BURNHAM FUELS LABOUR BUDGET ROW.

 

TOPSY TURVY.

 

The budget has plunged Labour into a topsy turvy row over the Chancellor’s income tax cuts.

Greater Manchester Mayor Andy Burnham is generally seen as a Labour moderate. He says he is at a loss to understand why Shadow Chancellor John McDonnell, a self-confessed Marxist, is supporting income tax cuts for the rich. McDonnell argues that, whilst the rich gain most, the move will help low income people too. The tax-free personal allowance is being raised to £12,500.

There is no doubt that Philip Hammond has presented Labour with a challenging budget where a commitment to balance the books by 2025 has been abandoned to fund increased spending, principally on the NHS. Unexpectedly high tax revenues have allowed Hammond to shake off his image as “spreadsheet Phil” in favour of the largest fiscal loosening since 2010.

He has clearly been driven to this move by the Prime Minister’s declaration that austerity was over. Privately he probably wanted to keep a bigger war chest than the £15bn he has set aside for a no deal Brexit and heed the warning of his predecessor George Osborne. On Tuesday the former Chancellor warned that trying to outspend Jeremy Corbyn would not help the Conservatives.

So, we carry on spending £50bn a year servicing the National Debt that currently stands at £1.8 trillion.

The decision to relax spending restrictions has meant the government has been able to tackle some of the many problems that years of austerity have created. A hefty amount of cash has been thrown at Universal Credit. UC could be the undoing of the Work and Pensions Secretary Esther McVey. The Tatton MP has made herself unpopular with the Chancellor with her demands for cash and Hammond notably praised her predecessor Iain Duncan Smith, not her, during his budget speech.

There was cash to ease the High Street crisis with business rate cuts for properties with rateable values under £51,000. Small businesses saw a cut in the apprenticeship levy.

The maze of organisations supporting regeneration continues to grow. Business led development corporations are on their way to join university enterprise zones, Local Enterprise Partnerships and Business Improvement Districts. Oh! for the regional development agencies. Simples!

There was more money for Northern Powerhouse Rail, £10m for a skills project in Manchester and cash for medicine research at Alderley Park.

Hammond was clearly irritated that many of his measures had been leaked in advance and there is speculation this could be his last Budget. I think that would be a shame as he is a steady hand on the tiller. His sin has been to warn about the damaging consequences of Brexit.

CHANNEL 4 DECISION GOOD FOR NORTH.

I welcome the decision of Channel 4 to relocate its headquarters to Leeds. Investment must be made across the North if the Powerhouse is to be fair to all. The eastern side of the Pennines needs a media jobs boost. Just a word of caution though, let’s see if the decision-making moves to Leeds or stays at Horseferry Road in London where the majority of Channel 4 jobs will still be based.

ECONOMY BOOST FOR TRUMP.

I expect the awful Donald Trump to hold the Senate and perhaps even cling on to the House of Representatives in next week’s midterm elections. The economy is booming and for many voters that will matter more than the many failings of this obnoxious man. The Democrats are relying on a big turnout of angered women but lack the vision and leadership to give confidence that they are on course to win the presidency in two years’ time.

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AN “AUSTERITY OVER” BUDGET?

 

PM BATTLES ON

As I have forecast for months, Theresa May has seen off the noose wielding Brexiteers with their empty threats. They are given too much credibility by political journalists who should know better. I remain of the view that the Prime Minister will present an EU deal to parliament which will get through with the support of some Labour MPs and the opposition of far less Tory Brexiteers than some commentators suggest.

THANKS A LOT THERESA.

So, let’s concentrate on Monday’s budget which is overshadowed by Mrs May’s claim that austerity is over. That’s probably not the view of the Chancellor who is correctly wary about the economic damage we are about to inflict on ourselves over Brexit. He is also aware that the roll out of Universal Credit is not giving a lot of people the impression that “austerity is over”. £7bn of George Osborne’s working-age benefit cuts are still to come. Will Philip Hammond do anything about that or the other government department cuts that are still due to kick in for the next three years?

The NHS is to get £20bn by 2024 but what about the police crisis? Criminals are getting the message that the diminished police force is being overwhelmed by criminality. You will get a crime number but what are the chances of the offender being caught these days?

The Chancellor has been cut some slack by a better than expected cut in the deficit and strong tax receipts. Nevertheless, Mr Hammond has hinted that taxes will need to go up to ease the pressure on public services. But I didn’t realise that after eight years of Tory, or Tory dominated governments, tax levels are close to a post war high.

As an alternative he could let the deficit drift up again. However, is already 80% of national income and would be badly placed to deal with a post Brexit recession.

HIGH STREET CRISIS.

One thing Hammond must tackle is the crisis in our high streets. Crippling business rates combined with on-line shopping are seeing shops closing in city centres and suburban retail strands.

Foreign tech firms like Amazon should be properly taxed on their actual retail turnover in the UK. That revenue will help a cut in business rates. There also needs to be a reform of the whole system so that business rates are reviewed annually and linking them to local economic success by removing the revenue cap.

SLEIGHT OF HAND OVER EURO FUNDS?

One of the many disadvantages of leaving the EU will be the loss of European Structural and Investment Funds. Instead of going straight from Brussels to the places in need, they will come from a UK Shared Prosperity Fund (UKSPF). That will be administered from Whitehall where the priorities of the regions are not well understood.

The Chancellor should use the Budget to tell us how much money there is going to be in the UKSPF and the criteria for its distribution to the North in particular.

We really do need to watch Whitehall on this. Otherwise the temptation might be for the Treasury to swallow these well directed funds into the black hole of general spending.

