I had planned to spend half of today on the PBR, and then move smoothly onto my opus on Quantitative Easing.  But there is something about tweeting for the left of centre that leaves my brain empty and shattered.  Good for nothing, in other words, apart from a blog.

I struggle to find much to cheer or jeer.  As David Smith says, its like a holding operation. While the FT sees fierce spending cuts, we got little detail about how it will happen: which schools, or how many, or what number of poh-leece, or tanks or benefits or biros.  In that sense, we are still where we were. Chris Cook is right: the debate still hasn’t really begun.

The Public Sector above 100k p/a are going to pay higher pension contributions.   But it is a bit of a right wing myth that there are loads of such people.

In principle, I like the tax on bankers’ bonuses: the enormous profits are almost entirely a result of the state underwriting abnormally cheap liquidity, implicitly insuring risks, and boosting asset markets.  A particularly thick chimp could have made money.  And if this encourages the banks to keep the cash as capital, the rebuilding process is further down the road. Predictable libertarians don’t like it, but tend to fail to see the deeper forces underpinning supposedly free and deserving behaviour.

Unlike Alex on LabourList, I am glad there is no Tobin Tax, for reasons explained on this blog before.

His going after 0.5pc on National Insurance deserved the headlines. Though compared to past impositions during a crisis, it is hardly the hammer blow to job creation that the Conservatives make it out to be.  But what is interesting is how Darling sees the best use for this as a lot of micro-schemes, like training and job guarantees, lower WTC requirements, Bingo Duty, a boiler scrappage scheme . . .

This is where the logic of Labour’s approach differs from that of the Liberal Democrats.  The latter see the need for one big simple message: Fair Taxation.  A 10,000 threshold, and less loopholes for the rich in various ways.   One big, simple, costly message.  Easy to put on one leaflet.  Labour instead seem to think they get more bang for their buck by spreading money between as many different initiatives as possible.  Maybe this is what happens when you are weak and everyone lobbies you 24/7.

Another interesting angle.  Being a GEEK, I looked into where the Treasury thought we could get growth next year.  Remember Slash and Grow, where I queried George Osborne’s optimism about the role of Exports and Investment to get us out of our hole?  Some of it, in terms of timing, may still be valid: they may want to go for it too soon.  But the Treasury is taking pretty much the same line about the sources of growth. They think that household consumption will beetle along at 3%, investment rise from 0 to 4 to 9%, and Exports outgrow imports by 2%. The last bit gets in bold for beating previous records.

Which is why Vince’s scepticism about the growth assumed by Alistair Darling  – and also Osborne – remains the most telling point.

Housekeeping note: I have updated ‘Play with GDP‘ spreadsheet for this new scenario, and also to reflect the way debt is eroded by inflation (why did no-one spot this?), which had given previous debt levels spat out of the sheet a scary high look.


2 thoughts on “The PBR: there’s really not much to say

  1. 1. What about Cable’s point on the 50% bonus tax, that it will just result in increased salaries?

    2. I didn’t expect any different, but I’m annoyed that we’re going with only 1 year of fiscal stimulus (2009), rather than 2 years like most developed countries, never mind that we’re the only G20 country still in recession, and the stimulus we did do, was mostly tax cuts rather than direct spending by government.

    3. On the exports thing, this reminds me of what Krugman has said, with so many countries trying to export themselves out of this crisis, where are we all going to export to? The moon?

    Some countries are thus going to have to be the losers from this, and it could well be us.

  2. Totally agree with 2 and 3.

    1: possible, though salaries then have to shoot up and stay there, which is very expensive. Bonuses are actually quite an intelligent way of paying people. And Vince’s way would strip equity capital out of the banks, wouldn;t it?

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