Facing massive problems funding the budget deficit, record levels of structural unemployment, public sector wage claims, energy prices and national debt, a fragile bond market, an imminent recession and negative growth, the Chancellor, Jeremy Hunt, simply froze in the headlights.
A budget for growth it was not, given the forecast recession, but just possibly it might have eased that recession a fraction, so I am not going to carp over some pretty minor spending increases. It’s his strategy, or lack of it, I worry about.
Take the issue of childcare support for working mothers. He chooses to spend an additional £4bn on professional child carers. Leaving aside the age-old concerns about separating mothers from their new-born children, surely a much better and cheaper solution is Single Parent Circles. In this a social worker organises five single parents to form a group in which one looks after the children while the others go out to work and pay across a fifth of their earning to the first. Apart from the social worker it doesn’t cost the taxpayer a penny. You could even take it a step further and rehouse all five of them in a single large house where they will also get the mutual emotional support they need.
Obtusely Hunt has picked up on the problem of record unemployment (only about 10% of those of working age unemployed are benefit claimants), of which about 17% claim it is due to lack of affordable child care, but he has completely ignored the root cause of it all which is open borders. The points-based immigration system is supposed to exclude anyone who cannot earn a living in this country, but because Big Business prefers younger, cheaper, trained workers these are simply displacing older or untrained British workers and the result is the same. Only a switch to an auctioned quota system for total immigration will solve this. If we can reduce unemployment by 5% (8% to 3%) that in itself would save the Treasury over £100bn.
And just a point on immigration whilst I am on it. Total gross immigration is now around 75,000 a month. Of these ‘only’ around 5000 are illegals and refugees, and another 5000 could generously be attributed to people with rare skills and experience we cannot generate here. The rest, 65,000 of them, are simply cheap labour. They are undermining our economy, not benefitting it. Indeed, look at the GDP per capita growth rates over the past 22 years. They show a steady and persistent decline. No benefit whatsoever showing up as a result of massive immigration!
But back to the budget. No further relief for business from energy costs – that could cause havoc during a recession. But the main argument is over growth, with the Tories still stubbornly insisting that massive tax cuts are required to create economic growth. Wrong – it is investment that does that. Investment in productivity is uniquely being undermined in this country by three factors – the still ever-increasing trade deficit with the EU, open borders as above, and what I call ‘impotent’ investment, in other words the amount of available investment funding going into pushing up house prices rather than productivity. The Bank of England must be instructed to manage house price inflation separately from general inflation so as to squeeze available funding back towards industry. No need for tax cuts – and in any case there has been no shortage of funds in the City recently desperately searching for yield.
But what I found particularly amusing on Newsnight last night was Jacob Rees-Mogg pointing out that the Irish raise more in corporation tax (presumably % of GDP) than we do despite have a rate of only 12.5%, which he used to present a sort of Laffer-curve argument for cutting taxes. Presumably a logical extrapolation of this would lead to the conclusion that zero tax rates would result in infinite tax revenues? A reductio in absurdum, methinks!
But the real point Jacob has missed is that the Irish are taxing profits generated in the UK but booked in the Republic via transfer pricing. This is just another example of how the Bond Villains of Davos have their sticky mits in our till. Until we tax multinationals on the basis on their global profits apportioned by turnover they will continue to get away with it.