborne's economic claims are shot to pieces.
Fourthly, that means that claim that there will be a balanced budget on this basis in the next parliament is not just ridiculous; it's as likely as George Osborne being the next Dr Who.
And that means, fifthly, that David Cameron's promises of tax cuts are just pure propaganda as the chance they will occur is s close to zero given that a budget surplus is their supposed pre-condition . That means that they should be completely dismissed as the daydreams of a pure fantasist.
Sixth, one has to speculate on why the OBR said this after Tory party conference when the issue was apparent before it. Again, OBR independence and / or competence are in question.
Seventh, why Labour is committing to these numbers is open to very real question.
Eighth, the need for a real alternative economic policy and not just a bundle of lies is now even more obviously necessary. But what chance of that, from any of the mainstream parties?
No wonder people are disenchanted with politicians.
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Utterly appalling, and to anybody with an ounce of intelligence, totally unsurprising. Then again, as Richard also notes:
“Seventh, why Labour is committing to these numbers is open to very real question.
Eighth, the need for a real alternative economic policy and not just a bundle of lies is now even more obviously necessary. But what chance of that, from any of the mainstream parties?
No wonder people are disenchanted with politicians.”
Which brings us back to the rise of UKIP, a party that feeds off the anger, despair, and resentment caused by the economic crisis which this hopeless coalition’s austerity policies are making worse every year.
My view would be that nobody should doubt the extent to which the Treasury is prepared to indulge in distortion, disinformation and economy with the truth to support the views of their ministers and thus the political party in government (or in this case the dominant party). This is not a new development, of course, but it has to be recognised that there’s been a step change in the politicisation of the civil service and departments of state and their subservience to one ideology (neoliberalism) under this government. The extent to which big business and/or representatives of the 1% have now captured key mechanisms and processes of policy making is unprecedented, and in my opinion is far more corrupting of democracy – and particularly a system of representative democracy – than pretty much anything that predates the First World War (e.g. the so called “rotten boroughs” system).
For me nothing symbolises the decent of government and the civil service into nothing more than a device through which big business controls the state (with the connivance and/or acquiescence of our political parties) than the appointment of the new chief executive of the civil service (the importation of this term into the civil service for the first time – as opposed to a government agency – is highly significant in my view). As The Guardian reported on Saturday, the new CE, John Manzoni, had continued with three private sector jobs while he’d been head of the Major Projects Authority. And he’s being allowed to continue as a non-exec director of SAB Miller while CE of the Civil Service. But more significant is that he comes to the civil service from big business. ‘He left the world of business to become chief executive of the Major Projects Authority earlier this year, joining Lord Browne, his former boss at BP, in the Cabinet Office. Browne, who is the government’s lead non-executive director and Chairman of Britain’s leading fracking company, Cuadrilla, was one of six members of the appointment panel who chose Manzoni for the job, though he did not chair it.’ (The Guardian, 11th October 2014, p.4).
I could make some points about the extent to which the culture and ethos of the Cabinet Office is likely to have become so compromised that it’s opinions of what is acceptable and ethical in government are open to question, but won’t. But what I will suggest is that now the management and culture of government and the civil service is so dominated by commercial actors and agendas, all underpined by a neoliberal bent, we can expect the same approach to dealing with “facts” and information – in short, the same moral and ethical stance normally associated with big business – to rapidly become the default mode of operation. Where the OBR fits into that I don’t know (the independence of the BoE doesn’t even warrant comment). But what was clear at the Tory Party conference was that Cameron and Osborne have created and intend to maintain a fairyland world of economic recovery, tax cuts and deficit reduction, and the airbrushing from history of the misery and suffering austerity has caused. And they now have a civil service that can be relied on to do whatever it takes to protect that charade.
The real question is why we need non-execs etc
What is parliamentary democracy for
I have been recording on these issues for the BBC this morning – no broadcast date yet though – it will be New Year
The answer would be to make government more “business-like”, Richard (and here you just have to remember the mantra, “private good, public bad”, to understand why. Just think of all the skills that Lord Browne and his ilk bring to government and the civil service that wouldn’t otherwise be there. Amongst his many claims to fame was the report that led to the end of a university system that had served him and many others very well – and was free – but could not be conferred (or afforded) when it came to today’s young people (mind you, it was another Brown, our sainted ex PM, that was dim enough to accept the policy, and whose judgement has once again been shown to be lacking over post independence devolution promises).
And parliamentary democracy? Just a sop to keep the rank and file of the population believing we live in a democracy where their vote makes a difference. Good to hear you’ll be speaking out on the matter, though, because our opposition parties certainly won’t. They know which side their bread’s buttered (Farage and his charlatans included).
Depressingly true – including the fact that I will probably end on the cutting room floor
Governments can’t be run on a businesslike basis. Governments have to be the providers of last resort, their business is the sustenance of life, of its length and quality, not creation of profit. A business perspective can shed personnel recently made superfluous by, say, efficiencies or technological advances, and not worry about what happens to them after. Government can’t have that attitude as it is, as I say, the provider of last resort for such people; do the business people now running government have any understanding of that, I wonder?
No idea at all….
You ask why Labour is committing to the numbers. OK, well, why?
I think one needs to differentiate between neo liberal economics and business expertise though. I don’t believe the public sector bad private sector good mantra, but there is a hideous lack of expertise in some Government departments. This includes the Treasury where, in my experience, it is more cock up theory rather than conspiracy theory.
What’s troubling is the even greater lack of expertise in the private sector
The idea of Lord Browne of Cuadrilla being in the Cabinet Office is sickening, and thank you Ivan Horrocks for drawing that to our attention. The Civil Service was politicised under Blair, with ‘sofa Government’, and has become even more politicised under Cameron. It is also, now, becoming _commercialised_, and its thinking is being dominated, as Ivan Horrocks says, by neoliberal ideology. ALL the main parties believe that ‘private (sector) good; public (sector) bad’, so the Civil Service takes that as Gospel truth, and operates on that basis. The Manzoni appointment is merely the culmination of a process that has been going on for quite some time now (far too long!), and which – hopefully – has reached its zenith. If it hasn’t, I dread to think what will be ‘outsourced’, and what will be privatised, next.
As to the issue of George Osborne balancing the books: the next ‘Dr Who’ should, in any event, be a black woman, and probably a Lesbian, but George Osborne will need to live as long as a Time Lord before he balances the books!
When will the madness stop and politicians and their economic shills that austerity is junk economics? That forever hacking at public debt means having to make further public sell-offs, more cuts or more borrowing to balance the books?
The EU and UK are trapped in this madness; the EU so desperate to show growth that they want to include drugs and prostitution in GDP figures.
Growth comes from spending, not from cutting!