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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REMEMBER THE ROCHDALE CHIPPY CHANCELLOR!

 

THE BUDGET AND BUSINESS RATES.

The coverage of the row over the hike in business rates has shown once again that the media generally sees things from a London and south of England perspective.

There are rumours that the Chancellor is going to take steps to soften the blow of this overdue review of business rates. If he does, it will mean he is not listening to the wise and under reported views of the leader of Rochdale Council. Richard Farnell has pointed out that he knows a chippy in Rochdale that is paying more per square metre than Harrods and says the south is squealing because it is being asked to pay its fair share. Farnell claims that most businesses in greater Manchester will be better off. Spot on Richard. Not before time this review is reflecting the soaring value of property in the overheated south eastern economy whereas some parts of the North have seen property values decrease. That should be reflected in what firms have to pay.

It is true that southern businesses shouldn’t be subjected to huge rises all at once, but the answer to that is for gutless politicians to review business rates more regularly irrespective of whether there is an election on the horizon. It is also true that we need to review the whole system to reflect the growth of on-line businesses that pay nothing, but that is for the future. If the Chancellor gives concessions next week it will be a victory for the effective southern Tory lobbying exercise and for south centric reporting by the media.

MAJOR BUDGET TASKS.

As we saw in his first autumn statement, Chancellor Philip Hammond is not inclined to dramatic and colourful gestures. Indeed, his most surprising announcement in November was to say that this will be the last spring Budget. Signals have been sent out that rebadged austerity is to continue with departments told to find savings in the run up to the next election.

It is true that the national debt stands at £1.8 trillion and the deficit is on track to be £68bn this year, but if this means we are set for a cautious budget then major problems facing the nation will continue to get worse.

Leaving the enormous uncertainties of the Brexit negotiations to one side there is a widespread belief that the government’s recent announcements on housing and skills are not adequate. The crisis in the NHS and particularly social care are laid bare on a daily basis. On the latter point, will we see the Chancellor break with caution and raise the possibility of dipping into people’s assets after they die to fund the rising cost of social care? The political problem is that, in opposition in 2007, the Tories denounced the suggestion, proposed by Labour, as a “death tax” and unveiled posters with the slogan “RIP OFF”.

However, some courage is required and with all the opposition parties so weak at the moment, there is no excuse for a lack of political courage in the budget.

GORTON PARLIAMENTARY SELECTION.

If Labour is serious about having MPs who reflect the area, then an Asian candidate should be chosen for the Gorton seat left vacant by the death of Sir Gerald Kaufman.

Although North West MEP, Afzal Khan, is the frontrunner, don’t be surprised if someone from outside that constituency or even Greater Manchester is chosen to avoid internal rivalries.

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THE COST OF BREXIT

 

THE EXIT FEE.

Extreme Brexiteers may rail against the figures, but the fact is we are going to pay a heavy price if we exit the European Union. That is the most important message from the Autumn Statement Some of us hope public opinion will change and we can yet halt this madness. But as it stands we are heading out and the Chancellor has spelt out the consequences of Brexit.

£59bn of the staggering £122bn of extra borrowing is directly attributable to Brexit according to the Office of Budget Responsibility (OBR). Because of that borrowing our debt to gross domestic product is set to peek at 90% in 2017-18. The weaker pound caused by the Brexit shock is forecast to lead to a 5% increase in food prices next year. A real problem for the Just About Managing.

AT LAST A MOVE AGAINST PENSIONERS ?

Perhaps it has been lost a little amidst the analysis of the immediate impact of the Autumn Statement but Philip Hammond this week flagged up a major area of controversy for the next parliament. The triple lock on pensions is to come under review. Rightly so, whilst some pensioners still struggle, most have never had it so good, to coin a phrase. In any case it is the young burdened by tuition fees, job uncertainty and the inability to buy a home that must be top priority for government in the third decade of this century, if not before. The problem is that up to now the elderly vote in larger numbers than the young. In the next parliament ministers will have to be courageous. I think pensioners will get the point but well done Mr Hammond for preparing the way for a change of policy.

NORTHERN POWERHOUSE.

At one point it looked as if George Osborne’s pet project was going to be quietly forgotten by his successor. However there was enough support for devolution to force the Chancellor to input significant funds into the Northern economy. £3bn for northern local enterprise partnerships in growth deals, a £400m investment fund to support smaller businesses and £60m in development funding for Northern Powerhouse Rail.

Areas about to elect city region mayors like Liverpool City Region and Greater manche4ster will get new borrowing powers. There is talk of a municipal bond to aid infrastructure investment. The continuing failure of Leeds to resolve the elected mayor issue and avail itself of these incentives is notable.

Specific road improvements include the highly congested part of the M60 near Worsley, the Waterfront Link in Warrington and dualling the A66 in the North Pennines.

MIXED PICTURE FOR BUSINESS.

The big challenge for business in the North is productivity. Nationally we are 30% less productive than the Germans and the North lags well behind London. A Productivity Investment Fund will help. There was relief that the increase in the Living Wage was modest and a welcome for the further cut in corporation tax. Some wanted a VAT cut to mitigate rising inflation but that wasn’t going to happen, nor apparently reform of business rates.

HAMMOND’S DEBUT.

There is widespread dismay that the Chancellor did not address the growing adult social care crisis but overall Philip Hammond showed himself to be a safe pair of hands on his début. He is not as close to the Prime Minister as George Osborne was to David Cameron but nor is there the ruinous rivalry of the Blair/Brown years.

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