The key message from today's Pre-Budget report. The amount of borrowing is truly astronomical leading to a total of £1 trillion debt.
Ok, so the answer to my previous question was that the Government doesn't care about strict rules on keeping budget details under wraps. The only major figure not leaked was the 0.5% increase in National Insurance Contributions. A tax paid by employees and employers just as they will (hopefully) be leading the country out of recession.
I'm highly sceptical that the VAT reduction will work and I also think the economy will go down before it rises again - so the timing may be all wrong for a stimulus.
Just like the last three budgets (including PBR's), I think this budget will quickly unravel. The NIC and 45% tax is a timebomb waiting to go off as the Government heads to the left.
I think this may be a game changer, but probably not in the Governments direction.
Squiffy.
Monday, 24 November 2008
PBR Leaks
The leaking of the cut in VAT and proposed increase in high rate tax to 45% for those earning more than £150,000 have been widely leaked. The fact that they have been picked up by most newspapers and broadcast media suggests that the leaks have come from the Government. But why?
It years gone by, this would be nearly a criminal act, but in recent years small details have been leaked to the press. It is wrong and the city takes a very dim view on it. This time big measures have been leaked - either the Government doesn't care about previous procedures, is completely incompetent with details or is trying to wrong foot George Osborne.
I wouldn't be surprised if the VAT cut is not announced and another measure takes its place. This would be almost unheard of, but they really want to knock George Osborne off his feet as his prepared response has to be ditched!
Which reason will be revealed in the next hour.
Squiffy.
It years gone by, this would be nearly a criminal act, but in recent years small details have been leaked to the press. It is wrong and the city takes a very dim view on it. This time big measures have been leaked - either the Government doesn't care about previous procedures, is completely incompetent with details or is trying to wrong foot George Osborne.
I wouldn't be surprised if the VAT cut is not announced and another measure takes its place. This would be almost unheard of, but they really want to knock George Osborne off his feet as his prepared response has to be ditched!
Which reason will be revealed in the next hour.
Squiffy.
Sunday, 23 November 2008
VAT to 15%
If the papers are to be believed, we are in for a cut of VAT to 15% in tomorrow's Pre-Budget report.
I'm not an economist, but I don't think it is going to work. Firstly, making items slightly cheaper isn't going to make everybody to rush out and buy goods when the economy looks dreadful. I also think that the drop in prices would have a bigger effect on inflation than desired.
If you're going to have fiscal stimulus package you need to put a large amount of money, a windfall, in people's hands. Some people would save the money, but a lot of people would go out and spend it.
Gordon Brown last week mentioned that the bigger threat to the economy now is deflation rather than inflation. Wouldn't the cut in VAT compound this possible problem?
What happens if none of this works? Another stimulus package, more borrowing and lots more tax later.
Squiffy.
I'm not an economist, but I don't think it is going to work. Firstly, making items slightly cheaper isn't going to make everybody to rush out and buy goods when the economy looks dreadful. I also think that the drop in prices would have a bigger effect on inflation than desired.
If you're going to have fiscal stimulus package you need to put a large amount of money, a windfall, in people's hands. Some people would save the money, but a lot of people would go out and spend it.
Gordon Brown last week mentioned that the bigger threat to the economy now is deflation rather than inflation. Wouldn't the cut in VAT compound this possible problem?
What happens if none of this works? Another stimulus package, more borrowing and lots more tax later.
Squiffy.
Wednesday, 19 November 2008
Back to the Future
The 80's are upon us, the BBC should start re-running Dallas and Dynasty. Shoulderpads will be back, along with the mullets, perms and rock ballads.
To aid us in this trip down memory lane, the two big political parties have obliged by reverting to 80's economic policies. Labour has ditched the policies of golden rules and trying to balance the books (although they did this a while ago but didn't admit it). In fact they have for the last few years been doing the old tax-and-spend tango, with a quick chassé of tax cuts before the big tax rises after the next election.
The Tories have catapulted the policy of sharing the proceeds of growth and reverted to 'sound' money, only allowing tax cuts paid for by savings in the current budget. It's back to Thatcher.
So as we listen to Duran Duran, there is now a clear dividing line in politics again. The past two elections have been fought with Labour standing in the centre and the Tories to the right - a position which it could never win from, which is why the Tories also had to move to the centre. But now the Labour party have moved to the left, and so the Tories can move to the right and still win.
I'm hoping the British public will see through the current boost for the Government and appreciate that times will be getting significantly harder with the burgeoning debt. We need 'sound' money now more than ever.
Squiffy.
To aid us in this trip down memory lane, the two big political parties have obliged by reverting to 80's economic policies. Labour has ditched the policies of golden rules and trying to balance the books (although they did this a while ago but didn't admit it). In fact they have for the last few years been doing the old tax-and-spend tango, with a quick chassé of tax cuts before the big tax rises after the next election.