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BUDGET EXPOSES BREXIT MADNESS

 

 

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BREXIT WOES.

In his Budget the Chancellor set aside three billion pounds more for the mounting cost of Brexit. Three billion pounds that could have been spent on the NHS (as promised by the Leavers) being put aside for more lawyers and civil servants to deal with the complexity of leaving. Being put aside to build huge car parks at Dover to cope with the hundreds of lorries held up by customs controls. And let us not forget the £40bn exit bill.

But Brexit is hitting us in a far more serious and widespread way. Look at the woeful forecasts for growth and productivity. It is true that these problems pre-date the EU Referendum, but I suggest the dramatic worsening of the forecasts are related to the uncertainties of Brexit and the perception that the UK is cutting itself adrift from the EU, many of whose members are in the Eurozone where the currency has strengthened considerably in the last year.

It is almost too late for the British people to wake up and turn against Brexit. The warnings are there for anyone who wants to see. This week the European Banking Authority and European Medicines Agency were relocated out of the UK. The latter is the most serious and will be a blow to our pharmaceutical industry quite apart from the fact that we will need to create our own expensive drug regulation body. The government should have faced far more criticism for this. They thought the future of these agencies would be part of Brexit bargaining. The arrogance! The ignorance! It was never going to be possible to keep EU bodies like these in a UK outside the EU.

Oh! but we will be playing on the global stage in the future say the Leavers. Is that the stage where the UK has just lost its place on the International Court of Justice?

PHIL SAVES THE DAY.

As I said last week, I respect the Chancellor. In a Cabinet of misfits his calm integrity stands out. After the Budget perhaps all the hysteria of him getting sacked and Theresa not surviving till Christmas will calm down.

This lot are in it for the long run. Locked into the messy Brexit process and tinkering with a weak economy, but still there. After all, where is the threat. Tory Remainer rebels probably lack the courage to torpedo Brexit and the government can always on Labour MPs like Frank Field and Kate Hoey to come to their aid. Meanwhile Shadow Chancellor John McDonnell struggles to convince us that Labour’s programme could be paid for without hugely adding to the National Debt. It pains me to say it, but the Lib Dems under Vince Cable seem to be fading away just when we need a strong party for Europe.

The Chancellor took some action on the immediate issues facing the country. Housing, Universal Benefit and the NHS but he is locked into Tory ideology by not sanctioning local councils to undertake a massive programme of house building. He is also averse to general tax increases, but why? A cross party panel of voters in Bury voted unanimously for such a move on Newsnight after the Chancellor had sat down.

Thank heavens the Chancellor has stuck with the £85,000 limit on VAT, but for how long will micro businesses be spared the bureaucracy of quarterly accounting. The moves on business rates have been generally welcomed but three-year reviews may be a mixed blessing, as will stamp duty relief for first time buyers. Will youngsters benefit or will house prices just rise. Council house building is the answer.

It now seems highly unlikely the Chancellor will be sacked now that he is “Eeyore No More” according to the Mail. So, the government is set to stagger on as the darkening days bring the reality of the consequences of Brexit ever closer.

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BUDGET BETTER GO WELL.

 

TAX AND SPEND

I think the fevered talk of plots to dislodge the Prime Minister is exaggerated. Whoever is PM on Brexit Day better stand by for massive criticism either for paying the Europeans too much or keeping us too close to the EU. Better to leave Mrs May to take the flack is surely the wise course for aspiring leaders. Reports that some Tory MPs want to go into opposition to refresh the party are ridiculous.

All that said the government is in a fragile state and is relying on Philip Hammond to deliver a good budget next week. I’ve got a lot of time for Phil The Till. When you look around the Cabinet table and see charlatans like Johnson and Gove, there is something reassuring about the grey man with his spreadsheets. He knows Brexit is a dangerous threat to the economy. He knows we are spending billions servicing our debts. Yet he is bated for exuding gloom when he should be apeing Johnson’s unfounded cheerfulness.

On Wednesday the Chancellor ought to loosen the purse strings to help with housing, the NHS, and elderly care. He needs to address our woeful productivity and skills record. But he should be bold enough to put up some taxes to pay for it and go back on a manifesto promise to raise the 40p income tax threshold to £50,000. The elderly should have to pay some National Insurance to begin the task of tackling intergenerational unfairness.

Unlike many commentators I don’t think a General Election is at all likely so now is the time in the political cycle to take a risk with incurring the wrath of those opposed to any tax rises.

But Phil Hammond faces strong opposition in his own party. Former Minister Nick Boles wants the Chancellor to scrap his deficit reduction target. He believes it is fine for the annual deficit to remain at 2.6% indefinitely. This in the face of an Institute for Fiscal Studies warning the deficit could be on course to be £20bn higher than expected by 2021/22.

GORDON BROWN.

The former Prime Minister has been in the North this week to boost sales of his memoirs. I had a lot of time for the granite integrity of this Scottish son of the manse. His one great achievement in No 10 was in October 2008 when he showed global leadership in the middle of the economic crisis.

His great flaw was his undermining of Tony Blair in his desire to be Prime Minister. Why did he want the job so badly? When he got it, he didn’t know what to do with it. Was he a continuity man for New Labour or something else?

He claims his differences with Blair were over policy and he had nothing to do with the personal attacks. The fact is Brown could have reigned in his spin doctors Damian McBride and Charlie Whelan who were constantly briefing against the Prime Minister.

Blair should have sacked Brown after the 2001 General Election, but it’s not just weak Prime Ministers who find it hard to dismiss troublesome Cabinet colleagues.

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