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Budget Resolutions and Economic Situation

This Budget bears little relation to the times in which we live and comes from a Government who have run out of time altogether. After the deepest recession in generations, Governments, financial institutions and credit rating agencies around the world are reaching a new consensus that urgent action must be taken to reduce budget deficits. Only recently, the European Commission called for more information on how the Government would go about halving the deficit from 2011. Markets are crying out for the detail of how this will be achieved, and the British people are demanding to know that their children's futures will not be sacrificed under the burden of this Government's debt. Yet the Budget is utterly lacking in the action needed to reduce the deficit. The Chancellor was content simply to make projections, when he should have been detailing plans, and to talk vaguely about an end point instead of precisely focusing on how we will get there. As such, this is a Budget of half measures, damaging delays and illusionary targets. Most worryingly, no effort was made to bridge the credibility gap. The director of the Institute of Directors noted:"““The chancellor's GDP forecasts are too optimistic and there is still no sign of a credible deficit reduction plan””." He went on to say that"““we need to hear a lot more from the government on debt reduction.””" Roger Bootle, economic adviser to Deloitte, said:"““The Government has still put to put the flesh on the bones of its plans to cut spending””." Although the Chancellor has revised his figures, borrowing still stands at more than 10 times its 1997 level. I recognise that unprecedented action has been taken in the form of the fiscal stimulus, but the Government have ignored the unprecedented consequences in the form of drastically higher debt. Indeed, Britain's national debt will hit an unprecedented £1.3 trillion by 2014-15, which is more than double the level of just a year ago and amounts to more than £50,000 per household. If we do not quickly get a handle on this, our triple A credit rating will be downgraded, investors will lose confidence and the recovery will stall, if not worse. This situation will not just sort itself out, it will not just evaporate and it cannot be left for future Governments or future generations to sort out; it is our moral duty to begin reducing the deficit now, and that requires action from the Government today. In the absence of a plan, the main positive in the Budget is that things are not quite as bad as expected: our borrowing is £167 billion, rather than £178 billion; the interest on the debt is slightly lower than expected; and the structural debt is predicted to be 75 per cent. of GDP by 2013-14, rather than 78 per cent. But saying that the situation is ““not quite as bad”” is not the same as detailing how it will get better. One cannot give a Budget, let alone run an economy, on happenstance and fortunate recalculations alone. Like the portrait of Dorian Gray, what beauty there is to this Budget is only skin deep. When we look below the surface, we see that the Chancellor utterly ducked making the tough decisions in the best interest of the country and instead chose to penalise the overwhelming majority of hard-working people. There is nothing stealthy about that. Although the Chancellor may coat it in the best intentions, it is plain that he chose tax hikes over public sector cuts. He made the wrong choice again on small businesses. When he should have cut the main rate of corporation tax, he instead chose to extend targeted tax relief for some businesses. That does very little to offset the £4.5 billion cost of the one penny rise in national insurance, which will be detrimental to all businesses. In the absence of any decisions on the deficit, the Chancellor took the wrong decisions on taxation. Cutting the deficit and getting the economy growing are one of today's defining issues. No doubt in the coming weeks all parties will be publishing their plans on how to reduce the deficit while promoting growth, but the Budget was the Government's unique opportunity to reassure the markets, secure the recovery and, most importantly, to help the British people. They have comprehensively failed in every respect. Indeed, it is nonsensical to expect the same Government who caused the problem on the one hand to offer an effective solution on the other. So, we need an alternative. If we do not get a grip now on tackling the continued implications of the economic crisis, it will be superseded by a social crisis that will make the recession look like small change. We must also give people greater opportunity to invest their own money rather than restricting financial freedom through the higher taxes that the Government are so keen on imposing.