The Tories have catapulted the policy of sharing the proceeds of growth and reverted to 'sound' money, only allowing tax cuts paid for by savings in the current budget. It's back to Thatcher.
So as we listen to Duran Duran, there is now a clear dividing line in politics again. The past two elections have been fought with Labour standing in the centre and the Tories to the right - a position which it could never win from, which is why the Tories also had to move to the centre. But now the Labour party have moved to the left, and so the Tories can move to the right and still win.
I'm hoping the British public will see through the current boost for the Government and appreciate that times will be getting significantly harder with the burgeoning debt. We need 'sound' money now more than ever.
Squiffy.
Thursday, 13 November 2008
Shameful
Yesterday's performance by Gordon Brown at PMQ's was shameful. To not answer David Cameron's questions about the horrible death of baby P, and then accuse the opposition leader of party politics shows just how low this man can go. Tony Blair would have handled the situation with his usual aplomb.
If anyone still believes that this man has the necessary requirements to be Prime Minister, then think again.
Squiffy.
If anyone still believes that this man has the necessary requirements to be Prime Minister, then think again.
Squiffy.
Friday, 7 November 2008
Gordon Brown's 18 percent
This week at PMQ's Gordon Brown re-iterated a figure that he used in the previous week's PMQs. He has now stated twice that UK interest rates rose to 18% on the day of Black Wednesday.
On the day of Black Wednesday, interest rates started the day at 10%, went up to 12%, then up to 15% before we withdrew from the ERM. After that decision in the evening, they went down again to 12% before diving to around 6% within several months. Gordon Brown is supposed to be a master of figures but these lapses show either that he's not up to basic economic facts, economic history, or honesty. Either way, it shows that he's not the man to guide us through troubled times.
Squiffy.
On the day of Black Wednesday, interest rates started the day at 10%, went up to 12%, then up to 15% before we withdrew from the ERM. After that decision in the evening, they went down again to 12% before diving to around 6% within several months. Gordon Brown is supposed to be a master of figures but these lapses show either that he's not up to basic economic facts, economic history, or honesty. Either way, it shows that he's not the man to guide us through troubled times.
Squiffy.
Tuesday, 4 November 2008
My Presidential Prediction
Tonight it's the US general election and I'm still sticking to my prediction of a win for Barrack Obama. I'm predicting a popular vote of 52% for Obama and 44% for McCain, and 340 electoral votes for Obama with the remaining votes going to McCain.
If this happens it will be consistent with my prediction for the election from the beginning of the year. Back then I predicted an Obama vs McCain fight with Obama coming out on top - this was when Hillary Clinton was the overwhelming favourite for the Democratic nomination and McCain was out of it for the Republicans.
A strange fact was unearthed in the Times this week. In all Presidential elections, apart from 1960, a Democrat has won the presidency when a Brit has won the F1 world championship!
Squiffy.
If this happens it will be consistent with my prediction for the election from the beginning of the year. Back then I predicted an Obama vs McCain fight with Obama coming out on top - this was when Hillary Clinton was the overwhelming favourite for the Democratic nomination and McCain was out of it for the Republicans.
A strange fact was unearthed in the Times this week. In all Presidential elections, apart from 1960, a Democrat has won the presidency when a Brit has won the F1 world championship!
Squiffy.
Sunday, 2 November 2008
Wow!
As an avid Formula 1 fan, I'm really glad that I got my prediction wrong at the start of the year. I thought that Kimi Raikkonen would be even stronger this year after finally winning the championship in 2007. I was wrong, gladly.
The race today, in Brazil, was fantastic. Even if Felipe Massa had won, the race would have been momentous. Massa would have been a great champion, but as a Brit I'm ecstatic that Lewis Hamilton won. After missing out with bad luck (from a dodgy gearbox) last year, this year he deserved it after some fantastic drives in Monaco and Silverstone. Also he deserved to win after losing a total of 7 points to Massa after being penalised unfairly by the FIA at Spa (overtaking Raikkonen) and Fuji (Bourdais being penalised for Massa's dodgy move).
The race was brilliant and heart stopping. After sitting in despair with two laps to go, thinking how could it go wrong again - just like last year - to complete elation on the last corner before checkered flag.
The champagne is flowing tonight.
Squiffy.
The race today, in Brazil, was fantastic. Even if Felipe Massa had won, the race would have been momentous. Massa would have been a great champion, but as a Brit I'm ecstatic that Lewis Hamilton won. After missing out with bad luck (from a dodgy gearbox) last year, this year he deserved it after some fantastic drives in Monaco and Silverstone. Also he deserved to win after losing a total of 7 points to Massa after being penalised unfairly by the FIA at Spa (overtaking Raikkonen) and Fuji (Bourdais being penalised for Massa's dodgy move).
The race was brilliant and heart stopping. After sitting in despair with two laps to go, thinking how could it go wrong again - just like last year - to complete elation on the last corner before checkered flag.
The champagne is flowing tonight.
Squiffy.
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