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Finance Bill

I have to say that my recollection is somewhat different. I cannot remember in which Budget the now Prime Minister announced massive increases in expenditure on schools and hospitals, but I can remember thinking that it was a make-or-break moment for the Government. I thought that if it worked—I did not think it would—the history of the following 10 or 15 years might be very different, but that if it all ended in tears, as I thought it would, we Conservatives would be vindicated. I am afraid to say that I now know that we were vindicated; the decisions the Prime Minister announced at that time proved to be the beginning of the obituary of this new Labour Government. I sincerely wish that when the Prime Minister was Chancellor he had not been so imprudent with the money at his disposal—or the money he was borrowing—in funding that splurge. Let me repeat the phrase "risible optimism", which was used by The Economist to describe the fundamental premise on which this Finance Bill is based. I have not read the words of Edward Hadas before, and I am not sure whether they appeared in The Daily Telegraph blog or in the main newspaper, but I like his parallel:""Suppose a triple-A rated company suddenly found that expenses were running at 123 per cent. of revenues. Such a huge loss would cause a financial red alert. Cut back spending, push up revenues, figure out what's going wrong and prepare for even worse times."" That is exactly the situation we face as a nation. I know that there are differences in finances, companies and Governments, but the scale of what we face is truly terrifying. As the article makes clear,""even governments face limits—and the UK authorities seem to be approaching them. They have engaged in pretty much every imaginable risky policy. Huge fiscal deficits are joined by the central bank's effective zero interest rate and a big experiment in money-printing."" The article goes on to conclude about the risk of default on sovereign debts that""the government might decide to spare taxpayers some pain by letting inflation erode the real value of the official debts. The rating agencies do not count such depreciation as a default. If they did, the UK's triple-A would probably be history already."" That is a terrifying conclusion. The most recent estimate that undermines the credibility of the Budget and the Finance Bill came from the European Commission only this week, as it issued its Economic Forecast. It said that""the UK economy is now clearly experiencing one of its worst recessions in recent history, in the context of the global financial and economic crisis."" It also stated:""The unemployment rate is likely to rise progressively to around 10 per cent. … in late 2010"." The consensus out there is now pretty clear: the Government are being too optimistic. To be fair to the Prime Minister—I always like to be fair; it is in my nature—he probably believed his own propaganda and he might actually have believed that he could end boom and bust. It is an extraordinary thought. I read economics at university many years ago and I have forgotten most of it; I was not even particularly good at it at the time.