Good speech, shame about the economy

The secular God of democracy has been served with a fitting sacrament. Since that deity is about form above substance and make-believe above truth, so was the Chancellor’s speech.

George Osborne, whose life’s interest is electoral strategy, with economy a distant second, faithfully reflected these priorities in his oration.

Every word was designed to improve the Tories’ chances next May. None addressed the fundamental problems facing the nation.

Oh to be sure, George was too clever to do an Ed Miliband and omit the deficits altogether. He touched upon them, but only tangentially, on the way to boasting about Britain’s economic growth, which puts to shame minnows like the USA, Germany and France.

But growth is a tricky thing, which can be best demonstrated on the example of a humble family of four.

The Smiths’ combined gross income is, say, £30,000 a year, barely sufficient to cover everyday expenses, never mind the new ones looming on the horizon.

The family’s knackered Ford costs more in repairs than it’s worth, the children need braces, the roof is leaking – above all, the huge overdraft needs paying off to keep bailiffs at bay.

The only way to thwart bankruptcy is to remortgage the house, and thank God for the house price bubble. Mr Smith goes to his bank and, what do you know, comes back with £90,000 in freshly minted electronic transfers.

The Smith’s income has thereby tripled, and that’s 10 times the growth rate of which the Chancellor is so proud. All problems solved then?

The question is rhetorical. Everyone knows they haven’t been solved. They’ve only been deferred. Before long ruinous interest payments will come in and, unless the Smiths increase their income the old-fashioned way, by earning more, they’ll go to the wall.

Yet that’ll happen tomorrow. Tonight Mr Smith goes down the pub and brags to his mates that his income has tripled this year. His friends, not being the envious sorts, are happy for him, especially since he buys the first round.

None of them asks Mr Smith to what he owes such an upsurge in fortunes. Such questions would be indiscreet and decidedly un-English. Happiness all around – until that time, soon, when Mr Smith won’t be able to afford going down the pub.

Sorry for such a lowbrow analogy, but our real chancellor has done exactly what my fictitious Mr Smith is supposed to have done. He glossed over the fact that, under his stewardship, our deficit spending has almost doubled compared to the profligate Labour government’s.

At the same tempo of borrowing, our public debt will hit £2 trillion in two years, three at most. And the only way to prevent this is neither to cut spending nor to hike taxes.

It’s to change drastically the whole approach to the economy in particular and political life in general.

As I argued yesterday, higher taxes will serve a most satisfying punitive purpose but no other. What happens when a government tries to plug budget holes by extorting more tax is that the tax base shrinks.

People either flee to greener pastures elsewhere or devote their creative energy to earning a crust off the books. As a result, while the ‘rich’ are squeezed till their pips squeak, to borrow a Labour phrase, the public purse doesn’t get any fatter.

When I talk about the futility of cutting spending, I only mean cosmetic cuts, little nicks designed not to solve the problem but to appeal to conservative voters.

George ticked that box by promising to reduce public spending by a staggering £5 billion.

To you, me and the Smiths this sounds like an awful lot of money. But to a nation planning to spend £731.4 billion next year, it’s worse than nothing – it’s a purely cosmetic nick constituting not sound economics but boldfaced deceit.

The budget deficit, and hence the national debt, will continue to grow until the bailiffs knock on the door to repossess the family silver and the I-Pad.

Even those who criticise George for this subterfuge, implicitly accept his way of thinking, for in our thoroughly corrupted polity there is no other.

They describe as wasteful this or that infrastructure scheme, such as the planned construction of a North-South high-speed railway or – I’m not kidding – the current effort to reinforce motorways’ central reservations.

No one seems to object, for example, either to ringfencing the NHS budget or to pumping a guaranteed extra £2 billion into it, as George promises to do. And only masochists relishing political ostracism would ever dream of suggesting that there exist better ways of paying for medicine. 

The underlying assumption is that we can buy evenly spread immortality by frittering money away on this inherently inefficient and ultimately unworkable socialist monster.

But I don’t mean to single out the NHS specifically – what needs dumping is the pernicious philosophy that made the NHS, and the whole ruinous, corrupting welfare state, possible. And if you think we’ll ever have a leader capable of this, there’s a bridge across the Thames I’d like to sell you.

Instead the chancellor unveiled a devilishly clever scheme to cut stamp duty, and I use the word ‘devilishly’ advisedly.

Anyone buying a house for under £925,000 will henceforth save a few thousand, supposedly making it possible for first-time buyers to get on the housing ladder.

The announcement was followed by a few rent-a-crowd interviews, of which one impressed me especially because the happy beneficiary of the chancellor’s largesse is buying in my part of London.

This girl, in her mid-20s by the look of her, was gasping with delight. She thought she wouldn’t be able to buy the £400,000 flat of her dreams but, now she’ll save £2,000 on stamp duty, it’s a doddle.

I must congratulate the young lady on her ingenuity. Being able to find a flat for that amount in my neighbourhood is like finding a virgin at a WAGs’ party. Finding a loose £400,000 (or being able to pay mortgage on that sum) is another glorious achievement at her age.

Now, my young friend, hand on your shapely breast, considering the overall outlay, does £2,000 really make the difference between buying and not?

George gave the impression it was more than that: it was almost the difference between life and death.

His conservative, smaller-state credentials thus established, George explained that the rich, those blood-sucking top 2% buying houses costing a million or more, which is to say buying in London, will pay more – in some cases £100,000 more – in stamp duty.

That makes George the sharing, caring type so popular on council estates and in Notting Hill. He is punishing the rich, stealing Labour’s mansion-tax thunder and improving his own electoral chances. Isn’t that what a responsible economic policy is all about?

But there’s some arithmetic involved, not just mass psychology. George is banking on the likelihood that this measure will heat up the already overheating housing market.

Since no one has yet repealed the law of supply-demand, house prices will go up, killing two birds with one stone.

Since property is by the far the greatest asset most families possess, they’ll welcome the increase in the paper value of their house.

At the same time they won’t mind very much that, should they want to convert paper value into cash, all other houses will have followed the same road, meaning our buyers will have to find an extra £75,000 to buy what was a workman’s cottage a generation or two ago.

Devilishly clever, my friend George. So clever that he’ll never have stupid little me vote for him and his equally clever friend Dave.

And you know what the most tragic thing is? Compared to the other lot, Dave and George just may be the lesser evil.
















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